Real estate in coastal and rural areas surrounding Sydney has enjoyed price rises in recent years on the coat-tails of a booming capital city market. This is due in part to a resurgence of the desirability of weekenders. Buying a holiday home is a bit of a romantic endeavour, so if you are thinking of taking the plunge, please read these pragmatic tips for buying a holiday home, or not…
1. Will you really use it? If it’s not within a 2 hour drive, you will start to find reasons not to get in the car. If your kids are in Saturday sport you’ll only make it there during school holidays.
2. You’ll suddenly have a lot of new friends. They might even get more use of it than you do. Freeloaders aren’t the best friends to have…
3. Maintenance is a huge cost and responsibility, particularly in coastal & bush areas.
4. Can you find a trusted local to keep an eye on it? Cleaning, gardening, maintenance, giving access for trades when needed… all difficult to do from afar.
5. Land tax. Ouch… Depending on the unimproved land value, you could be up for an annual bill in the tens of thousands of dollars.
6. Do you know how much to pay? City dwellers often buy weekenders wearing rose coloured glasses and decide on value relative to where they live. In other words, a place might seem like “a bargain” compared to what you can get close to home but is really over-priced when you consider where it is. This is probably one of the most important tips for buying a holiday home.
7. Are you picking the right time of the market cycle to buy? The weekender market has distinct peaks and troughs. Be careful of buying when there is a lot of demand, because prices come off the boil very quickly when city prices stop growing and they take a long time to recover.
8. Limited capital growth. Sea change and tree change areas simply don’t have the drivers that create sustainable market growth, so the value of your holiday home will climb at a slower rate than a city property of equivalent value.
9. Opportunity cost. Further to the point above, by committing to a holiday home, you’ll be foregoing growth that you could achieve by investing your money and borrowing capacity elsewhere.
10. They are extremely illiquid. It’s hard to find a buyer quickly for a holiday home so if you have made a mistake, or if you need to sell for any reason, you could get trapped. You’ll just have to hope the buyers haven’t come across these 14 tips for buying a holiday home.
11. You can’t rely on short-term rental to offset the mortgage. Seasonality affects demand, as does the availability of competing listings, so the occupancy & returns will both be patchy. Plus, this is a segment of the market that is vulnerable to new regulation.
12. Possibility of bad neighbours who are really hard to manage from a distance. If they are permanent residents, they could trash your dreams of advertising your holiday home for short-term rental. Or they could have a sense of proprietorship over your property which can cause problems. Or they could also be weekenders who rent their home as a party house.
13. You might get bored going to the same place all the time and stop using it.
14. It’s cheaper and easier to rent somebody else’s holiday home when you feel like getting away from it all. Plus, you get the chance to try out many different locations and enjoy the change of scenery… literally.
These tips for buying a holiday home are designed to protect you from making an expensive mistake. That said, we do know a few people who own a weekender that they are delighted with, so we know it can be possible to make a successful purchase. It’s just that they are the exception to the rule and luck has often been a factor. To maximise your chances of success, we encourage you to take off your rose coloured glasses, invest in A LOT of research and don’t rush it!
At Good Deeds Property Buyers, our mission is to help people make good property decisions. Part of that is knowing what advice is needed, as well as where and when to get it. If you’d like to find out how we can help you buy the right property, send us an email today.
Published: 7 March, 2018.
DISCLAIMER: Good Deeds buyers tips are intended to be of a general nature. Please contact us for advice that is specific to your individual circumstances. You may also need to get advice from other professionals such as an accountant, mortgage broker, financial planner or solicitor.