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Buying a coastal holiday home or investment

John McGrath
Tuesday, November 03, 2009

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Holiday homes became a luxury that many people couldn’t afford during the peak of the global financial crisis, with many forced to sell their coastal retreats or investments due to major losses on the share market. This resulted in an oversupply in Australia’s major coastal markets and prices have softened significantly over the past year.

We’re now starting to see a turnaround with RP Data reporting a 37 per cent rise in the number of homes sold in Australia’s most popular coastal locations over the past year. Much of this can be attributed to rising confidence in the Australian economy and a renewed faith in property among investors.

However, monthly sales volumes are still well off the 10-year average, indicating it’s still a buyers’ market in these popular lifestyle and holiday areas.

Whether you’re buying property for use as a holiday home or a regular investment with full-time tenants, major coastal markets in NSW, VIC, QLD and WA are now offering great value following up to 15 per cent price falls since 2008.

Beachside buying is a pretty safe bet as long as you stick to growth areas and avoid oversupplied markets, particularly when buying apartments. One of the benefits of buying coastal real estate compared to city real estate is the lower capital outlay. For example, you’ll need upwards of $500,000 to buy a good-sized beach apartment in Sydney but in Coffs Harbour or Cairns you’ll pay around $350,000 for a house.

Here are some examples of softening prices in Australia’s most desirable locations:

  • Byron Bay in NSW – median house price now $608,630, down 7.5 per cent.
  • Gosford in NSW – median house price now $406,081, down 5.9 per cent.
  • Coffs Harbour in NSW – median house price now $347,068, down three per cent.
  • The Gold Coast in QLD – median house price now $527,503, down 7.7 per cent.
  • Sunshine Coast in QLD – median house price now $501,678, down 4.7 per cent.
  • Cairns in QLD – median house price now $358,362, down 5.3 per cent.
  • Augusta-Margaret River in WA – median house price now $556,026, down 13 per cent.

Generally, I recommend houses over apartments for investment because land value appreciates at a faster pace over the long term. However, if you’re looking for a cheap property to use as a holiday home while still achieving decent capital growth, coastal apartments are a great option. You’ll pay about $250,000 for an apartment in Cairns (prices down 4.7 per cent over the past year) and Victor Harbour in SA (up 8.8 per cent); about $300,000 in Gosford (down 5.9 per cent) and about $365,000 in Ballina in NSW (down 6.2 per cent).

When buying coastal real estate as an investment, something to consider is its resale value in future years as demand from downsizers increases. It’s an extremely strong trend in Australia for retirees and empty-nesters to head to the coast in the later stages of life – a trend that will definitely continue due to our rapidly aging population.

If you’re buying a house in a great beachside location, consider whether the property will be attractive to downsizers in 10 years’ time, as they’re likely to be a prime buyer demographic for your investment property. Things to look for are sunny level blocks within level walking distance of beaches, shops and cafes. Avoid houses with steps – go for low maintenance single level properties with small gardens and off-street parking.

Why not do some research, identify a few investment locations and spend your summer holidays there? In major markets, you’ll find that most agents work up to Christmas and return to the office fairly early in January so it should be easy to get some information and arrange a few property inspections.

Important information:This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

Published: Tuesday, November 03, 2009

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