Holiday let investment is attracting growing interest from brokers and investors, even as tax changes and regulatory uncertainty reshape the market
The UK holiday let market is proving more resilient than many expected, with investors continuing to enter the sector despite a significant overhaul of the tax regime.
Nearly nine in 10 mortgage brokers (88%) reported an increase in holiday let enquiries over the prior 12 months, according to Cumberland Building Society's inaugural Holiday Let Index, published in August. Grant Seaton, head of intermediary lending at Cumberland Building Society, said the findings challenged assumptions surrounding the market. "Given everything the holiday let sector has experienced over the past few years, it would have been easy to surmise that investor confidence had fallen sharply," he said. "What our research actually revealed was a much more nuanced picture."
The figures point to continued demand despite the removal of Furnished Holiday Let (FHL) tax advantages in April 2025, stripping investors of mortgage interest relief and capital gains tax concessions that had previously set the asset class apart from standard buy-to-let properties. Holiday lets represent just 0.6% of the 26.9 million homes in England and Wales, according to a report by Frontier Economics commissioned by the Professional Association of Self-Caterers (PASC UK), released in August 2025.
For Joe Stallard (pictured top), managing director of House and Holiday Home Mortgages, that picture makes sense – the numbers, done correctly, still work.
The lifestyle factor
Stallard told Mortgage Introducer the appeal of holiday lets often begins with a personal experience rather than a spreadsheet. "I think people often come back, especially this time of year, having had a great little break with the family over summer and think, oh, wouldn't it be nice to own a place in the Lakes or own a place in Cornwall or the Norfolk beaches or something like that," he said. "And then it's like, you know what, we would use that ourselves. And if I can make the numbers stack up and get it to wash its face and pay for itself, then, yeah, it's still a big attractive part of it for people."
That dual appeal – income generation alongside personal use – remains a distinguishing feature of the asset class. But Stallard is clear that lifestyle motivation alone is not enough.
What doing it correctly looks like
For investors who approach it as a business, returns can be substantial. Stallard said revenues generated over a 12-month period "can far outweigh your traditional buy-to-let model", but only when investors think carefully about property type, location and target guest.
"You've got to know this type of property in this area is going to appeal to this type of people," he said. "Maybe you want year-round income, so you're looking at somewhere with some summer appeal, but also walks and things like that throughout the winter. So, a Durham or a traditional Lake District perhaps, rather than a Cornwall or a Devon, who you might expect to be a bit more seasonal."
He also pointed to guest experience as a differentiator often underestimated by new entrants. "There's way more that goes into it rather than just listing a property," he said. "It's really getting into the mind of, this is actually who we're going to let this property to, to make it a success."
What is driving the shift to short-term lets?
One evolution Stallard highlighted is in how the market itself is defined. The traditional conception of a holiday let – a coastal or rural property attracting summer visitors – no longer captures the full picture. He said a more accurate term for the sector is now short-term lets, encompassing city-centre breaks and properties in areas not historically associated with tourism.
Stallard cited Stoke-on-Trent as an example. Not an obvious holiday destination, but close to Alton Towers, Manchester and the Peak District. "You might not have families coming and staying for two weeks at a time, but you might do two-to-three-night stays and fill out the property throughout the whole year and get that year-round trade," he said.
This appeals particularly to professional landlords looking to diversify their portfolios. Adding short-term lets alongside buy-to-let, Stallard said, "makes their portfolio a bit more diverse, a bit safer, because if the buy-to-let market is struggling, then you've got this to balance it." On the lender side, he noted that competition has driven meaningful improvements in criteria and pricing, adding that holiday let lenders report "next to no arrears on this type of lending on their book."
Regulatory uncertainty and the inactivity problem
The single biggest drag on the market, Stallard argued, is not tax, it is uncertainty. "Whilst people are still waiting to find out what that news is, from my experience, that's always the biggest driver to inactivity," he said. Investors unsure whether local councils will double or treble council tax on short-term lets are reluctant to commit where the underlying numbers may shift.
Tax changes affecting landlords have compounded that hesitation, and the prospect of a national short-term let registration scheme adds further uncertainty. Despite that, Stallard said clients are becoming more accustomed to operating amid instability and less willing to defer decisions indefinitely. "The more uncertainty that comes, the more that advice is valued and required," he said.
Holiday lets, he added, deserve a better reputation than they often receive. "Holiday lets get a bad rap a lot of the time, whereas actually they're providing good quality accommodation for people to go and stay at and explore different parts of the UK," he said. "Looking at the overall picture and what these type of properties bring into areas in terms of economic growth and development really shouldn't be underappreciated."
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