Holiday properties are often considered risky compared to standard residential investments due to their inconsistent and unpredictable income. However, that risk is often balanced by higher returns and the lifestyle benefits that come with the opportunity to enjoy the holiday property themselves according to Your Investment Property magazine.

The tourist and accommodation property sector has performed very strongly in 2007 - experiencing record highs after several years of sluggish growth.

Jasmine Robinson, senior economist with ANZ, says that the demand for tourist accommodation has edged up, boosted by a stronger pick up in international visitor arrivals. Inbound travel for the first half of this year rose by 4.2% compared with the same period in 2006, and the domestic market travel also held up well.

Robinson says this increased demand provides scope for further improvements in performance in the next twelve months.

"Given the improved trading environment, investment interest in the accommodation sector is expected to stay positive as limited investment stock and a rise in room rates enhances its attractiveness," she says.

Investors contemplating buying a holiday-let property should consider whether the purchase fits with their investment strategy.

Smaller hotel-style apartments, for example, produce higher rental returns on purchase price. However, the capital growth on such an investment would be much lower than on a larger property, such as a self-contained apartment with spacious bedrooms and a separate kitchen, laundry and lounge room. This property type would return lower yields on purchase price, but would provide better long-term growth in value, as it's also attractive to owner-occupiers, which increases the pool of potential buyers.

To get the full detail of more than 100 holiday spots, read the latest issue of Your Investment Property magazine, out on sale now.

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