For Australia's holiday home investors, the numbers are getting harder to ignore as rates rise, tax breaks disappear and tourists watch their budgets.
In the small coastal town of Huskisson - two-and-a-half hours south of Sydney - you can't get a room, a table or a park in January.
It runs on two speeds: in peak summer, weekenders from the Harbour City and interstate road-trippers flood the place.
"Our clientele is around 85% tourists in summer, when locals avoid the area like the plague," says Mike Bunten, manager at the Huskisson Hotel. "There are no rooms available anywhere."
Come winter, the ratio flips, and the town quietly exhales.
It's a pattern playing out across Australia's most-loved holiday destinations, where the property market and a local economy rely on investor interest and discretionary spending.
On Census night in August 2021, roughly 40% of Huskisson's dwellings sat empty, suggesting they were second residences or holiday homes.
Other regional holiday towns exceed a 60% unoccupied rate, according to a Ray White report published in December.
Huskisson is a holiday hotspot in summer. Picture: realestate.com.au/buy
Tax changing the game
Huskisson agent Robert Zuzic at Oz Combined Realty estimates more than half of Husky's dwellings are investor-owned holiday homes. If people stopped buying them or sold them, the whole town would feel it.
The market is already in a lull, he says.
"Everyone's a bit uncertain about the global economy," Mr Zuzic said. "I can see [the tax changes] slowing the market further."
Holiday homes running at a loss for a few months of the year have relied on negative gearing to make the numbers work.
The federal budget proposes limiting that to new properties from July 2027, while scrapping the 50% CGT discount changes the exit maths entirely.
Agents are seeing hesitation throughout the Margaret River holiday home market region. Picture: realestate.com.au/buy
In Western Australia's southwest, Belinda Chandler at real estate agency Carlin Team, which operates across Augusta, Margaret River, Dunsborough and Yallingup, says buyers are becoming more hesitant.
"They're asking harder questions before committing, particularly investors weighing CGT implications on a second property," she said.
On Victoria's pretty Phillip Island, Mortgage Choice broker Cameron Mountford says investor inquiries since the budget have turned off "like a light switch".
"Violent is the best way I can describe May," he said. "If there's no longer negative gearing available, that's a challenging business case for holding these properties."
But REA Group economist Angus Moore urges some caution around the short-term noise.
Mortgage Choice broker Cameron Mountford says investor inquiries have turned off like a light switch since the budget. Picture: Supplied
"We're likely to see investor demand pull back, though it's hard to know how big the effect will be," Mr Moore said.
Investors set to sell
Some holiday homeowners may sell before July 2027 to lock in the old CGT rules, potentially flooding markets where seasonal vacancy is already high.
Others squeezed by rate rises may see their holiday home as the first luxury to go.
There's no sign of that yet in Huskisson, Mr Zuzic said, though adds "that may be something that comes about" over the next year or so.
For now, he says the top end looks insulated; at $1m to $2m, Husky's holiday homes tend to attract those with deep pockets.
REA Group senior economist Angus Moore says we're likely to see investor demand pull back, though it's hard to know how big the effect will be. Picture: Supplied
"If you've got money to buy a holiday home in Huskisson, I don't think there are too many other influences."
Ms Chandler agrees, saying buyers across WA's prime holiday locations tend to purchase with equity from primary residences rather than stretching their borrowing capacity.
"Buyer demand here is driven heavily by lifestyle and emotion, which means it holds up better than people expect during rate cycles," she said.
The divide may well sharpen: lifestyle owners who don't rely on rental income will hold. Investors running the numbers on a spreadsheet may be next to list.
Price falls on the horizon?
Treasury modelling suggests the long-term price impact of the tax changes will be modest - around 1% to 5% lower than they otherwise would have been.
Holiday home markets like Phillip Island are seeing less investor demand. Picture: Getty
But rate rises are a separate pressure, and they tend to bite hardest at the premium end, where most holiday home markets sit.
"More-expensive segments of the market have seen larger price falls, while more-affordable homes have been holding up," said Mr Moore.
"We might expect to see more of an effect of rate hikes on premium waterfront areas."
Mr Mountford is more pessimistic. He warns that in regional markets driven by investors, a sudden drop in investor demand leaves only local owner-occupiers with smaller budgets.
"The property prices will come down in those holiday areas," he said.
Yet, scarcity has long been a counterweight in holiday towns. The Ray White report found that Australia's most unoccupied holiday towns have often delivered the strongest long-term price growth.
But it also cautioned that high tourist numbers don't guarantee sustained appreciation, with some premium destinations appearing to have hit value ceilings where growth depends on broader economic conditions rather than tourism demand alone.
Ugly holding costs
Without negative gearing, holiday homes need to pay their own way - a tough ask when Australians have less to spend on travel.
Mr Mountford, who owns two holiday homes himself, is already seeing it. "I'm seeing a decrease in demand that's completely linked to interest rate rises," he said.
Ms Chandler warns that seasonal income distorts purchase decisions.
"What looks like a strong asset in January may look very different come winter when it's sitting empty and more expensive to hold due to higher rates," she said. "When occupancy softens off-peak, buyers who bought on optimistic Airbnb yields feel it first."
The headwinds don't stop there: mounting insurance and climate costs for coastal properties, new council surcharges on short-term rentals in certain areas, and tightening ATO scrutiny on holiday homes that aren't available during peak periods are all squeezing returns.
Windows of opportunity
Of course, this recalibration of the holiday home market provides opportunity for locals keen to get in, or investors wanting a holiday home in the new landscape.
Back in Huskisson, Mr Bunten isn't hitting the panic button.
The meal deals are popular, the locals are loyal, and the tourists, while more budget-conscious, keep coming.
"People who travel are still travelling," he said. "They just might not be going as far."
English (US) · 