The impact of tourism on property values is a topic of great interest to homeowners and investors alike. Tourism brings numerous economic benefits to a region and has now proven to influence property prices.

Understanding the local tourism economy's nuances when purchasing a property can provide valuable insights into future property value trends and investment opportunities. As with any investment, it's crucial to balance the potential rewards with the possible pitfalls of buying property in a heavily touristed area. Here we discuss both the positive and negative ways in which tourism can affect property values.

1. Increased demand for accommodation options

Tourism increases the demand for certain types of accommodation, including Airbnb’s, apartments and properties suitable to stay in when on holiday. This heightened demand can drive up property values, though keep in mind that demand may fluctuate seasonally. For example, areas that are summer hotspots or skiing destinations may only be in high demand during peak season, so if you are purchasing an investment or Airbnb, you will need to factor this into your projected returns.

Areas with high tourist traffic often attract out-of-town investors looking to buy properties to use as vacation rentals. Property investment from out-of-town buyers has the potential to over-inflate prices as investors are often willing to pay a premium for well-located properties.

2. Improved infrastructure and amenities

Tourist areas often benefit from improved infrastructure such as better roads, enhanced public transport and upgraded utilities, which can make the area more attractive to potential property buyers.

To cater to tourists and population surges, areas may also develop more robust amenities, such as shopping centres, restaurants, recreational facilities and attractions. These improvements can make the area more desirable, thereby increasing property values for local homeowners.

3. Economic growth and employment opportunities

Tourism can significantly boost the local economy through direct spending on accommodation, food, and entertainment. This economic uplift can lead to higher property values as the area becomes more economically vibrant.

With tourism also comes job creation, which can increase the local population's purchasing power, further driving up property demand and values.

4. Overcrowding and Resource Strain

High levels of tourism can lead to overcrowding, which can strain local resources and infrastructure. This can detract from the quality of life for residents, if issues like noise pollution, increased crime or traffic congestion are evident. These issues may negatively impact property values. Another resource factor is the availability of rentals. If more real estate is injected into the short term letting pool, less long-term residences are available for local tenants to secure, which can lead to a hike in rents.

In some cases, excessive tourism can also lead to environmental damage, such as pollution, excessive litter and natural habitat destruction, which has the potential to negatively affecting real estate values in the area.

5. Regulatory Impacts

Local governments may implement zoning laws and regulations aimed at controlling the growth of tourism-related properties. These regulations can affect property values by limiting development or changing the types of properties that can be built. For example, some coastal areas around New Zealand have height restrictions, and limit property builds to a single storey in order to protect the view from surrounding homes. Some apartment complexes that operate under a body corporate may have restrictions around using units as Airbnbs or for short terms stays.

Tourism undeniably plays a significant role in shaping property values. Property owners and prospective buyers in tourist-heavy areas should consider these factors carefully.

Want to know more about market trends in your area? Get in touch with the team at EVES: www.eves.co.nz/our-people