Making Holiday Homes Work: A Strategic Investment Approach

Holiday homes continue to catch the attention of savvy investors, and for good reason. These properties offer an increasingly compelling investment case in today's evolving real estate landscape.

Is a holiday home still a smart buy?

Unlike investing in a residential home, a holiday home offers the dual benefit of personal enjoyment and income generation. And with New Zealand still high on the travel wish list of international visitors, the right holiday home in the right spot has the potential to bring in appealing returns. However, those following the ups and downs of the New Zealand property market of late may wonder if investing in a holiday home still stacks up.

Finding a holiday home in a prime position remains one of the fundamental keys to success. Properties in coastal areas or offering proximity to ski fields and other tourist attractions consistently demonstrate strong performance. On Waiheke Island, for example, homes within walking distance of beaches and with plenty of room for extra guests command premium rates and enjoy high occupancy. The key is identifying locations that combine natural appeal with good infrastructure and accessibility.

 

Trends in the holiday home market

The classic Kiwi bach has come a long way in recent decades. Today's holiday homes often sit at the higher end of the market, which has its pros and cons.

Even during economic uncertainty, well-positioned holiday properties maintain their appeal and value. While some owners may find themselves needing to sell during leaner times, these properties rarely stay on the market long. Buyers recognise that a strategically located, high-quality holiday home can be more than just a summer getaway—it can be a solid investment able to generate year-round returns. This evolution from 'occasional retreat' to 'smart investment' has fundamentally changed how people approach holiday home ownership.

Making your holiday home work for you

Smart holiday home investment comes down to a few key elements:

• Making the most of market dynamics
  Seasonal fluctuations create distinct opportunities and challenges. Using your property during shoulder seasons while releasing it to the rental market during high-demand periods can create a good balance between lifestyle benefits and investment returns. Getting your pricing right across busy and quiet periods helps keep bookings flowing while maximising your income.
  
  
• Growth potential
  Premium holiday spots tend to hold their value and grow over time. When buying in sought-after locations where new development is limited, like beachfront locations or holiday hot spot areas, your investment has room to appreciate.
  
  
• Tax benefits
  Recent tax changes, including updates to the bright-line test in July 2024, could work in your favour. Getting sound advice on structuring your investment helps you make the most of these opportunities.
  
  
• Getting the basics right
  To make your holiday home a success, you'll want to focus on:
  
  Professional management
  Engaging professional property management can transform a holiday home from a potential liability into a smooth-running investment. An experienced property management team can take care of maintenance, guest bookings and management, while keeping an eye on optimising rental returns.
  
  Seasonal variations
  Understanding and planning for seasonal fluctuations in rental income is crucial. Keep some money set aside for the quiet months and unexpected costs, and you'll be in a good position for the long run.
  
  Portfolio diversification
  Holiday homes offer a unique opportunity to diversify investment portfolios while providing both lifestyle benefits and potential financial returns. They often attract a different market segment than traditional residential investments.

 

If you're new to holiday home investing, do your research first. Choose your location carefully and get good people to manage it. Look for properties you'd love to stay in yourself—chances are others will too. Today's guests have high expectations, and smart owners are stepping up to meet those expectations.

The winners in this market will be those who can create spaces that work both as premium rentals and personal retreats.