13 Sep 2021
Words Martin Kelly Australian Financial Review & CommercialRealEstate.com.au

Investors mob holiday parks, sparking sharp asset price rises

Sale prices for some quality coastal holiday parks have doubled in the past 18 months due to surging investor interest in the domestic tourism growth story, while increases of more than 30 per cent are par for the course.  

Other factors contributing to the boom include the rise in popularity of manufactured housing estates – also known as lifestyle communities – higher park earnings and the shortage of investment-grade assets.

“We are seeing a number of newer players trying to get into the industry, with varying degrees of success, and assets selling at values that we wouldn’t have thought possible only a few years ago,” said Angus Strachan, director of business services at BDO, an industry financial advisory firm.

Mr Strachan cited one recent sale of a NSW coastal park for $16 million which was officially valued at $8 million 18 months ago.

“Now I would imagine there’s an element of the valuer being conservative, but there was another offer not too far away from that valuation made just before,” Mr Strachan said.

“I’m not saying prices have doubled across the board, absolutely not, but there are isolated examples of some parks’ value going up by millions of dollars in a short period of time.”

He said the major investors were a mix of holiday park and over-50s lifestyle operators such as Ingenia, Aspen, G’Day Parks, GemLife, NRMA, Tasman, National Lifestyle Villages and Hampshire Property Group.

They are competing with syndicators and private equity for prime parks, forcing up prices, which in turn is prompting an increasing number of operators testing the market.

BDO says it is working on 15 transactions, while ResortBrokers has sold four parks in the past three weeks for $22 million, and has another five parks under contract worth another $34 million.

Greg James from ResortBrokers said the NSW north coast market had been running hot with yields for quality holiday parks almost halving from 12 per cent to 7 per cent.

“It’s tightened up that much, they’ve become such a highly sought-after asset class,” Mr James said. “There are more buyers in the market and good parks are very difficult to get.”

For the corporates Mr James said it was all about “scale and numbers, rather than experiences, which some other buyers are looking for because it’s a very lucrative market as well.”

Prices for quality parks had increased by up to 50 per cent in the past 18 months at an average of more than 30 per cent.