With Australia Day signifying the conventional end to the summer holidays, numerous holidaymakers with sun kissed skin and sea smelling hair, will be considering buying their own seaside loft or beach house.
In light of summer's timely closure and the traditional influx of seaside home buyers, Australian property investment firm Aviate openly advises everyone to get a hold of themselves and stay away from buying holiday real estate properties.
Aviate Group managing director Neil Smoli spoke with The Australian Financial Review and disclosed, "Investing in a holiday home is anything but a holiday and investors should not let their emotions cloud their view."
Smoli said holiday homes for the most part experience consistent low performance in capital growth and in rental return profits. He is also exposes that most money lenders and banks have very poor interests in financing holiday properties.
Smoli said that rental yield is unreliable and unpredictable due to its seasonal nature. Financers are known to remain in the safe zone. Given the unpredictable climate, it is less like likely that anyone would finance such venture.
This judgement is also based on Aviate's experience with a handful of clients who lost a lot of money from investing in holiday home investments. Most of these purchases are emotionally influenced and were poorly strategized.
One example that Smoli sighted was a client that made gross profit of only $18,000 on a three-room loft in Cairns which he bought for $360,000 in 2005.
"The client was originally attracted to the property after a holiday in Cairns. They envisaged that they would go back annually, however they actually only returned once more since the time of purchase."
Smoli said locations terrible for holiday home investments were those prone to high unemployment, instability, limited livelihood opportunities or those dependent to one or two economic sectors, commonly tourism.
