7 Pros and cons of buying a holiday home

For Dexter Say, a 2-storey property in Niseko, Hokkaido, is literally home away from home. In 2008, the freight trader bought the 3-bedroom house in the Japanese town, famed for its powdery snow, for about 56 million yen (S$690,000). It was initially meant to be an investment, but it is now their happy holiday getaway.

Mr Say, his wife Alicia and their two kids head out there three times a year. The best part of having your own home, he says, is "having your creature comforts on hand, which is especially important when travelling with young children". Other pros include not having to deal with unexpected surprises that could arise from booking a hotel or an Airbnb unit. When the family isn't staying there, the property is rented out mostly to foreign guests in winter, and to domestic visitors in summer.

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Like Mr Say, Jansen Siak, managing director of a communications agency, is the owner of a holiday home overseas. His 1-bedroom apartment in Bangkok was completed end 2018. He had been thinking about buying a property overseas and picked Bangkok because it isn't too far away from Singapore.

His apartment is near Silom, a bustling part of the city. Mr Siak visits Bangkok about five times a year, staying about three to five days each time, usually in a hotel in the Silom or Ratchaparason areas.

1. Holiday Homes vs Investment Properties

Vanessa Chan, associate director of international residential at JLL Singapore, says, "Buyers of holiday homes need to consider how often they wish to use the property, who will maintain and manage it while they are away, and how they will finance it as lending options may be limited to foreign purchasers and cost of maintaining the property."

This differs from buying a property for investment where "the main purpose is to capitalise on property price growth and rental yield", she explains. Ms Chan also notes that Singaporeans tend to buy holiday homes with good transport connections. Popular destinations include Johor, Kuala Lumpur and Bangkok.

2. Privacy of Holiday Homes

Aliwassa Pathnadabutr, managing director of CBRE Thailand, says there are pluses and minuses to having a holiday home. "Such homeowners get the privacy of their own residence and can keep it exactly the way they want it," she explains. In addition, buyers get the added benefit of potential capital gains on the property in the long run should they ever decide to sell.

3. Maintenance Cost of Holiday Homes

The main downside of owning a holiday home is "the maintenance and expenses that come with buying a property that buyers will only use occasionally, such as the juristic fee and property maintenance", says Ms Pathnadabutr. "Also, buying a holiday home means that you may feel tied down to that property when they visit, so it may not be the best choice for those who want variety in their choice of accommodation."

4. One and Two Bedrooms Holiday Homes

Ms Chan says 1- and 2-bedroom unit types are the most liquid when it comes to renting and selling. Apartments are generally easier to maintain in terms of costs but yields tend to be lower compared to landed property. Important factors to consider are operating costs such as property management fees, which lower the net rental yield achieved.

Still, Ms Pathnadabutr notes that rental yields aren't always the deciding factor, since some buyers don't intend to rent out their property at all. But should they do so, the rental should at least cover all juristic fees, maintenance, agency fees, any interest and principal payments on the property, she advises.

5. Landed House vs Apartments

Having bought a house, Mr Say believes it's a better option than an apartment. Especially if the destination is worth visiting all year round. "In summer, you will be outdoors a lot. With a house, you have more space for the kids to play, and can even have a barbecue in your garden," he says.

As with buying other property, the choice of developer is important. Mr Siak picked his apartment because "the developer is reputable and the projects it has done previously are of good quality". Similarly for Mr Say, buying his home in Niseko was an easy affair: "The agents and developers in Niseko are extremely familiar with foreigners buying property."

6. Secondary Market Not Mature

While having a holiday home sounds ideal, especially for regular visitors to a destination, not everyone is convinced about buying one. Avid snowboarder Alex Ng, who has visited Niseko eight times in four years, is happy to stay in an Airbnb for each visit. A 2-week stay in an apartment can cost him about S$12,000.

He has spoken to property agents in Niseko and also surveyed the economic landscape, but he will not be buying, even though there are numerous new developments popping up: "Prices are soaring and because there are constantly new developments, it will be difficult to sell off the property in the future. The secondary retail market is not mature yet."

7. Uncertain Future Plans

But the 40-something has other reasons too: "I don't know if I would be going that often as my body ages, and the kids get older and we'd probably do other things then. So the continuity of always going to Niseko for snow is a question mark. We may try other places like Europe or Whistler or even down south to New Zealand."

This article was first published in The Business Times.