In the wake of the recent volatility in the stock market, many buyers are wondering if it's still safe to put their money on coastal properties. While there are some indications that sales volumes have come down, prices in coastal areas are still holding up on their own, according to Jonathan Rivera, state director, residential research, PRD nationwide.

Rivera wrote in the latest issue of Your Investment Property magazine that the current downturn hasn't continued for long enough to cause sellers to drop property prices. "While there's a lot of speculation that coastal property owners might come under pressure due to their exposure to the sharemarkets and will have to sell up at a lower price, I think there are enough people migrating to the coastal areas to underwrite the values."

Coastal hot spots such as Tweed Heads West in northern NSW have jumped by 20.41% in the past 12 months, and a solid 6.22% in the three months to March 2008. Another NSW suburb, Bonnells Bay, located on the Central Coast, racked up 15.8% growth year-on-year and a healthy 5% growth in the three months to February.

High-return, low-risk investment
Investing in property along the coastline is like buying into the blue chip sharemarket. The price of entry is normally higher than inland properties, but the rate of return is often better and the risk of a loss is minimised due to the scarce and unique nature of these properties.

Coastal property has performed exceptionally well when the markets have been driven by the following fundamentals:

  • Population growth
  • Strong tourism market
  • Private and government investment in infrastructure and job creation through employment opportunities
  • Solid developer confidence in future residential developments
  • Airport and major infrastructure networks (hospitals, education, public transport and arterial roads, etc)

Regional opportunities
The cost of buying into a coastal community which satisfies all the above-mentioned market fundamentals is high. Therefore, emerging coastal communities which might not yet have all of these facilities are still worth a look. The more 'regional' beachside towns represent some of the best capital growth potential and in many cases provide a comparatively affordable entry point into this popular coastal market.

Ultimately, when selecting property in emerging regional coastal hot spots, buyers should look for property that has as many of these market fundamentals as possible, plus any features which make the region unique - such as an economy based on military, tourism or agricultural and mining services. Diversified areas such as these provide a low-risk investing environment, as the local economy is well balanced and should be capable of withstanding any economic fluctuation, such as changes in commodity prices or fewer tourism numbers.

If you're looking to buy on the coast, shop hard and do your research. If you can find a property that has all the attributes - right price, water views, an older style that can be renovated, proximity to new retail centres - then it's most likely a sound financial investment. In order to take advantage of all three markets, the property must have the ability to be used as a holiday let, a permanent let and an owner-occupied residence.

To discover the locations of cheap waterfront properties, check out the latest issue of Your Investment Property, on sale now.