The reality of buying a holiday home


Every year over the summer holidays, a great migration takes place. Australians, in their droves, pack their bags, load up their cars and head for the coast or the country for a well-earned vacation.

Many who enjoy magical summer getaways also have an annual dream of buying a holiday home of their own - a dream that has been made more financially feasible in recent years by the possibility of renting it out through one of the popular short-stay accommodation platforms such as Airbnb and Stayz.

But new regulations being rolled out by governments and councils are biting into this short-stay rental proposition.

Sun chairs on balcony overlooking the beach at a holiday home.

So, for anyone seriously contemplating their future holiday plans, here are some of the pros and cons of buying a holiday home from a lifestyle and investment perspective, as well as a run-through of the recent regulatory changes that may affect your future plans.

Let's start with how to holiday:

Alternatives to buying

Purchasing a property of any kind is likely to cost hundreds of thousands of dollars in upfront and ongoing costs.

So, aside from owning a holiday home, what other accommodation options are there and how can you get the best bang for your buck when booking them?

Hotels and motels

While there won't be a hotel or motel in every small town, and they might not suit the needs of larger groups, they could be an option for smaller families.

With any booking over the busy summer period, the general advice is to do it as early as possible, and make sure you check prices on different comparison websites as well as directly with the hotel.

Short-term rentals

Whether it's through Airbnb or a traditional letting business, booking a short-term rental might be the best option for families or groups looking for an entire house.

Again, booking well in advance is likely to be key to securing the home you want for a decent price, and for online bookings it's worth contacting the property directly as it may offer discounted rates.

House swaps

For holidayers wanting to try something different, a house swap with another family could fit the bill.

Rather than having to find someone to swap with by yourself, there are plenty of dedicated online platforms that facilitate the process, and while these websites generally charge a fee, it will likely cost far less than renting a holiday home or paying for a hotel.

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Lifestyle vs investment

There's a common line of thinking that purchasing a holiday home should be a lifestyle, rather than an investment, decision. But is this true, and is it at all possible to have the best of both worlds?

The equation is certainly simpler if the holiday home is bought purely for your own holidays or for those of family and friends. In this case, it's a matter of weighing up the costs of having a holiday house of your own against the benefits.

The outlay is unlikely to be trivial, though. In addition to the costs of buying a home (for example, loan repayments and stamp duty), there may also be ongoing expenses such as insurance, council rates and bills to factor in.

On the flipside, the benefits are pretty straightforward: you'll have a home away from home to enjoy whenever you want. And it might not be a major priority, but you could even benefit from capital growth over time.

The decision will likely become more complicated if you're looking to use your holiday home for your own vacations while also renting it out at other times.

Any income generated through rent can obviously be used to offset the costs, but there may also be additional expenses, such as management fees and landlord insurance related to renting it out.

It's also worth bearing in mind that if you're planning to use the home yourself during the summer or other holidays, these are also likely to be the most popular times for guests and the periods with the largest earning potential.

That's not to say a balance isn't possible though. Lloyd Edge, a property expert and director of Aus Property Professionals, recently took the plunge himself by purchasing a holiday home in Mollymook on the NSW South Coast.

"It was a lifestyle decision for us, but I always have my investment cap on as well. We bought it because we were looking for a weekender that we could take our family to, but we also wanted to be able to rent it out to bring in some cashflow by listing in on Airbnb," he says.

Bobby Haeri, co-director of The Investors Agency, says that it's on this point - the reliability of cashflow - that buyers will need to consider particularly carefully before purchasing a holiday home that they plan to rent out.

"Many people are enticed by investing in holiday homes, as they feel it's a great way to invest in an asset while being able to enjoy it for regular holidays," he says.

"However, in my opinion, not all investments are assets and people should be very careful when looking to invest a large amount of capital into holiday homes as they can be a burden and leave a hole in the family's cashflow."

Impact of regulations 

Among the many considerations for current and future holiday homeowners wanting to rent their homes on the short-term market is the impact of regulation.

While it can be argued that platforms such as Airbnb have provided lucrative income streams for some homeowners and greater competition in the accommodation market, various state and local and state governments have begun introducing measures to disincentivise short-term rentals in an effort to combat the lack of long-term rental housing in some tourist hotspots.

For instance, Brisbane City Council has a 65% rates surcharge for short-stay properties that are rented out for more than 60 days a year, while Hobart City Council recently voted to double rates for short-stay owners.

The Victorian government has announced a 7.5% levy on revenue collected by platforms such as Airbnb and Stayz from 2025.

These are just some of the reforms. More are likely to be introduced unless the housing crisis is rectified soon. But will that change the equation for holiday homeowners? For Edge, it will at least prompt some pause for thought.

"I think it will have a bit of an effect. I don't think it will have too much of an impact on investors purchasing property in those areas necessarily, but they might end up renting it out as normal investment property with a tenant and 12-month lease.

"Those people who simply buy a holiday home as a combined holiday home for themselves and an Airbnb - they might have second thoughts."

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Tom Watson is a senior journalist at Money magazine, and one of the hosts of the Friends With Money podcast. He's previously worked as a journalist covering everything from property and consumer banking to financial technology. Tom has a Bachelor of Communication (Journalism) from the University of Technology, Sydney.