Considering a Holiday Home Purchase? Here’s What You Need to Know

December 4, 2024

The holiday season is upon us, and many Australians are gearing up for a well-deserved break. For some, this time away might spark thoughts of owning a holiday home. But is it a wise decision? Can a vacation property still make financial sense? In this post, we’ll walk you through the key considerations before investing in a property and tips for funding a holiday home.


Weighing the Pros and Cons of a Holiday Retreat

As you lock up your primary residence and head for a sea or tree change, some holidaymakers dream of extending their vacation experience by purchasing a holiday home. But with property prices still on the rise, is it a smart move?


Holiday homes can be a significant investment. Consider this: an apartment in Coolum on Queensland’s Sunshine Coast might set you back around AUD 870,000, while a house in Byron Bay on NSW’s north coast could cost around AUD 3.5 million. 


There are, however, more affordable options. A unit in Portland, Victoria, about four hours from Melbourne, can be purchased for around AUD 304,000. While in WA’s Margaret River wine region or Tanunda in South Australia’s Barossa Valley, you could find houses priced between AUD 670,000 and AUD 770,000.


Is a Weekender a Smart Investment?

Wherever you decide to buy, a holiday home is likely to require a substantial financial outlay. But it’s crucial to consider whether this investment will provide long-term capital growth. Properties in vacation hotspots are often located in regional areas, which can have very different growth dynamics compared to major cities.


CoreLogic identifies regions like Mackay, Geraldton, and Townsville as seeing exceptional property growth due to affordability and lifestyle appeal. However, not all regional markets are booming. For instance, Batemans Bay on NSW’s south coast and Warrnambool in Victoria have experienced declining values in the past year. Do your research, especially a comprehensive property valuation, and choose an area where property values are likely to appreciate.


Can a Holiday Property Generate Income?

Gone are the days when most holiday homes stood empty for most of the year. Today, platforms like Airbnb and Stayz provide opportunities to generate income from short-term rentals. However, various state regulations and council restrictions limit the number of rental nights per year. Additionally, councils like Hobart City Council have increased rates for short-term accommodation properties, so these factors need to be considered when budgeting for your holiday home. On the plus side, if rented out, you may be able to claim some of the ongoing costs as tax deductions.


Financing Your Holiday Home Purchase

Holiday home loans work similarly to regular mortgages but with some key differences. Properties in popular vacation spots can be highly seasonal, increasing the risk for lenders who may require a larger deposit.


Your vacation retreat could also be viewed as an investment property, potentially leading to higher loan rates compared to owner-occupied home loans. However, if you’re already a homeowner, you might be able to use existing home equity instead of a cash deposit.


Need Advice? Get in Touch

Curious about financing your dream holiday home? Osinski Finance can help turn your vacation pipedream into a fun-filled, financially rewarding reality for your family.


If you’re interested in finding the best loan options or getting a free property report before taking the leap, give us a call today. Our team is here to guide you through every step of the process and help you start your journey to owning a holiday home!


Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.


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