Buy to Let

Demand to buy holiday homes rises amid UK travel boom

Christina Hoghton
Written By:
Christina Hoghton

Holidays lets offer the potential to generate a good return for landlords, but they can be more complex to manage

In the last three months, search demand for ‘holiday homes for sale’ have grown by 73% year-on-year, according to Arbuthnot Latham.

The bank said that the coronavirus pandemic and restrictions on international travel have caused a surge in demand for UK holidays. In fact, demand hugely outstripped supply as soon as people were able to get away.

Now property investors and landlords are looking to invest in holidays lets to take advantage of the market boom.

Matt Stevenson, senior commercial banker at Arbuthnot Latham, said: “This is a £25bn industry. The largest section of the market, accounting for 43% is for parties of two. The biggest shift is towards larger properties which offer accommodation for ten or more – seeing a 35% increase.

“Income from holiday lets typically generates a higher gross yield than on a buy-to-let basis, however there are a number of considerations on whether the net return is worth it.”

What investors need to know

Arbuthnot Latham have pulled together some key considerations for those thinking of investing in a holiday home:

Wear & tear – Holiday lets are likely to suffer higher maintenance costs to keep the property in good condition as there is a high turnover of tenants. Possibly more so if pets are allowed.

Costs – You will be responsible for all utilities, council tax and business rates. There are likely to be seasonal void periods which means cashflow needs to be managed.

Changeover – Whenever guests depart, the property will need to be cleaned and linen changed. Who will undertake this task and what are the costs?

Privacy/disruption – What is the location of the property in relation to other dwellings and how might the comings and goings of new guests impact those tenants.

Location – Is the property in a location that will attract tourists?

Competition – How can you differentiate yourself from the local market in popular tourist areas?

Facilities – What standard does your target market desire? Open fires, hot tubs and fast Wi-Fi are all popular searches.

Agents – Will you use a booking agent or manage yourself? Seek recommendations from people you know.

Pets – Will you allow them? If so, how many and will you charge extra for them? Consider the additional cleaning that may be required.