With the holiday-letting season approaching, property investors are facing a key question — whether to buy a holiday retreat for personal use or a pure investment property that maximises returns.
But the decision comes at a time of growing economic uncertainty.
Financial adviser Gemma Mitchell (pictured left), author of The Money Reset, said investors must decide early whether they’re buying for lifestyle or yield.
“Buying a lifestyle asset and becoming almost an ‘accidental investor’, renting it out when they’re not using it, might not turn out the best investment strategy in terms of capital growth and returns, but it is a good way to offset some of the costs,” Mitchell told Domain.
“If, on the other hand, it’s purely an investment, you’ll think about it differently, and look for somewhere that’s low maintenance with a good cash flow.”
She said many buyers in the current environment are re-evaluating their borrowing power and timing, especially with interest rate expectations still uncertain.
Some investors are considering whether it’s smarter to buy several smaller properties or to put their capital into one premium home.
“Buying a number is a good way to spread the risk and opportunity for different rates of growth and it gives you financial flexibility as you can sell at different times when you want capital,” Mitchell said.
“But it might mean less income, while the outgoings might be similar. Multiple properties can mean multiple fixed expenses, including the costs of managing them, as well as the stamp duty in buying each.”
Theo Chambers (pictured centre), CEO and co-founder of Shore Financial, said that for most buyers, investing in one quality property in a prime location is still the smarter choice — particularly in a slowing economy.
“A large house in a more desirable location, which is more expensive, will appreciate in value more and rent more consistently,” Chambers told Domain. “People want to rent a place not far from a town where they can visit restaurants and pubs.
“As well, often they go with other families and want a bigger house than they have at home, and a good backyard for a barbecue. From the maintenance point of view, it’s also better. Trying to maintain three or four rentals is a headache.”
Chambers added that strong demand for well-located coastal homes continues to support prices, even as overall confidence softens. He advised investors to review booking data and seasonal occupancy rates before committing.
However, Daryl Smith (pictured right), buyer’s advocate and head of growth at MadeComfy, said yield potential varies widely depending on location and dwelling type.
“It depends on picking the correct areas where there’s still growth opportunities,” Smith said.
He noted that two two-bedroom apartments on the Sunshine Coast could sometimes outperform a single luxury home on the Mornington Peninsula.
Smith named Australia’s top five holiday investment markets as:
“There can be good earnings potential for both,” he said.
Despite falling consumer sentiment, housing optimism remains strong. Westpac’s latest data shows the House Price Expectations Index climbed to its highest level in 15 years, with three-quarters of Australians expecting prices to rise over the next 12 months.
For brokers, this divergence presents both challenge and opportunity — borrowers are becoming more cautious about affordability and timing yet demand for well-positioned investment properties remains resilient.
For mortgage brokers, the coming months will be crucial. Clients are weighing holiday investment strategies against a backdrop of economic uncertainty, rising costs, and evolving rate expectations. Advisers can play a key role in helping investors model returns, assess cash flow, and identify properties that balance lifestyle appeal with financial performance.
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