Source: Melbourne Investor Feb/March 2007

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Why Beachside Property is hot

Source: Melbourne Investor Feb/March 2007

Written by John Hendra

Golf Club Properties Limited

John was a founding partner of MITS Ltd; an information technology group established by a management buy-out in 1990. Since 1998 John has been instrumental in establishing Golf Club Properties Limited.

Why Beachside Property is hot

From Queenscliffe to Bass Coast, coastal retreats and property along Victoria’s coastline have always been well sought after. Today, they are an investment goldmine.

Buying into a coastal town is a lifestyle decision that more and more people across Australia seem to be making. Australia’s resilient economy has avoided the economic downturn experienced by many OECD countries during 2001 and 2002 and as such interest rates have remained generally stable in the last fi ve years despite recent rate rises.

By the Valuer General’s reckoning in A Guide to Property Values 2005, prices have been determined by two factors: proximity to city and proximity to coast. The big winners were those who owned property in Melbourne’s inner or bayside suburbs, or on the coastline within a couple hours drive of the city.

Of all the areas Phillip Island grew the fastest with prices at Smiths Beach jumping from $70,000 in 1995 to $324,000 ten years later. Sorrento on the Mornington Peninsula quadrupled from a typical value of $150,000 to $590,000 while houses along Western Port, South Gippsland and Bellarine coastlines almost tripled in price. Properties with spectacular ocean views remain the most hotly sought after and virtually assure long-term value growth particularly due to the limited supply.

One particular area in the Bass Coast region, San Remo, offers stunning ocean, island and bay views. It’s cliff top outlook proffers the perfect getaway opportunity for landlocked Melburnians looking for the peace of a coastal town. Bayviews, beach walks, wineries and the proliferation of golf clubs and resorts strongly support the growth in interest for coastal property.

So why have coastal areas boomed? Here are six clear reasons:

1. Families continue to aspire to own inner city family homes and weekend getaways, influenced by inner city apartment options over traditional family homes.
2. Retirees are making the sea change, converting holiday houses into homes and selling inner city properties to fund lower cost coastal ones.
3. Upgraded freeway access and by-passes are reducing travel times.
4. Local council support of tourism-based infrastructure provides upgraded local amenities therefore improving recreational lifestyles.
5. Increased level of housing quality and new constructions are turning areas into more attractive and appealing destinations.
6. Growth of ‘resort’ style properties with an array of family amenities without the maintenance issues.

Positive population growth, huge tourism rental potential, declining household sizes and rising incomes ensure that demand for dwellings constantly outpaces supply and prices continue to rise.

Investment options in these locations range from buying your own holiday house for your own personal use, to buying a holiday apartment which provides a year round rental return. If you hope to negatively gear your holiday house remember you can only claim tax deductions on the period the house was actually occupied by tenants throughout the year, a common
miscalculation by would-be investors.

The best tip is to ensure that you do your research before you jump into buying a coastal property. Seek investment recommendations from your preferred financial planner to understand how holiday home rental and resort leaseback/rentals work. Some of the resort style apartments have the potential to deliver a self funding investment from day one from higher rental returns by being in more appealing locations and offering more recreational facilities.

See www.land.vic.gov.au as a starting point.