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The latest trends in holiday lets

Despite the UK’s widespread lifting of restrictions on overseas travel, factors such as airport disruption and the cost-of-living squeeze mean many will holiday on home soil again this year. This looks set to sustain demand for the holiday lets invested in as the pandemic gave rise to last year’s staycation boom.  

With Spring now in full swing, our thoughts turn to breaks away and this is reflected in the growing number of enquiries we’ve seen for holidays lets.

Covid travel restrictions now largely lifted, would Britons turn their backs on the domestic holidays that peaked in popularity last year, lured by the warm weather that is much more of a certainty abroad?

The Easter period is traditionally the start of holiday season so last month’s break gave us a good gauge of the state of the staycation market.

Large numbers headed for foreign shores, taking advantage of deals aimed at tempting back travellers to the heavily impacted sector. But the surge in demand was met with flight cancellations, leading to severe delays. This has acted as a reminder that issues remain with staffing levels and processes in a travel industry that has had to react to frequently changing regulations.

Travel experts have warned that unless addressed, these holiday headaches could impact demand for overseas summer breaks, with holidaymakers instead opting for staycations that are deemed to have a lower risk of disruption.

In addition, with the cost of essential everyday items rapidly increasing, leading to inflation growth not seen for 30 years, some households may look for cheaper UK alternatives to holidays abroad.

Research published by Mintel suggests that a rise in people choosing to vacation closer to home this year may translate to demand for holiday lets; a growing number of people are open to the idea staying in a cottage or villa rather than a hotel during their holiday. Responding to a survey, a quarter of families said they have experienced a holiday in a short-term let in the past three years, but just under half, 47%, indicated that they would consider this type of accommodation for future trips.

And it isn’t just coastal and countryside properties, evidence of holiday let demand can also be seen in the Central London lettings market.

The first lockdown greatly reduced demand for the many Airbnb type short-term lets servicing the large numbers of tourists that visit the capital each year. Landlords were forced to re-list them as ASTs at a time when some people were moving out of the capital in search of more space and access to greenery, resulting in an oversupply.

Research carried out on behalf of Paragon revealed how just 16% of landlords operating in Central London reported increasing tenant demand in Q1 2020. The same research covering Q1 2022 found that 84% of Central London landlords now report increasing tenant demand, the highest region alongside the South West and Wales.

Of course, a primary driver of this demand will be a return of those who are again drawn to the capital as the buzz of urban living returns but, annually attracting over 20 million tourists, the sheer size of the London holiday let market means it will have some impact.

So, with a number of different indicators suggesting that demand for holiday lets could continue, we may see more landlords look to broaden their stock profile, especially as other more conventional housing types, particularly family homes, are in such short supply.

Holiday lets are closely linked to the issue of constrained supply, becoming the subject of significant criticism after reports of people in holiday hotspots unable to find and afford a home in their local area due to them being let to tourists.

To minimise any negative impact, Airbnb have proposed tourism taxes which would benefit local residents. Any investment would need to take these potential costs into account, along with the additional overheads associated with short-term letting such as regular cleaning.

The current high house prices and premium paid on holiday let properties in the most desirable locations will also deter some but, with furnished short-term lets able to generate comparatively higher yields, they remain an attractive proposition for others.

With landlords more likely to buy holiday lets in areas they are unfamiliar with, brokers should ensure their customer has carried out plenty of research, checking for any restrictive covenants which could affect the ability to mortgage or to switch to a standard let if needed. Lenders have varying criteria on holiday lets too, with rental being assessed in a number of different ways so brokers who have knowledge of the lender’s criteria will do well in what is a niche but potentially profitable sector of the market.

This website is aimed at mortgage intermediaries and investment professionals only and is not intended to be relied upon by borrowers or investors.

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