Staycations: An Enjoyable Investment
The UK’s holiday lets market has seen a huge boost driven by temporary restrictions on international travel due to pandemic. UK holiday let property investments have prospered as working patterns have changed, with a widespread remote working set up offering employees more flexibility. Long weekends and staycations are set to continue long after the pandemic abates, providing landlords and property developers confidence that they will see high rental returns.
Holiday lets are more attractive to workers who are looking for the most economical way of using space more efficiently, as less of their time will be consumed in an office. As enforced frugality has led to many employee’s savings increasing, and workers are looking to invest in working in more spacious environments with outdoor space. Many workers will be weighing up whether they: a) move to a new house further away from central cities, b) buy a holiday home to retreat to at the weekend, or c) upgrade their existing property. Or, if workers do not have the means to invest in a property, they may look to let a holiday home out to work from for long periods of time.
Where are Holiday Seekers Looking to Stay?
Due to the pandemic, demand for suitable holiday homes in desirable locations across the UK is at an all-time high. Traditional ‘bucket and spade’ resorts, such as Margate are seeing an increase in new business thanks to the pandemic, as locals living inland are frequenting the beach more regularly.
Families generally retreat to beaches, where children can enjoy the space and freedom it provides. Cornwall, Devon, Cotswolds, Norfolk coasts, Hunstanton, the Isle of White, Dorset and Brighton are all popular with UK tourists. However, in these sought-after locations, demand is outstripping supply, which is why some ‘micro-beaches’ such as Folkestone, Plockton, Barton-on-Sea and Robin Hood’s Bay have seen an increased interest as a result of the pandemic.
A Surge of Growth: Towns a Commutable Distance From London
In addition to these locations, some of the less well-known locations will generate tourism, namely towns commutable distances from London near the south coast such as Chichester, Wickham, and Bognor Regis. Some areas that were previously not in vogue, but are within a commutable distance from London may see an upswing in property values. largemortgageloans.com specialises in financing commercial developments. Paul Welch, CEO of largemortgageloans.com comments,
“For the foreseeable future, people are looking to buy a spacious retreat near to the countryside where they can escape on a Thursday, returning Monday when they need to be back in the office.”
Seaside Towns are Levelling Up
Residential findings in Q4 2020 revealed growth in the middle of the UK, and counties surrounding London stepped to the forefront of people’s property search. People are seeking coastal retreats near their homes, rather than seeking the same overcrowded hotspots. “I expect that beach resorts will see some ‘levelling out’ over the next few years,” says Paul Welch. “If you have a house in Crawley, you may visit Brighton for a long weekend, and if you live in Horsham, you may be drawn to Chichester. Similarly, if you live in Essex, then you might invest in Clacton-on-Sea.” The silver lining is that destinations that once appeared run-down will become destinations where people come to spend money. There is likely to be an increase in pop-ups and new businesses hoping to capitalise on the increase in footfall. If you are renting a holiday let out 40 weeks a year, ultimately this will increase the property value.
New Lenders Enter the Holiday Lettings Market
More lenders are offering holiday let mortgages due to increased confidence in the holiday lets market. Interest rates for borrowing vary from 2.99% 3-5% (with some additional fees). Niche building societies are competing in a market that has awoken after laying relatively dormant. Loan to value ratios average approximately 75% (depending on the financial profile and potential income forecasts). When lenders assess a holiday let application, they will work out what the rental income will be, based typically on 30 weeks per year. Depending on where the property is located they will work out an average rental income based on high, medium and low seasonality. Holding a holiday let within a Limited Company is a more compelling proposition due to the potential tax savings. Maintenance, marketing and general costs can be offset against your rental income. The holiday let boom could be where we all end up taking our business zooms….