Why caravan parks could be a hot investment

Changes to the way Australians travel mean the humble caravan park could be a solid investment prospect, according to a leading commercial real estate expert.

Ray White Commercial’s Head of Research, Vanessa Rader said high air fares and an uptick in caravan and camper sales during the Covid-19 pandemic showed the growth fundamentals for caravan parks were strong.

“Looking ahead, the viability of caravan parks as an investment looks sound particularly due to their long-term potential, coupled with domestic tourism levels continuing to increase as the drive segment grows,” she said.

“The current high cost of airfares and accommodation has aided in the uplift in demand for occupiers, keeping vacancies low and the prospect of continued rate increases high.”

Ms Rader said that the long-term land banking potential of caravan park sites was also working in their favour.

“The large land parcels associated with these sites are also attractive, opening up future opportunities and alternative uses as well as their often positive cash flows stemming from high occupancy and growing returns,” she said.

Transactions down in 2022

Caravan park sales had fallen in 2022, partly due to tight supply but also in line with a downturn across the commercial sector.

“During 2022 there was $203.8 million in caravan park sales recorded across the country, this is 30 per cent down on 2021 results, albeit 42.6 per cent up on 2020 results,” Ms Rader said.

“The reduction in turnover during 2022 is in line with the broader commercial market, which has been hampered by the growing difficulty in obtaining finance.”

Ms Rader predicted higher interest rates would lead to softer values in the sector during 2023, as well as a reduction in sales volumes.

Caravan renaissance a positive

Despite this reduction in sales volume, an uptick in caravan and camper sales, particularly among younger Australians, painted a bright picture for long-term returns.

“The increase in caravan and RV sales over the past 10 years has done much to spur on this segment of the market, no longer considered a retiree holiday option,” Ms Rader said.

“The uptake by younger generations and families has seen the number of registrations increase between 3 per cent and 4 per cent per annum. 

“During COVID-19 was a strong appetite for these vehicles resulting in continued growth in registrations, closer to 5 per cent per annum, however, there has been a mismatch in demand and supply with a lag in the delivery felt over the last couple of years similar to the broader motor vehicle industry.”

Increased occupancy rates

Ms Rader said an increase in domestic travel was also a positive sign for caravan parks.

“Over the past four years we have seen demand from travellers increase across caravan, camping and cabin sites, excluding lockdown periods,” she said.

“In 2022 we recorded an increase in domestic tourism, resulting in strong improvements in hotel occupancy rates, with caravan and camping sites no exception.”

This increase had already translated to higher occupancy rates.

“The national occupancy average (for caravan, camping and cabins) for 2022 sits at 61.5 per cent, well ahead of 2019 (prior to COVID-19) results of 49.4 per cent,” Ms Rader said.

Tasmania and Queensland in particular had continuously averaged above the national occupancy rate.

The prices caravan parks are able to charge had also increased with high occupancy rates, Ms Rader said.

“With increased occupancy comes rising prices, revenue achieved in caravan/camping sites growing as much as 43.2 per cent in NSW to $46 per site,” she said.

“Tasmania is currently home to the most expensive sites at $61 representing a 26.7 per cent annual increase.

“This is due to the limited supply and occupation often eclipsing 75 per cent in a market which has seen strong domestic tourism over this 12 to 18 months.”

Queensland sites currently average $42 per site (up 36.7 per cent), while Western Australia averages $52 per site (a 16.6 per cent annual increase).

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Jack Needham

Jack Needham was a Digital Editor at Elite Agent in 2022 & 2023