Plans to overhaul capital gains tax could transform the Australian holiday home market and make it harder to find suitable accommodation.
Compare the Market spokesman Chris Ford said potential changes to capital gains tax (CGT), widely expected to be announced in the upcoming federal budget, could significantly impact the market for holiday homes.
Holiday homes and short-term rentals now account for about 20-25 per cent of the accommodation available to book in many popular tourist spots.
“It could really discourage people buying their own holiday home to begin with or some holiday homeowners from purchasing additional properties, if they don’t intend to hold onto the property forever,” he said.
Currently, the 50 per cent CGT discount generally applies to holiday homes owned by individuals for more than 12 months as they are considered investment assets.
Cyprus has pipped Australia as the number one nation in the world to own a holiday home. Picture: iStock
It comes as Compare the Market research named Australia the second-best country in the world to own a holiday home under current tax settings.
The holiday home index, ranking global destinations based on affordability, climate and lifestyle features like restaurants and crime, found Australia was among the world’s best destinations.
Cyprus – an island in the eastern Mediterranean Sea – finished ahead of Australia in the rankings, while Malta, Italy and Greece rounded out the top five.
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Everything could be set to change for Aussie homeowners should changes be made to the capital gains tax discount
This home in Minnamurra, on NSW’s South Coast, is listed with a price guide of $4.95m
Mr Ford said coastal regions were naturally among the most common holiday home hotspots in Australia.
Popular locations for Aussie holiday homes include the likes of Victoria’s Mornington Peninsula, NSW’s North and South Coasts, and Queensland’s Gold Coast, Sunshine Coast and Far North.
“A lot of holiday homes are away from major cities in quieter areas closer to nature as well as local attractions and landmarks while some are also located near regular festival sites, providing a home base to return to,” Mr Ford said.
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This home in Elounda on the Greek island of Crete is listed for $7.24m
Crete is the largest Greek island by both area and population
Compare the Market general manager of money Stephen Zeller said there were lots of considerations when looking for your dream holiday home spot.
“Buying a holiday home is about more than just finding a beautiful location; it’s about making a smart financial decision,” he said.
“Affordability is a key factor, as is weather and lifestyle amenities.
“Italy, for example, offers accessible housing prices compared to other European nations, which can make financing more manageable.”
Thanks to Italy and Australia’s reciprocity agreement, Aussies can generally purchase residential houses and apartments without a special residence permit.
However, nonresident buyers do need a valid passport, an Italian tax code and must adhere to visa regulations.
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This home in Montebello, Tuscany, Italy is listed for $3.13m
Tuscany is famed for its heritage, hills and world-renowned wines
Mediterranean tourist hotspots like Italy and Greece ranked highly in affordable housing and dining, placing them among the most attractive locations for a permanent holiday home.
The dining options of leading nation Cyprus also helped it to top spot, with the island nation being home to 534 restaurants per 100,000 people.
Third-placed Malta features 414 activities per 100,000 and is the ninth-most densely populated country in the world.
As of 2021, Cyprus had a smaller population (923,272) than Adelaide (1.34m), while Malta had a population roughly the size of Greater Newcastle, NSW.
BEST COUNTRIES FOR HOLIDAY HOMES
| Holiday home hotspot | House price index | Holiday home index score |
| Cyprus | 99.6 | 8.25 |
| Australia | 122.14 | 7.46 |
| Malta | 171.93 | 7.11 |
| Italy | 92.58 | 6.91 |
| Greece | 144.44 | 6.76 |
Source: Compare The Market
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