Buying a holiday house near Australia’s most popular city

Written by in Investment on February 9, 2018

2017 saw Melbourne continue as Australia’s no.1 domestic destination for would-be travelers. Surveys by Roy Morgan showed that between 2015 and 2017 Melbourne maintained its top position as a destination point, despite interest waning by -5.2 per cent over the two years. Sydney trails Melbourne, but also saw interest decrease by a similar amount (-5 per cent). The unsurprising standout was Hobart. An effective marketing campaign by the Tasmanian state government and booming interest in Hobart’s MONA and surrounding natural attractions led to a +8.7 per cent increase in interest for potential travelers.

Monopolizing on Melbourne’s sustained allure for tourists, homeowners (especially downsizers) have seen an opportunity to create an ideal lifestyle for themselves without suffering any major financial compromises.

With Melbourne having experienced the second largest increase of capital growth in Australia over the past ten years (second only to Sydney), many homeowners have seen an opportunity to borrow on their equity or sell their existing homes to buy properties either on the coastline or in the country, either as their permanent place of residence or as a second home.

2016 ABS figures revealed significant vacancy rates in many regional areas, the highest being Taylor Bay (89 per cent vacancy rate). What this figure fails to properly reflect is both the time of year that the census was conducted (Winter) as well as the fact that census night was on a Tuesday, which means that many houses with occupants working and living in the city midweek were not accounted for.

Figures from below show some of the highest performing regional and coastal areas surrounding Melbourne, in terms of an increase in the median sale price of houses since this time last year.


Town February 2017 February 2018 % increase
Anglesea $670,000 $795,000 +18.7%
Blairgowrie $772,500 $972,500 +25.8%
Bright $411,000 $519,500 +38.5%
Daylesford $475,000 $519,500 +9.3%
Flinders $1,482,500 $1,610,000 +8.6%
Healesville $475,000 $600,000 +26.3%
Macedon $620,500 $815,000 +31.3%
Mount Martha $881,000 $960,000 +8.9%
Rosebud $475,000 $570,000 +20%
Rye $567,5000 $666,000 +17.4%
Torquay $695,000 $770,000 +10.8%


Gerard Gray of Dickens Real Estate in Bright says buyer interest in the area has been unprecedented, and it isn’t just holiday homes that are soughtafter.

“We’ve certainly seen the most significant growth since the start of the property boom in the early 2000’s,” says Gerard. “Sale numbers were fabulous in 2017, driven by low stock levels and the consequent play of supply and demand. While there were holiday home purchases, what we noticed was a significant proportion of families relocating to Bright for both the lifestyle and affordability. School numbers were higher than what was expected for the year, which tells us that parents increasingly wish to find areas to live where their children can have a healthy and community-oriented upbringing.

“We expect that a little less stock will be available in 2018, which should continue to drive demand in the area.”

Homeowners that have benefited from significant capital growth within Melbourne have opted to either borrow on their equity or sell their larger Melbourne homes to split their finances between smaller apartments in Melbourne and larger properties in regional/coastal areas, where they can enjoy the benefits of a lifestyle in the country over the weekends, or extended periods of time for many retirees and downsizers.

While holiday homes have been traditionally leased as short or long term rentals over busy periods, an increasing trend is for homeowners to use such short term services as Airbnb to lease their apartments within Melbourne. These often come with the benefit of year long interest from tourists, and increased interest over Melbourne’s various major events, such as the AFL Grand Final, Spring Carnival and Grand Prix.

Down on the Mornington Peninsula, the economy continues to be dominated by construction, with ABS data revealing that the construction industry’s output nearly doubles that of the second largest industry, manufacturing. Upgrades to infrastructure continue to not only make the Mornington Peninsula a desirable living destination but are also shortening travel times to the city.

Make sure to keep in mind some of these key considerations when buying a holiday home. If you do decide to lease either your regional property or your city property for long or short periods, you need to be aware of some of the tax implications and ongoing costs. Apartments close to the city often come with significant yearly body corp fees, while renting out either home for any period of time requires you to keep track of such periods so that you can accurately report these as tax exemptions.