Click here to read Homely’s full article.
From original:
Whether you’re bolting or walking into the new year, the idea of an endless summer spent at the beach isn’t far from anyone’s mind. Evenings spent on decks watching the kids play in the garden, with a cold glass of something in your hand or packing up sandy towels and drink bottles after a hot morning at the beach, there’s nothing more Australian than a beach house.
The thought of whether you could live there forever certainly crossed your mind, and in the bliss of it all, it probably made sense. Would you leverage equity and buy a second place near the beach? Maybe a small apartment you could Airbnb during the off season while you and the family could head down over summer? Or throw in the towel completely and just move permanently down the coast. It’s only a few hours’ drive right.
While all of these are possible, a good idea should always be sense checked in the cold light of day so we thought we’d ask the experts at their desk for their thoughts on why buying a beach house is (mostly) a great idea.
Remember, before taking the plunge, check with your accountant or financial adviser as there are different tax implications that may apply to you.
353 Esplanade, Mount Martha VIC 3934 listed by Warlimont and Nutt Real Estate
Positive news for potential buyers
In a recent article by Nila Sweeney for the Financial Review, supported by data from CoreLogic, it was reported that house prices in popular coastal towns in Australia have experienced significant declines. Byron Bay in particular witnessed a reduction of more than $600,000 from its peak value two years ago. These changes are attributed to factors like rising interest rates, which have impacted both sellers and buyers. This trend of decreasing property values – or softening – is prevalent across various coastal locations, with 27 towns seeing drops over $200,000 and 56 towns over $100,000 from their pandemic highs. For instance, Byron Bay’s home values have decreased by 24.1%, Ocean Shores by 25.2%, Suffolk Park by 23.7%, Lennox Head by 23.2%, and Brunswick Heads by 22.3%. This shift presents new opportunities for buyers who were previously priced out of these markets during the pandemic-driven surge.
In contrast, some more affordable coastal areas in Queensland, like Moore Park Beach, Elliott Heads, and Burnett Heads, have seen price surges to new highs, delivering major gains to owners in the region.
So what do the experts think?
If there’s one thing the property market has been, it’s inconsistent. Nevertheless, there remains plenty of opportunity for would-be seachangers looking to make the move. Our experts weigh in on what they think.
Matthew Scafidi, Abode Advocacy
“If you have the ability to buy a beach house or holiday home it can be a great investment, especially if you are going on holiday let it when you’re not using it. This can bring you in an income that will help with repayments, whilst giving your family a great holiday throughout the year. If you choose your location correctly you should also expect to see good capital appreciation also.”
LOT 312 Coastal Link, Apollo Bay VIC 3233 listed by Great Ocean Road Real Estate
Pete Wargent – Allen Wargent Property Buyers
“There are now more than 200,000 Airbnb listings in Australia. It’s become more popular and it’s a great way to increase rental incomes and yields on property. Buying a beach home can give you the best of both worlds – personal use, and an investment rental property. Furthermore, being close to the water is a proven point of scarcity for Aussie property.
Indeed, properties with water views can sometimes even appear immune to market cycles, being almost continually in strong demand. Some caveats – you need to make sure you account for a holiday home correctly at tax return time, as many don’t (check the ATO rules for what constitutes being available for rent). Also, coastal markets saw a huge surge in prices through the pandemic, so you need to be careful about not overpaying at the potential peak of the cycle.”
4/40 The Esplanade, Torquay VIC 3228 Listed by McCartney Real Estate
Tim Carson from McCartney Real Estate
“Whether you rent it out or downsize, beachside property – especially properties down the surf coast of Victoria, such as Torquay, have shown to be great investments from any angle. We’ve seen capital gains year on year as well as strong returns for people who take advantage of the holiday leasing period. A beach house is also a great idea for city dwellers looking to downsize or for families. As an example, Torquay offers great schooling, kids activities and more for families as well as a strong sense of community and beachside bliss for those looking to downsize. You can’t go wrong with a beach house, whatever way you look at it!”
32C Riverside Drive, Torquay VIC 3228 listed by McCartney Real Estate
Ben Williams, Head of Investor Relations Homely
“There are a number of advantages to owning a beach house. Firstly, holiday rentals, whilst very seasonal, can deliver great income and for many, will allow the owner to take advantage of negative gearing benefits whilst still being able to use the property throughout the year. It also provides the owners much more flexibility over their own properties. The residential tenancies act is very burdensome for landlords and choosing to rent your property on a short term basis removes the need to complete things like regular compliance checks (which are expensive) and having to go through the headache of removing troublesome renters.”
13 Toorbul Street, Bongaree QLD 4507, listed by LJ Hooker – Bribie Island
It would be remiss of us not to include a contrarian point of view. Lauren Jones, LJBA, weighed in with brutal honesty:
“As a Buyers Agent I often get asked whether buying a beach house/holiday home is a good decision, and most of the time I tend to recommend against it. It doesn’t often make sense financially – especially now that the price of property has increased so dramatically. What I usually will recommend to these people is to buy an A Grade investment property that meets their goals and objectives of wealth creation, and then Airbnb or get a hotel for their holiday breaks.
When a lot of people think about buying a beach home, they think about buying a unit in Gold Coast or Sunshine Coast. There can be issues with buying an investment property in these markets. Often these units are in big complexes with extravagant body corporate fees, the buildings can have structural and/or maintenance issues and these locations have a history of being quite volatile – often due to oversupply issues. Some people may find themselves having to put more money into the property than they expected, or even find themselves with a property that is worth less than what they paid. This is of course not always the case. It is good to reach out to an accountant or financial planner to discuss this further as I am not qualified to give financial or tax advice, but when you buy a beach house as a second property, this property does not have the same tax benefits as your principal place of residence. If you don’t generate any income on the property it will be subject to capital gains tax when you sell it. If you do decide to rent it out on a platform like Airbnb, you will need to include the income on your tax return and pay any necessary taxes on it also. You can find out more information on the ATO website here. While sometimes I believe it can be a good outcome, I find more often than not, buying a beach house is not the right financial move.”
There you have it. The experts have spoken. And there’s plenty to think about! Whether you’re investing in an asset that may enjoy capital gains over time, investing in the ideal lifestyle for your lifestage or family needs, a beach house could be great lifestyle idea. Just make sure you do your research first to make sure it’s also a good idea financially.
