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$90k gross income: Holiday apartments emerge as solution to budget changes
Investors have been flocking to holiday apartments in lifestyle markets, seeking high gross yields to offset lost tax benefits, with some properties generating $90,000 a year in short-term rental income.
Investors have been flocking to holiday apartments in lifestyle markets, seeking high gross yields to offset lost tax benefits, with some properties generating $90,000 a year in short-term rental income.
As tax changes continue to reshape the property landscape, investors are looking beyond traditional residential assets for stronger cash flow, with holiday apartments emerging as one alternative.
Raine & Horne Port Douglas/Mossman reported that investors had continued to flock to the area, with sales increasing 32 per cent year-on-year in August, after holding firm in July.
Principal and co-owner David Cotton said demand had remained strong despite buyers being more price sensitive amid the tax changes and higher interest rates.
“We’re still selling properties, although house sales have slowed down a little,” he told SPI.
Holiday apartments generate high yields
According to Cotton, apartments remained popular with investors seeking stronger gross yields and lifestyle buyers looking for an affordable entry into the Port Douglas market.
“The holiday units in this town have constantly just turned over; people buy them, sell them,” he said.
One three-bedroom residence recently sold as an investment for $720,000, and is soon set to enter the holiday accommodation market.
Cotton said the new owners will comfortably earn $600 a night, which, for an average of 150 nights annually, could generate approximately $90,000 in gross holiday letting income a year.
As a result, he said the property equated to a potential gross yield of about 12.5 per cent.
Currently, rental yields sit around 6.7 per cent to 7.5 per cent for units and apartments in Port Douglas, with returns usually higher for short-term stays, being up to 8.4 per cent in some cases.
“It depends on the management of that particular property, how good the management is and the sort of returns,” Cotton said.
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Lifestyle sells
According to Cotton, lifestyle and tourism were the key selling factors in the region, while it also attracted many residents from the southern states for its pleasant weather.
“The weather in the top of Queensland is basically absolutely perfect from April all the way through to November, whereas down south generally is colder,” he said.
Additionally, Cotton said Port Douglas enabled an escape from the city, being a relaxed country seaside town.
“It’s got the Barrier Reef, it's got the Daintree rainforest, it's got the Atherton Tablelands. We're also spoiled rotten in Port Douglas for restaurants, coffee shops, retail,” he said.
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