There are several factors that have caused a relatively new industry emerging within the property industry which focuses on vacation property – not on hotels, beach resorts or guest houses, but on private villas, mansions, apartments or condominiums for the part-time recreational use of their owners.
One reason is that a generation of baby boomers with deeper pockets is now nearing the age of retirement and seeks a home-away-from-home just to add a bit of pep to their silver years. Others are simply affluent investors wanting to put cash earned during a multi-year stock market or commodity price rally to use. Some, with the time window of ultra-low mortgages closing, feel that it’s right time to purchase a holiday home now as both an investment and also for personal use.
“The current macro-economic situation with low interest rates reduced both the cost of acquiring property and the attraction of keeping money in cash,” says Liam Bailey, Knight Frank’s global head of research.
“The potential investment returns from holiday rentals are also as draw. With the emergence of managed holiday home developments, owner do not have to take care of the home themselves, can still use it temporarily but look upon it as an investment rather than a luxury, combining the best of both worlds,” he says.
Potential buyers have literally almost the entire world to choose from, with more and more countries easing property buying procedures and prerequisites and an increasing number also combining the purchase of a home in their country with enticing visa incentives.
However, buying a vacation home can be tricky at times. Prices may vary with the seasons, and some regions tend to be overvalued in terms to their rental potential and with regards to running costs. That said, a sumptuous Bermuda villa, an Alpine chalet in Switzerland, a luxury apartment with sea view on Australia’s Gold Coast or a posh Tuscany mansion might be romantic retreats, but they provide little in return when accompanying expenses such as maintenance, property management fees, insurance and annual travel costs are factored in. It also pays off when potential buyers consider purchasing options that reduce at least a part of their responsibility for those costs, namely timesharing property or fractional ownership or buy-to-let models, as Knight Frank’s Bailey suggests. And it goes without saying that a holiday home should only be bought from a position of financial strength and not as a mortgage-back investment adventure.
Below is an overview on holiday homes at undervalued destinations in different price categories with high rent potential due to tourist demand.
Below $200,000
Hua Hin, Thailand
Less than a three-hour drive southwest of Bangkok, Hua Hin is a popular holiday spot for Thais and foreigners alike, and also a summer residence of the royal family. The property market is thriving, and villas with pool and garden in gated communities in the hinterland, but not far from the beach can be had for as little as $150.000, while luxury sea view condos are a bit pricier.
Apulia, Italy
Italy’s southern region of Apulia, forming the heel of the boot-shaped country, is a lesser known corner in Europe, and prices for houses are still moderate. Country mansions, townhouses or beach villas can be found for below $200,000 and have a great appreciation potential due to the region’s rapid touristic development, especially if renovated and equipped with extra amenities such as a pool or rooftop veranda.
Cayo, Belize
There are many housing developments geared towards American retirees provide, with homes starting at around $130,000 at this little-known holiday destination in western Belize with many parks, ecological reserves and archaeological sites. Amenities include well-paved roads, state-of-the-art utilities, air conditioning and high-speed Internet.
Nha Trang, Vietnam
Nha Trang is a vivid coastal resort city in southern Vietnam known for its beaches, diving sites and offshore islands. It has a long curving stretch of beach along a promenade, dotted with hotels and seafood restaurants. A two-bedroom sea view condo or a townhous can typically be had for less than $150,000 and has a good holiday rent potential.
$200,000-$500,000
Silver Coast, Portugal
Lesser known than Portugal’s southern resort coast of the Algarve, Costa de Prata, half- way between Lisbon and Porto, is a beautiful stretch of coastline with great development potential. Renovated townhouses and villas in new developments overlooking the deep-blue Atlantic Ocean are priced from 300,000.
Salzkammergut, Austria
The Salzkammergut is a region in Austria with pristine lakes in an impressive alpine setting and idyllic villages with the option to go swimming or mountaineering in summer and skiing in winter. One town, Hallstatt, impressed Chinese visitors to such an extent that they rebuilt an entire clone in Luoyang, Henan province. Townhouses and larger apartments start at $400,000, but see cottages and country mansions can be significantly more expensive.
Bali, Indonesia
Modern villas with pool in Bali are still reasonably priced starting from around $200,000, particularly when they are inlands. The price for beach-facing property with more than two bedrooms can climb quickly, though. Rental yields are high owing to Bali being a highly popular tourism destination and an all-year influx from visitors.
Paphos, Cyprus
Buyers looking for a place in the Mediterranean sun look no further than Cyprus which offers a wide range of property from country villas to yacht club developments. A popular, yet undervalued destination is Paphos, a city on the southwest coast of Cyprus, believed to be the birthplace of Greek goddess Aphrodite. Reasonably sized luxury villas and premium townhouses start as low as $200,000.
Above $500,000
Lamu Island, Kenya
Situated at the northern coast of Kenya, the small island of Lamu is a holiday escape with white sandy beaches and cooling sea breezes that developed into a hotspot for discerning vacation home buyers. Beach property on Lamu Island is indeed lovely, but also rare and expensive, with prices in a wide range from $600,000 to $4 million for a really posh residence.
Antalya, Turkey
While apartments and older townhouses in Antalya on Turkey’s southern coast are still remarkably affordable, newly-built beach villas are certainly not. Premium villas with pool and a sea iew in what is believed to be Turkey’s “new trend region” for discerning tourists and increasingly for expats and retirees are not to be had below $500,000.
Tamarindo, Costa Rica
Located at the northwestern coast of Costa Rica, Tamarindo is an idyllic, yet modern coast town with good infrastructure, long-stretching beaches renowned for their waves and a laid-back lifestyle. Ocean-view villas carry a price tag from $600,000 and above, with luxury properties easily reaching $2 million to $3 million.
Provence, France
One of the most beautiful regions in Europe, France’s southeastern province of Provence is truly enchanting with its beautiful landscape, excellent food and tranquil atmosphere. However, this comes at a price, since demand is high and supply of prime property low. Renovated farm and country house can cost everything between $800,000 for a villa with garden and pool in a small village up to $11,000,000 for a large mansion with surrounding vineyard. The choice is yours.
