While the impact of the pandemic has receded, one expert believes that the demand for staycations has remained
The number of holiday-lets in England has risen by 40% since the pandemic, according to analysis by the BBC of council figures.
“The UK travel market keeps growing with spending estimated at over £15 billion last year, much higher than before the pandemic,” said Jean Errington (pictured), business development manager at Harpenden Building Society.
Among this rise in spending, Errington noted that the UK holiday-let market is booming and, as a direct result, she believes mortgage brokers have a great opportunity to build business as investors look to snap up suitable properties and maximise returns.
Staycations remain popular
As the risks from the pandemic have receded, Brits have started to holiday overseas again. That said, the popularity of staycation breaks is set to remain, according to research from Verdant Leisure.
Findings suggests that 2023 will see a boom in UK breaks due to the cost-of-living crisis. The research found that 84% of respondents said they are likely to go on a staycation in 2023, with 56% of those stating that the cost-of-living crisis would steer them towards a staycation instead of a holiday abroad.
“With such demand for ‘staycation breaks’, investors are seizing the opportunity to acquire holiday-let property to rent out, providing a stream of financing opportunities for both lenders and brokers,” Errington said.
Increasingly popular investment choice
Renting out a holiday-let may come with stringent rules and regulations, but Errington said, with high financial returns possible, the ‘administrative’ burden can be softened, making them a popular investment choice.
“Landlords can typically achieve a much better pro-rata rental yield compared to a long-term let,” she said.
Even with greater ongoing management costs, Errington said high levels of occupancy can lead to rents and yields that are 30% higher or more.
She added that holiday hot pots like Devon and Cornwall, or properties close to an event location, can bring in surprisingly high yields.
“Short term holiday rentals, for instance close to the Edinburgh Festival, or Eurovision in Liverpool this year will, in some cases, set visitors back thousands creating a tidy profit for landlords,” Errington said.
Errington believes would-be landlords should carefully assess the financing options when purchasing a holiday-let to get the best overall deal.
She said that some specialists allow for the owner of the holiday-let to use the property as a holiday home themselves for up to 90 days per year, as well as there being tax incentives for landlords too.
“Furnished holiday-lets have a unique standing with taxation, and therefore gain from certain benefits and allowances usually only available to normal trading businesses,” Errington said.
Benefits of holiday-lets
Errington said that the popularity of holiday-lets has remained strong in part due to the additional features this product type can offer.
“Loans of up to £1 million are available, Airbnb rentals are accepted, personal income can be used if required to support the loan, up to three properties on one title will be considered, as are properties above commercial premises, with 75% loan-to-value (LTV) available on interest-only and 80% available on repayment,” Errington said.
A varying range of incomes are also considered for this option, Errington said, including pension, trust, investment and maintenance as well as 100% of bonuses, overtime and commission.
“In our experience, holiday-let purchases are often made by customers with multiple forms of income from a range of financial sources,” she added.
Do you expect for the popularity of holiday-lets to continue in 2023 despite the impact of the pandemic receding? Let us know in the comment section below.
