Buying a holiday home? Don’t make this classic mistake
Aussie hotspots delivering standout rental yields in the holiday season have been revealed, but experts warn to watch out for some of these top mistakes.
With peak holiday season weeks away, investors can eye certain Aussie hotspots for not only relaxation but rental returns.
According to Palise Property founder Steve Palise, several markets are currently offering standout rental yields and strong capital growth prospects.
“Markets like the Sunshine Coast, Gold Coast, and the NSW coast, including The Central Coast, South Coast, and Northern Rivers, are seeing incredible demand,” he said.
He attributes the momentum to lifestyle migration, remote and hybrid work and a shift away from the major cities.
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“These areas are giving investors the best of both worlds: consistent holiday bookings and strong long-term growth,” Mr Palise said.
“The key is knowing whether you are buying for a holiday rental or purely as an investment, as each has its own nuances.”
Factors such as accessibility, local attractions and improving infrastructure were important contributors to a high-performing short-term rental market.
Mr Palise said investment hotspots in NSW included The Central Coast, Coffs Harbour and South Coast such as Wollongong and Kiama.
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“Most of that is coming from lifestyle buyers, Sydney weekenders who want a property they can manage themselves – but also doubles up as an Airbnb and use as a weekender or full time if they decide to move,” he said.
“Central Coast has a tighter rental demand than Sydney currently, the average is 10 applications per listing within 48 hours of it going live.”
Mr Palise said the Sunshine Coast in Gold Coast has also offered “fantastic performers” outside of Airbnb and holiday markets.
“It ticks all of the fundamentals but also layers on it’s a beautiful destination to be,” he said.
“It’s something like 12 beaches in the sunshine coast within a 15 minute drive and then the same thing in Gold Coast.”
Infrastructure and accessibility were noted as macro growth drivers of success, with airport upgrades, road improvements and lifestyle amenities increasing rental demand and property value over time.
“Infrastructure is going to give long term growth, population growth, job opportunities, good infrastructure spending and proximity to all the major amenities,” Mr Palise said.
Year-round demand was another important factor.
“If they (properties) don’t have any industry outside the holiday destination they are susceptible to that one industry and that’s it, certain things like the weather can affect it,” he said.
“Sometimes the Australian dollar can even affect how well a holiday location goes because you actually get less international tourists to it as well.”
Tree change locations such as the Blue Mountains or inland farm stays may surge in success over the opposite months of beachside locations.
“Beachside goes well in summer and the tree change ones – people go in the winters and the springs,” Mr Palise said.
Investors were said to also have done well with certain inland properties offering a tree-change.
“They are the Airbnb lifestyle properties you can do a farm stay, tree change stay where you get a six bedroom house with a big property with a pool,” he said.
“Those ones require a little more active management I would say as you have to stay on top of the market and what people want in the area.”
Some of the biggest mistakes buyers make when investing in lifestyle locations included buying in a purely seasonal market, not understanding insurance costs, council regulations on short-term rentals or year-round demand.
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According to Mr Palise, investors need to understand the differences in return potential, management requirements and local market dynamics.
“This is where most people fall over, they think just buying in the region will give you the same return and you can have a holiday destination,” he said.
Mr Palise said properties should sit in proximity to main strips of cafes and restaurants otherwise within walking or a short distance to the beach, bushwalks and lifestyle in the area.
“You have to know what holiday-makers and renters want – that’s typically proximity to infrastructure and the lifestyle amenities of that town,” he said.
“Then the actual layout of the property needs to be looked at as well, open and airiness to it, good sunlight and good furnishings. “Just changing the furnishings of an Airbnb can change the occupancy rate by 20 to 30 per cent.”
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Originally published as Buying a holiday home? Don’t make this classic mistake
