Hands up if you window shop for a holiday house while on a ripper holiday? Yep, we all do.
It’s hard not to get swept up in the vibe of a great holiday destination, and understandable that you want to buy your own four-walled piece of it – to return to, to rent out or to retire in.
Hundreds of thousands of Aussies own holiday homes.
It’s estimated there are about one million holiday homes across the country today, ranging from alpine shacks to beachside cottages, inner-city apartments and everything in between.
Sounds good. So why are fewer of us buying holiday homes in 2014?
According to new research there is imbalance in supply and demand of holiday homes.
The annual realestate.com.au Housing Affordability Sentiment Index (HASI) survey for 2014, released in May, showed 6% of all vendors were in the market this year to sell a holiday home.
Only 1% of all buyers were in the market this year to buy a holiday home.
Read more: HASI: national housing sentiment 2014
Are we over holiday homes?
Not on your life, says Bernard Salt, Demographer, Social Commentator and Partner of KPMG.
Salt, who is Chairman of the Tourism Forecasting Committee, agrees there’s “a mismatch” between the number of holiday home sale listings and holiday home buyer numbers.
But, he says, the present slump is no reason to “jump the gun” and cash-out.
“What will drive the next holiday home demand surge is another economic boom,” Salt says.
“The past one ran from 2001 to 2007. Everyone was highly leveraged and buying holiday properties on the Sunshine Coast and Gold Coast and other holiday locations and then the economic outlook changed with the GFC. But there are signs of improvement.
What will drive the next holiday home demand surge is another economic boom.
“The logic of the holiday house is still sound and if you own a holiday home my advice would be don’t be too quick to cash out unless you need to.
“The next upturn may be 2018 to 2022 – or sooner – it always comes and when it does, it will be hard and fast.”
Salt forecasts Gen Y – people born between 1981 and 1994 – will play a big role in the next holiday home bonanza. Latest HASI results don’t rule this out.
A whopping 53% of Gen Y is already property owners, an increase of 5% on 2013’s figures, and almost one in every four (23%) own investment properties.
Of those who own their own home, 47% want to buy a second property in the next five years.
The question is, will Gen Y’s growing property portfolio include homes of the holiday kind?
Read more: How to style a holiday home
The holiday homes lifestyle will “never go out of fashion”, says Salt. But, right now, buyers are wary of such a big discretionary spend and are preferring to take budget holidays and cheap flights when we want to get away.
The holiday homes lifestyle will never go out of fashion.
“You really need to have your career established and usually your own home before you buy a holiday home,” Salt says.
“But of course Generation X is more frugal, more cautious than Gen Y, and there is just not enough of them (Gen X) to make any real impact on the holiday homes market, which is why the next boom will be almost certainly be driven by Generation Y.”
Read more: Are tree changes the latest in luxury leafy getaways?
Key holiday home questions
If you’re thinking about buying a holiday home, Your Empire buyers agency Chief Executive Officer Chris Gray says you should ask yourself these key questions:
- What is the total annual rent (not just during peak holiday times)?
- What is the capital growth outlook?
- How long is this destination’s holiday season?
- Is the location multi-faceted, or is tourism its only economic driver?
- Who will manage your holiday home’s lettings?
- What are the alternatives?
“When analysing any decision, especially a financial one, I always look at the alternatives and weigh up the pros and cons,” Gray says.
“Have you considered investing in a more secure location, where there’s more industries and demand supporting the area, and then using this rental income to rent in the holiday destination of your choice?
“Do you really want to go to the same holiday destination every time, or would you like the flexibility of going somewhere new each time you holiday?”
Not all holiday homes perform the same
WBP Property Group Chief Executive Officer Greville Pabst says it’s normal for our holiday homes to suffer during an economic downturn or property cycle trough.
“This is because holiday properties are typically seen as discretionary assets and aren’t underpinned by the same levels of demand as a regular residential property,” Pabst says.
“But, not all holiday properties perform the same.
“A well-selected beach house will not only hold its value better during hard times but will grow significantly more in value during the good times.”