Holiday Homes Don't Make Financial Sense in 2025

Jason · 00:00Welcome to episode 229 of The Numbers Game. I'm Jase. I'm here with Nick and Marty, and today I'm excited because we're going to talk about holiday homes. Nick, it's exciting, right? We're happy. We're up and about.

Nick · 00:12No, no. I'm going to tell you why in 2025 you're not going to buy a holiday home. You're not even going to consider it, Jase. Marty's even thinking about selling his.

Jason · 00:23Well, you've got my attention early.

Marty · 00:24What, we buy a caravan or something instead?

Jason · 00:27Yes, that's the Aussie dream. A caravan.

Marty · 00:30Is that dead?

Nick · 00:31Well, it depends on the generation, but I see why you were talking caravans and Jase wasn't. It's a different stage in life. I just— Jase, any plans to buy a holiday home?

Jason · 00:43I think the feeling around it, like it would be a feeling of success and excitement that, you know, if I was in a position to own a holiday home, I think I'd just buy my— like buy a home full stop to start with. But I mean, yeah, I think when you, you know, if you had a vision board like some people do, there's that, you know, beach home that you can go down to to get away from.

Jason · 01:06Yeah, I live in inner city in Melbourne. So the idea of getting down on the weekend, I actually just ran the Inverloch half marathon on the weekend and, you know, was down by the beach. Pity it was Melbourne weather, so it was absolutely pissing down. But again, that idea of being able to escape on the weekend and get down and enjoy the beach.

Jason · 01:23Yeah, there's an appeal.

Nick · 01:25Just duck down Inverloch every weekend. That'd be relaxing, wouldn't it? What about when the marathons down the Great Ocean Road or Mornington Peninsula?

Jason · 01:36Yeah, good fun.

Nick · 01:36What do you do with the holiday home? Just leave it empty?

Jason · 01:39I could rent it out if I'm not down there. Like, if I'm not down there running the Mornington Half Marathon, I'll just rent the home out at a premium because there'll be heaps of people that want to rent my beautiful holiday home.

Nick · 01:50But when's the marathon? Annually?

Jason · 01:52May.

Nick · 01:53Okay.

Jason · 01:53Yeah, every, every May.

Nick · 01:55Look, I get the emotional side of the holiday home, and I think when we all grew up, not so much where I grew up, I grew up in a regional area, so it wasn't a thing. But I think my generation in Melbourne, a lot of them grew up with a holiday home down the Peninsula or down the Bellerine or out at the Valley, wherever it was.

Nick · 02:16But that was somewhere where, as a family, you escaped to and you, let's be honest, you made memories. You know, for us, we went to our grandparents on the Central Coast, and that wasn't a holiday home, but that's where we went every holiday, and that's where most of our memories were made.

Nick · 02:33So I think, um, I see the, the benefit of a holiday home, and I see why people want to do it. And I've actually considered it myself, and to be honest, I would still consider it myself, but with certain parameters. But I wanted to just tear it apart today and I wanted to talk about the cost and then talk about the benefit and why you were buying a holiday house and are you actually

Nick · 03:03getting from that holiday house what you wanted or what you thought you would? And then also look at the alternatives. What else could you be doing, you know, instead of buying a holiday house? But I'll skip to you, I'll pass to you. Sorry, Marty, you're you know, if there's anyone on this podcast who could afford a holiday house, it's probably you.

Nick · 03:22So thoughts?

Marty · 03:24Not gonna waste my money. Not gonna waste your money. No, I, I always remember growing up in Camberfield and my grandparents were in Forchner and they had the holiday, they had the little holiday shanty in Yarra Junction and we would go up there every Christmas and make memories like you say.

Marty · 03:42But it was a pain in the ass because they worked in Forchner and, you know, just getting there and then they had to mow the lawns and in the middle of winter, they didn't go up and to the point where they sold the house in Faulkner and went and lived in the Valley. And that's how we eventually all got there.

Marty · 03:58But it was just— and my sister's going through the same thing. She's got a little holiday house in Phillip Island, but the annoyance, she's going, we've got to use it more. We're paying all these costs and sometimes they'll rent it out over the Grand Prix and stuff with the motorbikes down there, make a bit of money.

Marty · 04:17But I can tell it's a pain point. So for me, I've never been sort of an advocate personally. I just find like I probably wouldn't use it and I'd probably go and, you know, stay somewhere else that, you know, when I want to stay.

Nick · 04:31Well, I think the reality is life's busier now than it used to be. And I'll be transparent, what pushed me away from a holiday home was seeing friends my age that have them that just never get there. Kids' sport. Kids' birthday parties.

Nick · 04:49There's always something on, on a weekend. And you know, to pack up your car on a Friday, head down on a Friday night in the hustle and bustle, stay all day Saturday, wake up Sunday thinking about getting back. You've got to get back Sunday night. I question how relaxing that actually is.

Nick · 05:06And of course, there's times in the year when you can get down there and you know, whether it's summer holidays or whatnot and you're spending a good chunk of time down there. For sure, I think holiday houses make sense. But what's the alternative? Could you rent a house over that period?

Nick · 05:23Could you go to a different area every year if you're really only getting down there for a good break once or twice a year? And I think what's happening now is, you know, the cost, the cost to maintain these properties, whether it's interest rates, if you have leveraged, land tax, council rates, insurance, inflation.

Nick · 05:46So people are probably going away and spending less, so they're not renting your properties. The cost is a real factor at the moment. And you've only got to look at areas like the Mornington Peninsula. We were going to bring it back to Melbourne. And, you know, I've been down there recently and it feels like every second house is on the market.

Nick · 06:01There's a for sale sign up. So it's a fair impact. And I think people are realizing that it's really difficult. And the challenge that I would I put to people is if you can afford to have a holiday house, then you can probably afford a pretty cool house.

Nick · 06:17So my argument has always been, why don't you have a house that you don't feel you need to exit every weekend or live in an area that you don't feel you need to get away every weekend? And I'll pick on Melbourne because that's where we are, but it almost baffles me that people that might live in Melbourne that have a holiday house 60 minutes down the road, You're going to the same weather conditions.

Nick · 06:38You're going to the same water almost, you know, bay to bay. So it's just, you know, I'm just challenging it and thinking, well, okay, there's so many other options now through Airbnb, stays, house swaps. My in-laws have an arrangement in place at the moment where they have a couple that live on the Sunshine Coast that are from the UK and they travel back there a couple of times a year.

Nick · 07:06My in-laws go to their house a couple of times a year. They're actually there at the moment, maintain the property, walk the dogs, and they get a free holiday on the Sunshine Coast twice a year, and they absolutely love it. They're baby boomers, so they're cautious with their money like a lot of the baby boomer population are.

Nick · 07:23So I think now there's so many alternatives to get away. Kids are busy with other things. Kids have different interests than what we might have had growing up, you know, riding the bikes all day. There's a kids are into different things. They mightn't want to be at the beach all day.

Nick · 07:40I think it's changing. And yeah, I think COVID is a really— I think COVID's kind of been a reset because everyone went that way because of COVID But now people are realizing the costs and they're starting to offload these properties.

Marty · 07:56And I think that's the difference, Nick. When you look at it back in the day, there's no Airbnb, right? So you go and stay at hotels and stuff, or you might do a house swap every now and again, but there was, there was no such thing as Airbnb. So that has really opened up the avenue to go and have different experiences with your family and you've got more flexibility and it's exciting.

Marty · 08:17So I go, to me, that's a big factor. And the other one is it was dirt cheap. People were obviously buying holiday homes far away from Melbourne metropolitan. And back in the day, it was very cheap to get into those properties out at Rosebud and, you know, back in the Valley, I remember grandparents bought for friggin' $20,000.

Marty · 08:38It's like $15,000. It was, you know, cheap as chips. So you could actually pay for it. And so I think the whole premise is different. And like you say, nowadays, why wouldn't you put more into your main asset and go and experience the world the way you want to experience it?

Marty · 08:57Yeah, that's my thought process around it.

Jason · 09:00Joe, I love it. I think it's a great, great concept. And so, I mean, we've, we touched on it. I think we dropped the word primary place of residence or main residence exemption quite often, but that ability to generate wealth in a tax-free environment compared to the cost of holding a holiday home, the complications that come with it, the record keeping of when you use the property versus when you might have been renting it out to someone else.

Jason · 09:23You know, you need to keep a diary of all the days that it wasn't available on the market. You then need to prorate that for your tax deductions at tax time. And hands down, rental property tax returns are easily one of the most audited tax returns in Australia. At the moment, it is going bonkers, the amount of audit letters that have been sent out because the ATO is now collecting data from multiple, multiple sources, including real estate agents.

Jason · 09:49So a real estate agent now has to share with the ATO the data around how much rental income your property is generating. Now think about, you know, some of the silly things that happen. You've got gross rental income that the real estate agent has. But if you told your accountant the net rental income that hit your bank account because you forgot about the agent's commission or something that was pulled out of it straight away, you're an audit, you're a red flag, you're going to get audited.

Jason · 10:15You know, if the property is in husband and wife's name, but you told your accountant, now we put that 100% in my wife's name so that we can get a better tax deduction. You're going to get audited because there's two people's names on the property, but it's in one tax return. So there's all these complications now that, you know, and you may have had the intention of filling it out correctly.

Jason · 10:35You may even be using an accountant and still get it wrong. That's, you know, so the complexities around it, you know, that's just tax implications, not including just the general things that go wrong— maintenance, interest rates going up, insurance policies if you're in flood or cyclone affected areas like all these extra things to think about to hold a holiday home or, you know, if it's an investment property, but it's something you're using as a holiday home as well.

Jason · 10:59Lots of complications compared to other alternate wealth building strategies.

Marty · 11:04Yeah.

Nick · 11:04And there's probably going to be more complications because if you look at the recent regulations that have come in, I've just got 3 here. It's quite clear the government doesn't want people to have these holiday homes because they're an asset that sits there unoccupied most of the times. So Brisbane, 65% surcharge on rates for short-term properties.

Nick · 11:25Hobart, doubling of the council rates for short-stay rental owners. Victoria, 7.5% levy on Airbnb and stays revenue from 2025. So you just look at that and you think, what's next?

Nick · 11:40But that's just purely on the financial side. And I think if we go back, I don't know, 10 years, 15 years, however much longer you want to go back, but it was far easier to buy these properties. But you look at some of these areas now and the cost to get into these houses, to me it just doesn't make sense.

Nick · 12:00I think you're better off to go somewhere for a couple of weeks a year and go and experience somewhere completely different. Go and experience a different climate. Go to a— I know, Marty, you love the sunny coast.

Nick · 12:16Why wouldn't you go to the sunny coast twice a year for 2 weeks, actually get there and relax, spend the whole 2 weeks there in the sun versus, you know, I'm going to pick on Melbourne because that's where we are, versus try and get down there for 1 or 2 weekends of the year.

Nick · 12:32That to me is a better solution. And you might have a holiday house in one of those areas. So like Sunny Coast is a good example because people want to go there because it is sunny. So you're probably always going to get good rental on it. So maybe you have a holiday house in an area like the Sunny Coast where you can go to for a couple of weeks a year and get a different experience versus trying to find that weekender.

Nick · 12:53Because the reality is most people just don't get down there because weekends are busy.

Marty · 12:59And the weekenders, like if you, if you're buying to get into a weekender, like I did some numbers, like let's say you're going to buy something in Dramana and people just haven't got the capital to go in without much leverage, right? So in this day and age as well.

Marty · 13:14So it's like people are having to leverage up if they want to get into a holiday home. But look, just to give you a couple of numbers, if you bought for $950,000, which is the average medium house price out in Dramana now, which is unbelievable. Let's say you borrowed 80% of it, $760,000 loan to get yourself in at 6.2%.

Marty · 13:34Here are some of your annual costs. You got $47,120 in interest. You got $3,000 on general insurance. You got $3,000 on general maintenance, probably $7,000 electricity, water, gas bills. And then you got $2,325 on land tax.

Marty · 13:52If the land's around about that $600 mark. So your annual cost is around about $62,445. So that's not gonna be a holiday home. You're gonna have to Airbnb it, or you're gonna have to rent it out, which gives you a few more headaches. And, um, and even if you did rent it out, $595 per week is the average rent per week.

Marty · 14:14You're still going to be down $25,000, $30,000 in holding the property and not get to use it. And the capital growth is about 5.74% in the area. So it grows at $54,000 a year, but in the last 12 months it's come back 9.35%.

Marty · 14:31So who's going to want to hold that? That, just, just let me have the 2 weeks in an Airbnb. Less stress. I can actually enjoy my life. Why would I do that to myself?

Nick · 14:41Well, Marty, just to put some numbers to you, but we actually did go down the Mornington Peninsula after New Year's. So it was a little, it was a little bit cheaper than the Christmas period. The Christmas period was too expensive. And I just quickly worked it out. So the, based on the value of the house that we were in, I know what it sold for because I looked it up, but it was an awesome house, was in a great location, had everything you needed, but the weekly rent we were paying was 0.03% of

Nick · 15:12the property value. So you could rent that property out for 3 to 4 weeks of the year and pay less than 1% of the value. Now that's far less than trying to maintain the property even if you did get rental income on it, that's hypothetical.

Nick · 15:31You may get it, you may not. And then obviously with the new regulations coming in, plus the upkeep, if you've got someone renting it out through something like Stayz, the money that you pay to get that property cleaned. I've got friends—

Marty · 15:4440% or something, isn't it?

Nick · 15:45I've got friends that have got a house down there. It's like a second job. They're always getting phone calls. They're always fixing this. You know, it's short-term rentals. So people come in, they don't look after the place in a lot of cases.

Marty · 15:56So huge cost.

Nick · 15:58I look at what we paid over the Christmas break and it's far more economical than trying to hold the property yourself. Unless you were lucky enough to not have debt, but then you've got to discuss the opportunity cost of that money and what else you could have done with it.

Nick · 16:14So it's not, you know, some people would say, we don't have debt on ours. Well, no, you don't. But what's the opportunity cost of all that capital sitting in that property?

Marty · 16:22Yeah, it's certainly eye-opening when you when you talk about the numbers like that, it's, yeah, I'll take the 2 weeks away any time.

Nick · 16:29And you can be nimble. You can go elsewhere.

Jason · 16:31Are you finding these conversations that are coming up more and more in the financial wealth side of the business, Nick?

Nick · 16:37Not really. Look, the only holiday house conversations you have now, and I actually don't mind this strategy, is if you've got a plan to retire there. I've got a really good client who's got a house in Noosa and they they bought it, mutual client actually, Jase.

Nick · 16:53They bought it some time ago, so they did pretty well. But the reality is, like somewhere like Noosa, if you are lucky enough to afford to get in there, you got in there at the right time. It's pretty much unaffordable for most people now, including myself. But you would look at something like that and the rent would be unbelievable.

Nick · 17:12And if you had a long-term view to get there yourself, then that to me makes sense. So they're the conversations we might have with people planning retirement. But yeah, very rarely, like people our age now, it's all about trying to find enough money to educate your kids, let alone, you know, and they're all trying to keep up with sports.

Nick · 17:32You know, one's going to footy, the other one's going to netball or dance, whatever it is. They're not thinking about getting away on the weekend. They're trying to think about finding an hour on the weekend to have to themselves. So I just think life's changed and it's just not high on the agenda for most.

Marty · 17:51Yeah, I think the rental side of it, like even I was weighing up is renting out the property compared to Airbnbing our property in Doonan at the time. And it was like rental just made more sense on the longer term.

Marty · 18:10You didn't want people coming through the joint. And all the furniture you got to put in there, the linen. And I think the overall cost, I worked it out, was around about— yes, you obviously got more, but your cost was something ridiculous like 40% to 50% that you were burning on the gross revenue you were taking in.

Marty · 18:31So when you look at it and then you look at all the hassles of it, it just makes sense to rent it out and Yeah, and simplify it. I wouldn't do it as a holiday home.

Jason · 18:42Yeah. Interestingly, I guess if this is striking home for anyone who is listening or, you know, they've got friends that have holiday homes that aren't being utilized, it'd be a great one to throw to the team at Innov8 to just get in and have that wealth planning and financial conversation to go, if I hold onto this property, what does it look like and projected out?

Jason · 19:00Or what else could I do with that money or that investment in the short term that may get you a better bang for buck? And you know, if the plan is to one day have a house in that particular area down the track and be really interesting, you know, to map out what is the best financial outcome for you because, you know, there are definitely options out there that people don't consider when they go and make these decisions.

Jason · 19:19You know, investing emotionally, emotionally on the idea of the nice holiday home down by the coast versus, you know, as Nick touched on, having a better home to live in, to be close to home and enjoy the property you're in without having to escape every weekend.

Nick · 19:33You've still got your money invested in an asset being your home that's going up. So it's not like you— the argument might be, oh yeah, but I've got 2 properties going up. Well, no, you take that anywhere from, you know, we're talking Melbourne and that $1 million you had in a holiday house, you put it into something a little bit closer to Melbourne, it's probably going to have a high growth potential anyway.

Nick · 19:54And you're still getting that uplift on that capital amount that you put in and maybe spend some money on a pool. So when it gets hot, you've got somewhere to swim.

Marty · 20:02But Nick, aren't you even thinking like even with investment properties where it's not even a holiday home, that theory of actually selling up and putting it into an owner occupied to simplify life and maybe having some cash to go into other assets is not, is not the craziest idea in the world.

Marty · 20:20Depends on your overall plan, but, but it's not the craziest idea. I think people are genuinely thinking that they've got a business. I've got an asset working for me. Put a bit more in the owner occ, no capital gains.

Jason · 20:33Renovations, subdividing property, battle axe. Granny flat on the back. There's so many options.

Nick · 20:38There's two sides of the argument, Marty. You're right. Some people now, and the government's probably pushed us this way, but yeah, people want simplicity. All right. If I sold two investment properties and pocketed $600 grand in net value, I can put that into an owner-occupied house.

Nick · 20:54It's still going to go up in capital value.

Marty · 20:57Yeah.

Nick · 20:58And I'm going to get the house I want to live in and then I'm going to get, you know, a tax-free result when I sell it. The counterargument to that is some people will say, well, no, you know, don't buy a house worth $2 million, buy one worth $1 million and just deal with it and then have $1 million also earning you a rental income.

Nick · 21:14There's two arguments.

Marty · 21:18Or put it into shares or something.

Nick · 21:20Yeah, like some people are like, you know, but at the end of the day, what we see all the time is the money's the money. But at the end of the day, you've got to you can enjoy where you come home to every day. That's the other thing. And you can't put a value on that. So everyone's different and it depends on your motivations.

Jason · 21:37And I have a question that's just popped out. Is this going to be the resurgence of hotels and motels? If all the Airbnbs and accommodations that are short-term rentals end up sold or on the market or rented out long-term due to the regulations, government changes, surcharges and levies, we'll have less less options for Airbnbs and stays, do people go back to hotels and motels?

Nick · 22:01Have to go somewhere.

Marty · 22:02Where's the dog going to stay? If you're talking about family holidays and caravan, you know what I mean?

Jason · 22:08We're back to caravan parks.

Marty · 22:10Yeah. There's something nice about having a home to go to. It's, yeah. So I don't know, maybe, but I think we're now programmed a little bit to look out for those homes. It's like Nick went away. Over the Christmas holidays. I went to Rosebud, stayed somewhere. It's, um, you know, there's plenty of home away from homes now.

Marty · 22:27It's pretty cool.

Nick · 22:29There is.

Jason · 22:30Yeah.

Nick · 22:31I think the other thing too to consider is the, the work-life, um, work-life balance is probably the wrong thing, but the, the work balance, you know, you no longer have to live right near work. So, you know, if you, if you want to live somewhere different to where you are.

Nick · 22:50Hypothetically, you're in the north in Melbourne and you would like to move bayside, but it's not near work. Then the argument there, if you're working professionally in a professional business, not obviously in a trade or something where you need to be there, but you don't need to live close to work anymore.

Nick · 23:07So you can be more flexible in choosing where you would like to live and the lifestyle you would like. And you can build your life around that versus building your life around the location of your work, which would have been the case maybe 10, 15 years ago. So that's, I think that's another thing to think about.

Nick · 23:24You can really live wherever you want these days within reason.

Marty · 23:29And a lot of discussions in, you know, friends of my age are talking about, you know, we're coming out of our 30s and 40s always chasing something more. And it's like just the discussion around really simplifying, consolidating a position. Why do you always have to extend to chase in order to work harder and harder and harder, but take some of that progress, consolidate positions, live well, and enjoy life rather than running on this treadmill to nowhere

Marty · 23:59sometimes, even though you think you know where you're going. So even changes in perspective and again, all individually tailored. But all great questions, wider questions to ask rather than just giving something for the sake of giving something.

Jason · 24:14100%. Well, if you've enjoyed this episode of The Numbers Game, as we always say, like, subscribe, give us your 5-star rating. You can always email hello@thenumbersgamepodcast.com.au or reach out to Nick, Marty, or myself. We love to hear from our listeners. If you've got any questions you'd like us to unpack or answer, we do love an audience question, so feel free to shoot those through.

Jason · 24:36And even if it's around the episode today or anything in general, And if this has piqued your attention to think, well, what am I doing with my property choices? Definitely reach out to the team at Innov8. They are a wealth of knowledge. They've helped dozens and dozens of our clients. And yeah, definitely worthwhile jumping onto innovate.com.au and book yourself a catch-up with the team.

Jason · 24:57Until next time though, thank you for listening.

Marty · 24:59Why buy a holiday home when you've got holidays all around the world? Game over.

Jason · 25:06This podcast is for educational and informational purposes only. The conversations are of a general nature and do not qualify as financial or tax advice. We recommend before you make any financial decisions, you consult a licensed professional. Individuals on the podcast may hold positions in the companies discussed.