Demand for regional property is surging as local buyers upgrade their homes and tens of thousands of city dwellers relocate to the regions for a lifestyle change as they’re able to work from home. 

There’s also a third group boosting competition for regional properties – holiday home buyers. Their motivation is two-pronged – secure a safe holiday destination for their families to enjoy during the COVID-19 era, and leverage ultra-low interest rates to invest in booming regional markets.

As discussed in our McGrath Report 2022, the significantly increased competition for regional homes is resulting in exceptional price growth that even outpaced the cities by a significant margin in FY21. 

Regional NSW home values rose 21.1% vs Sydney 15%, regional Victoria 15.9% vs Melbourne 7.7% and regional Queensland 17.1% vs Brisbane 13.2%, according to CoreLogic figures. 

These capital gains are making the concept of buying a holiday home more appealing. City dwellers can buy a comparatively affordable property, receive a very reliable rental income due to the popularity of home sharing platforms, and ride the wave of capital growth occurring in holiday hot spots today. 

A survey commissioned by ING shows 32% of today’s investors are considering buying property in holiday towns compared to 30% targeting the inner city and 37% preferring outer city areas. 

The key motivators for investing in holiday towns include value for money (50%), the ability to use the property as a personal holiday home (28%) and taking advantage of the burgeoning holiday home rental market (25%). 

The history of Australian holiday homes can be traced back to the late 1800s, when many wealthy families owned substantial holiday houses in popular beachside areas. 

In the 1920s and 1930s, the ‘weekender’ gained popularity as mass car ownership allowed the middle class to discover less crowded vacation spots, where they typically bought basic fishing cabins.

Between the 1960s and 1980s, the appeal of holiday houses declined as working women demanded a proper vacation instead of merely “a change of kitchen sink”. 

The emergence of resort hotels in Australia, Fiji and Bali encouraged shorter but more luxurious holidays built around services and activities, according to tourism historian, Richard White.

Today, a humble fishing cabin is less likely to satisfy middle class buyers. Many are seeking higher quality properties in prime coastal locations, and this demand is changing local markets, not only through raised competition and higher home prices but also through gentrification.

The NSW Central Coast provides a case in point. The traditional go-to destination for Sydney families seeking an inexpensive break, the area saw surging buyer demand in 2020 for old stock to be ‘flipped’ into profitable Airbnb holiday homes in waterfront locations such as Avoca, Forresters Beach and Killcare.

The desire to spend more time away from cities, and to “holiday at home” in Australia instead of overseas (for now), is creating more interest in grander holiday homes with better amenities, too. 

Some older buyers plan to convert their holiday houses into their primary homes upon retirement, so they are especially motivated to buy higher quality. 

CoreLogic data shows house prices in Australia’s most loved tourism hot spots are soaring. Annual growth is as high as almost 40% in Byron, 27% in Mansfield, Victoria, and 21% in Noosa. 

In years gone by, holiday homes were never about a prospective return on investment. For many, lifestyle factors have always outweighed any possible monetary gains. 

Whilst this attitude is changing somewhat, as property is increasingly seen as the best way to grow wealth, the big takeaway from the pandemic is the importance of a good work/life balance. The holiday home embodies this new goal, so current strong demand looks likely to continue.  

To read more about the best holiday home markets, download the McGrath Report 2022.

The views expressed in this article are an opinion only and readers should rely on their independent advice in relation to such matters. 

For more information including articles, checklists, guides and more visit McGrath’s Insights Centre.

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