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Is now the time to invest in a UK holiday let?

With staycations a growing trend, is now the time to invest?

2 minute read

holiday let

Despite lockdown 2.0, the holiday let market has remained robust. Some lenders and brokers have reported that mortgage enquiries for holiday properties has hit the roof.

While you might think a global pandemic and UK recession would see prospective landlords holding off, it seems that’s not the case.

The property market is in fact seeing a mini-boom, with an impressive return to pre-coronavirus levels of activity in September just four months after re-opening began in England. Data from HM Revenue and Customs shows that 98,010 property sales went through in September, up 21% on August’s figures and down only 0.7% on last September.

But why the surge in holiday lets?

The wider housing market boom is put down to home movers looking to up-size to larger properties, with more space and gardens. And for those that can afford it, the appeal of a second home outside the cities is obvious.

Foreign travel restrictions have also fuelled the demand for UK seaside and rural destinations. During the holiday periods, hotels booked up or were operating at limited capacity which increased demand for self-catering accommodation. This has piqued investor interest in holiday let properties.

A time-limited stamp duty holiday has also forced the hand of potential buyers. Although holiday let investors will continue to pay a 3% stamp duty surcharge on purchases, they will pay no further tax on the first £500,00 of the property’s value if they complete before end March 2021.

That means a holiday let investor buying a £500,000 property now would halve their stamp duty bill from £30,000 to £15,000.

Brokers also suspect a lack of 90% mortgages and a drying-up of first time buyer activity in the market has led to prospective landlords filling the void.

Mortgage options also look good. Moneyfacts data reveals that the number of holiday let mortgage products on the market increased from 74 in mid-August to 114 at the end of September.

What to think about before buying a holiday let

  • You’ll want to get financial and tax advice. Our guide on holiday let mortgages explains holiday let mortgages and the tax benefits of this product over a buy to let mortgage.
  • Have a clear idea of costs. As well as the purchase price, there is the stamp duty surcharge, council tax, maintenance costs, and capital gains tax to consider
  • Consider professional management, particularly if you live far way. Deep cleans will be needed during the pandemic.
  • Consider how you will let your property. Will you do it yourself using a platform like Airbnb or pay a company? Our guide on buying a second home covers this and other issues.
  • Don’t base your purchase on current trends. Demand for staycations could fall away as Brits are allowed to travel abroad again. Do your research on the area in which you’re buying.

Are you considering a holiday let? Let us know about your experience in the comments below


1 Comment* Required

  1. This is right on target! My wife and I own a successful 5 Star reviewed holiday cottage business in the South Shropshire Hills and anticipate a huge demand once the Lockdown eases. I have applied for planning permission to increase our bed spaces from 5 to 24 with part of our big converted barn and two new cottages in our garden. We are over 70 and planning to retire but when we put the property on the market very soon we expect high demand which all sellers around here are already experiencing. We may be prepared to sell before appointing an agent. I have been on the HOA email list for over a year. If anyone reading this wishes to talk informally please ask the Alliance to forward my email address to you and I will respond.

    Comment by ROBERT TROMANS — November 13, 2020 @ 10:08 am

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