Is buying a Holiday Home really a Waste of Money?

If you have just returned from a fortnight’s holiday at the Costa del Sol and are now contemplating buying a holiday home, you are not alone. According to High Street bankers HSBC, some 5.4 million Brits are currently dreaming of buying a holiday home abroad, favouring mainly the Spanish mainland and the Balearic Islands. However, a recent online article published on Yahoo News suggested buying a holiday home is a huge waste of money. But is it really?

Dream Locations

Some 30% of buyers named the Spanish mainland and the Balearic Islands as their dream location, while 16% of potential holiday home buyers were still considering France, despite a crack down on foreigners by the French tax authorities. Italy, Portugal, Greece, Cyprus, Turkey, Florida and the Caribbean are also named as dream destinations for holiday home purchases.

The Downside of owning a Holiday Home

Investment

Your money is tied up in property that you won’t be able to sell quickly in the current market. While some markets, most notably Florida, is seeing shortages for certain types of homes now, the Costa Blanca and parts of the Costa del Sol for example have a huge surplus of empty unsold homes. It will take many years before current housing stock in some European countries will be sold – in some parts of mainland Spain the authorities are even talking about demolition of unwanted housing stock.

Costs

The reality of owning a holiday home is, of course, never as dreamy as the estate agent will lead you to believe when you visit potential holiday homes in your preferred location. For a start, there is the aforementioned pesky taxation, which can be considerable in Spain and France. It is charged annually in Spain and can add several thousand Euros to your running costs.  There are also exchange rate fluctuations to be considered when first buying a holiday home that can have a negative impact on purchase price and buying costs.

New legislation has streamlined taxation matters governing holiday home lettings. However, you should weigh up all your options and make detailed enquiries before buying a home with the view of letting it. If the area you have chosen is already saturated with self-catering accommodation, choose a different area with plenty of year-round amenities in close proximity, such as Marbella or Granada.

The Advantages

If you know that you and your family or friends will make use of the holiday home frequently, then buying a home together can work out very advantageously. As long as you are realistic about the amount of time you are going to spend at the foreign location, your dream home should not turn into a millstone around your neck!

Investment

A carefully chosen location like Marbella for example will eventually return to bring home owners high capital gains. This has already occurred in the luxury homes market in Marbella, where prime homes are already becoming scarce.
 
Running Costs

Spain has welcomed record numbers of tourists this year, namely 6% more than last year. More people than ever before are looking for self-catering accommodation rather than staying in hotels on package tours. This means you should be able to let out your holiday home at a high yield, provided you choose the location well. Remember to factor in higher running costs due to greater wear and tear.

A Home from Home

With frequent budget flights from your home location try to make the most of your holiday home – think winter sun, spring breaks, summer vacations and autumn relaxation and stick to a regular visiting regime. Holidaying with the family in a hotel is expensive, usually far less comfortable and there is less privacy, too. Children in particular don’t enjoy hotel holidays as much as staying in a villa, apartment or townhouse, where they have more room to play.
The Costa del Sol holiday home should be just that: a HOME where you feel comfortable. Like every other home, it is an investment, but it also a sanctuary and a place where we can truly be ourselves. Does that sound like a waste of money?

Typical Marbella 2-bed apartments start at EUR 225,000.