Australia has been named the world’s second‑best country to own a holiday home, but mortgage brokers say clients should be alert to looming tax changes that could dent returns and borrowing capacity for coastal investors.
New research from Compare the Market, reported by realestate.com.au and the Daily Telegraph, places Australia just behind Cyprus in a global index that weighs affordability, climate and lifestyle factors such as restaurants and crime.
That strong score reflects the appeal of Australian beach towns and lifestyle regions to both local and overseas buyers. But it comes as Canberra considers tightening capital gains tax (CGT) concessions in the federal budget – a move that could alter the maths for second‑home buyers, especially those relying on rental income to cover mortgage repayments.
Compare the Market spokesman Chris Ford said potential CGT changes could significantly reshape demand.
“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,” Ford said.
A Money.com.au survey found 39% of investors would pull back if the 50% CGT discount were reduced, and another 22% would do so if negative gearing were capped to one property. In total, 61% of respondents signalled they might step back under the proposed reforms.
According to the analysis, holiday homes and short‑term rentals now account for about 20%–25% of bookable accommodation in many of Australia’s most popular tourist regions.
That concentration in hotspots such as Victoria’s Mornington Peninsula, the NSW north and south coasts, and Queensland’s Gold Coast, Sunshine Coast and Far North is driving strong competition for stock – and, in some pockets, tighter rental availability for permanent residents.
Compare the Market general manager of money Stephen Zeller (pictured) stressed that lifestyle appeal should not overshadow the numbers.
“Buying a holiday home is about more than just finding a beautiful location; it’s about making a smart financial decision,” Zeller said.
Under current rules, the 50% CGT discount generally applies to holiday homes held for more than 12 months as investment assets, softening the impact when owners eventually sell. Any scaling‑back of that concession could reduce after‑tax returns, particularly for higher‑income borrowers and those planning to flip properties rather than hold them long term.
Separate modelling by Qaive and Tulipwood Economics suggests that restricting negative gearing to one existing rental per investor could cut new dwelling starts by more than 45,000 over five years and push real rents up by as much as 2.4% by 2029–30.
Zeller noted that “affordability is a key factor, as is weather and lifestyle amenities,” with Mediterranean destinations such as Italy and Greece also scoring highly in the index.
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