The Holiday House Is A Lifestyle Choice

The holiday house purchase decision: emotional or logical

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You've just spent two glorious weeks at the end of January at your friend's beachside holiday house with your young family. The stress of the past year's hard work has vanished and you're feeling great. You've reconnected with your partner and your five and eight year olds have been reacquainted with a parent.

It's about the worst time possible to make a rational investment decision but you decide that you should buy your own holiday house, now. A couple of hours drive from home, so that you and the family can recreate the bliss of the recent holiday every weekend.

Some holiday house reality

Before you make what for most people is a very significant expenditure, let's inject a dose of reality to this emotionally charged thinking. Some hard-nosed considerations include:

Unless the property is available to rent (on commercial terms), you are unlikely to be able to claim tax deductions for maintenance costs and interest on any loan to purchase the property;

Assuming the holiday house is not considered your principal residence, it will be subject to capital gains tax on sale;

Unless you employ people to maintain the property and bear the additional expenses, many of those blissful weekends will be spent doing chores;

When children are relatively young, organising weekends away is easy. But once sporting and other alternatives emerge, it becomes increasingly difficult for the family to go to the holiday house during school term;

Rental returns are highest during school vacations. But once your children are in secondary school, it may be the only time the family is able to use the property; and

Last, but not least, because of the money tied up in the holiday house there may be a reluctance to go anywhere else for holidays. But the appeal will almost certainly wear off for some members of the family, particularly for teenage children who have cooler things to do on weekends than to go to the holiday house with mum and dad.

The holiday house is a lifestyle choice

Holiday houses, like boats and hobby farms, are lifestyle assets. You should not consider them as serious investments. The reality is that they are highly likely (but not guaranteed) to turn out to be poor choices compared with more appropriate investment alternatives available at the time of purchase.

Ahead of the purchase decision, a holiday house does not tick off on what we would consider best investment practice (see

by: John Raymond Leske

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