Sun, surf and lazy summer days. Here in Australia, the beach is a way of life for a great slice of our population.
In our capital cities (except for Canberra), we’re blessed to have beaches which are located minutes from the CBD. And with thousands of kilometres of coastline, there are many towns worth looking at for investment and a potential sea change.
The benefits of living near a beach don’t need to be explained. But is a beachside pied-à-terre the best investment over time? Can owning a coastal property set you up for life? Or are you better off looking at other areas to purchase?
According to figures from Australian Property Monitors, it depends on what you’re looking for – rental return or capital growth? Or does individual lifestyle choice trump return on investment every time?
Looking at Sydney over the last five years. The best performing area for rental return and capital growth combined was the inner-west, which outstripped beach areas such as the Sutherland Shire and the Northern Beaches.
The APM figures revealed the inner-west had an 8.2 per cent total return over the last five years compared to Sutherland Shire with 5.4 per cent and the Northern Beaches on 5.8 per cent.
The story is repeated in Queensland, with Brisbane West was the best performing region in the capital with 7.83 per cent return, closely followed by the eastern (7.48 per cent) and northern (7.62 per cent) parts of the city. The Bayside regions lagged behind with 5.74 per cent (Bayside North) and 6.16 (Bayside South).
APM Economist Matthew Bell said these figures were not surprising, given rental yields are usually lower for more expensive property.
“With coastal properties generally more expensive than non-coastal, it’s not surprising that their yields tend to be lower.”
“Typically, even within the major cities, yields for the more expensive areas tend to be lower. Renters tend to have a lower relative limit to the amount they’ll pay on a weekly basis relative to the house price,” he said.
Mr Bell said when it comes to coastal properties, it was wrong to assume that it will be the best performing property class over the longer term.
“While I think the mainstream view that coastal property has superior capital gains, I’m not sure that view extends to total returns (including rental yields),” he said.
In Adelaide, the results were closer with coastal areas slightly outperforming their inland neighbours. The eastern and northern regions of the city had a total return of around 9.6 per cent over the last five years, while the southern and western parts of the city had a 10.6 per cent and 9.9 per cent return over the same period.
It was a mixed bag in Perth, with the best performing region being the city’s non-coastal South East with a total return of 15.2 per cent but closely followed by the coastal South West (13.2 per cent), East (14 per cent), South West (13.2 per cent), North (12.7 per cent), and the City on 8.2 per cent.
But, for those of us who are already converted to a life by the sea – the potential return on investment over time is only a small part of the equation.