The idea of owning a holiday home — a personal retreat that doubles as an income-producing asset — remains highly appealing in Australia. In 2025, research even ranked Australia as the second-best country in the world for holiday home ownership based on factors like climate, lifestyle and tourist demand.
Realestate
But beneath the allure, recent tax changes, shifting regulations and market realities raise important questions:
Are holiday homes still worth it? And under what conditions do they make sense financially in NSW and across Australia in 2025?
This article breaks down the latest data and offers clear insights for landlords, investors, new homeowners and first-time buyers.
1. Australia’s Global Appeal — Still Strong
According to a December 2025 global index, Australia scored highly for holiday home demand, outperforming well-known destinations like Italy and Greece.
What this means for buyers:
– Strong global booking interest — good for short-term rental demand
– Continued appeal as a lifestyle choice for families and owners
– Coastal and regional NSW locations remain popular with holiday-makers
However, appeal doesn’t automatically translate to strong financial outcomes — especially when ownership and tax details are factored in.
2. Tax and Deduction Changes — A Key Shift
In 2025 the Australian Taxation Office (ATO) issued updated guidance affecting holiday homes and short-stay rentals like Airbnb and Stayz.
Key points:
– New ATO rules could deny deduction claims on standard holding costs (like interest, council rates and insurance) if a property is classified as a “leisure facility”.
– To preserve deductions, owners may need to show the property exists mainly to produce rental income, not just personal use.
– The transition period before full enforcement runs until July 1, 2026, giving owners time to adapt.
This is critically important:
Owners who buy mainly for personal use and only occasionally rent out may face reduced tax benefits, making the investment less financially appealing.
3. NSW and Local Regulation Dynamics
Beyond federal tax rules, local short-term rental regulations in NSW — already evolving — add another layer of risk and planning complexity.
NSW councils are tightening compliance around short-term rental properties, in response to housing affordability pressures and rental supply shortages.
Although details vary by locality, owners are advised to understand:
– Registration requirements
– Night cap limits in some areas
– Penalties for non-compliance
This regulatory context makes property choice and location strategy more important than ever.
4. Financial Reality — Rental Seasonality & Income Variability
Holiday homes often rely on seasonal demand, which in Australia centers around:
– Summer holidays
– School breaks
– Peak tourism periods
This can mean:
– High revenue in peak months
– Lower occupancy and income outside those windows
Unlike long-term rentals — which provide steady monthly cashflow — holiday home returns can fluctuate widely. Owners must account for:
– Vacancy periods
– Peak vs off-peak pricing
– Ongoing maintenance costs year-round
This makes budgeting and long-term financial modeling more complex than for traditional investments.
5. Lifestyle vs Investment — Clarifying Your Purpose
Experts emphasise a major factor that divides successful holiday home ownership from regret: purpose.
If you’re buying primarily for:
Lifestyle enjoyment
– The intangible benefits can outweigh financial returns
– A holiday home can become a cherished family asset
Investment returns
– Short-term rentals must compete with traditional long-term investments
– Tax, regulations and seasonal risk are key considerations
It’s rare for a holiday home to outperform a conventional investment property purely on rental yield unless:
– The location is extremely high-demand
– You optimise bookings and occupancy
– Costs (taxes, maintenance) are strategically managed
6. Conclusion — Worth It? It Depends
In 2025, holiday homes in NSW and across Australia continue to offer value — but only when owners are clear about purpose and the financial reality.
They can be worth it if:
✔ You value lifestyle use highly
✔ You actively manage rentals or hire expert management
✔ The property is genuinely available for income-producing use
They may be less financially attractive if:
✖ You expect steady cashflow like a traditional investment
✖ You use the property mainly for personal holidays
✖ You assume deductions without understanding new ATO rules
Ready to explore what this means for your situation?
💬 Connect with RnJ Realty for personalised property guidance
