They’re often derided as poorly built weekenders or secluded shacks, but holiday homes can make better investments than most other types of housing. Why?
It all started with the gold rush. Melbourne and Sydney became cites, immigrants poured in, new ideas of freedom and nationhood were born and the age of speculative investment arrived.
Australia’s population trebled to 1.7 million in the twenty years to 1871 while the new railway lines were opening up vast areas of the hinterland for development, so as the gold rushes ended, private investors speculated on a new asset – land.
All through the 1870s and 1880s land was subdivided and put on the market everywhere – along the probable routes of as yet unbuilt railway lines, in projected future suburban areas, along coastlines or wherever it appeared likely that existing cities would spread or new cities could be founded.
Large tracts of original land grants were purchased and hastily sub-divided and put back on the market. They were speculatively traded and re-traded, with the price rising spectacularly each time.
The attraction of residential land as a secure investment was irresistible. Increasing numbers of investors were sucked in as the demand for land proved to be insatiable.
In many cases hasty subdivisions were put on the market without even having been surveyed on the ground, but rather than demonstrating the firmly entrenched belief that land had intrinsic value, what was being exhibited was pure speculation.
Bust followed boom in 1890 when Great Britain’s bankers turned off the tap.
Without funds, the land speculation boom collapsed as buyers disappeared and our major cities were left surrounded by huge amounts of residentially zoned subdivided land in some of the most beautiful mountain and seaside locations, but virtually all of this land was inaccessible, unserviced and virtually worthless.
This is how around one million blocks of land on which holiday homes were eventually built came into existence, at a time when the population of Australia was only around three million.
[sam id=37 codes=’true’]It wasn’t until the motor car arrived in the early twenties that Australian families suddenly had access to these undisturbed blocks.
Not only were they dirt cheap to buy, they were located a short drive from the cities in beautiful coastal areas such as the Central Coast, Gold Coast, Mornington Peninsula or Fleurieu Peninsula and the mountains that lay behind, such as the Adelaide Hills, Dandenongs and the Blue Mountains.
Cheaply built holiday homes sprung up everywhere only to stop with the onset of the Great Depression and the Second World War.
During the post war baby boom many of these weekenders became affordable permanent housing, especially on the urban fringes of Sydney and Melbourne.
They were snapped up and although prices rose quickly, remained well below median city house prices because the dwellings tended to be badly built and poorly serviced.
As the suburban sprawl continued during the sixties and seventies, holiday homes became islands in highly sought after areas, surrounded by modern unit blocks and houses.
Many survived this period of suburban expansion intact, but for the most part the only investment attraction was their potential for future redevelopment and they remained cheap rental options, looked upon with some disdain by other home owners.
For those still standing, the stigma attached to them as sub-standard housing has long since disappeared.
A new generation of home owners has seen the potential of their location and the fact that they are still priced well below other houses in the same area.
While a typical holiday home in 1950 was valued at less than half the price of a typical family home, the situation has reversed dramatically, so that the same holiday home would now be worth around 30% more.
In other words, the location of holiday homes in the most sought after areas of our capital cities has meant that their capital growth rate has been much higher, even without renovation or improvement, than that of median priced housing.
In addition to achieving high passive growth in the right areas, investors in ex-holiday homes can achieve the highest growth in equity that is currently possible in the housing market, by renovating these properties.
This is because they are invariably located in the most sought after suburban areas, facing beaches and lakes in streets where many houses are at the high end of the price range for the suburb.
The house on the left was a five minute walk to one of the best beaches near Sydney. The street features a collection of renovated homes along with a few old weekenders like this one, which sold for $550,000.
It was renovated to the two story mansion below, selling at auction for $1,700,000 a year later.
The potential of old holiday homes for renovation is enormous and unlike areas with heritage listings and council restrictions on development, such renovation is encouraged by council and the local residents.
The trick is to find an easily renovated property with views, well located close to the water and facilities, in an area offering a mix of both old weekenders and renovated mansions.
Yesterday’s holiday homes are poised to become tomorrow’s investment bonanza. But don’t wait too long – once the last weekender has been renovated they will be gone forever and the opportunities they present to investors for capital growth and renovation will disappear with them.