Philip Macalister: Holiday homes reveal market trend

Bach in Leigh , on sale for $385,000. Photo / Supplied

Sitting at the beach on the Coromandel, I could be accused of having rose-tinted glasses when I say the economy is on the up.

But for some time I have had this theory that the bach market is a good barometer of what is happening in the property market.

When times are tough the holiday-house market pretty much closes down, and few transactions are done, despite low asking prices. As the economy picks up the bach market accelerates. There are signs this is happening now.

Some people have money sitting around and options such as bank deposits just aren't attractive. The prospect of owning a bit of paradise does look good.

I have a theory that when the economy has a head of steam, as in the last property peak, people splash out sums of more than $1 million for a bach, then borrow a little more to buy the boat and then a little more again to buy a car powerful enough to tow it.

Many baches are used only a few weeks a year, so it can make an expensive holiday. Sometimes they are rented out when not in use, which can provide a good income.

When the agent says something like, "baches do go up in price", he is probably right because many people keep baches in the family and hold them for a long time.

Philip Macalister is publisher of NZ Property Investor magazine and www.landlords.co.nz