Rise continuing despite removal of restrictions
The popularity of holiday-lets has continued to rise, fuelled by the staycations boom.
“We continue to see a substantial increase month on month in holiday-let lending since launching into the market in 2019,” according to Emma Graham (pictured), business development director at Hodge Bank.
During the course of the pandemic, Graham said she saw business increase by 154% with customers opting to purchase second homes for their own personal use, alongside letting them on a short-term basis for lucrative yields.
Looking to the future of holiday-lets, Graham believes the picture is bright for the market and expects to see this continue.
During the height of the pandemic the government introduced travel restrictions - this meant that many of the UK public looked inward for holiday destinations. As a result, there was a boom in the number of landlords or potential landlords looking to purchase properties across the country with the intention of letting them out.
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Graham said that you only have to look at the flurry of lenders who have recently started supporting the market to confirm this is viewed as a growth area.
The dynamics of the market are also changing - Graham explained that lenders have historically lent in areas such as Devon, Cornwall and the Lake District, but are now seeing a lot of activity in larger cities, particularly across the North of England, where short term lets can accommodate weekend breaks now that restrictions have eased.
A recent Holiday Letting Outlook Report from Sykes, showed that 39% of enquiries year-to-date are from consumers who are new to the holiday let market with bookings looking stronger than ever.
With travel restrictions having been removed for the most part, Graham said the popularity of holiday-lets has still not dropped off.
“In fact, we continue to see a very healthy appetite for our holiday let offering,” Graham said.
She believes this has been helped by the past restrictions, as people have had an opportunity to reconnect with the UK and have a new appreciation for the country they call home.
“Before the pandemic our research showed people were accustomed to taking one UK break a year, but we are now seeing more people opt for two UK breaks a year alongside their standard overseas trip,” she said.
She also believes that the new way of working, for many who live in the UK, feeds into this.
“With hybrid working becoming the norm, people working remotely can be more flexible with their leave and this is also helping to drive the market forward,” Graham added.
Turning to what impact continued base rate rises will have on holiday-lets, Graham said the rate environment will inevitably have an impact across all areas of the property market, but she does not think it will adversely affect holiday letting.
Even if demand wanes slightly, Graham believes consumers will still get a healthy return on their investment especially when letting their property out over peak times.
“It is also worth noting that the majority of business we have written has been on a five-year fixed rate basis, so the majority of customers will not be subject to variable rate rises in the short term,” Graham said.
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When focusing on the future and new opportunities for the holiday-let space, Graham said that innovation is important and, in the short term, she thinks there are opportunities from a refurbishment perspective.
Although an Energy Performance Certificate (EPC) rating is not currently required where furnished holiday-lets are concerned, this is something that could change in the future.
New EPC regulations coming into force from 2025 mean rented properties will need to have a certification rating of C or above.
“The majority of lenders in the market expect properties to be lettable from day one and some additional flexibility here would help investors improve both the energy efficiency, as well as specification of their properties, which will in turn increase the potential for a stronger rental yield,” Graham concluded.
