Many Britons were forced to abandon foreign holidays because of the pandemic, and instead flocked to the UK’s tourist hotspots.
Traveling abroad has never been easier with the’red’ travel list being reduced to just a few destinations.
Since’staycations’ became a common practice, buyers of UK holiday lets have had to face stiff competition. Prices were also pushed to new heights in a hot market.
The UK’s holiday rental market has been extremely busy for the past year. This is because of the pandemic, which forced many holidaymakers to stay in the UK rather than traveling abroad.
Jackson Stops’ analysis indicates that there have been 17 buyers on average for rural properties over the last 12 month. While coastal properties have seen more buyers, with 22 buyers competing for each property that goes on the market,
With foreign trips back on their agenda, and the colder temperatures dampening the appetite to go on UK holidays, could this winter be an opportunity for holiday let owners to purchase more cheaply and without as many delays?
Speculative buyers are a problem. They have made inquiries to agents and brokers for curiosity purposes, but not in any real intention to buy. This has caused delays in the process for serious applicants.
This false perception gave sellers the impression that there was more interest than there was in their property, which allowed them to push up their prices.
Holiday Cottage Mortgages, a specialist holiday mortgage broker, reported that enquiries increased by an astounding 108 percent between August 2019-2020.
However, at the height of the frenzy in August 2020, its data showed almost three out of five mortgage assessments requested by buyers were from buyers who were ‘purely browsing.
Deciphering between those who are serious about buying and those who are browsing has been extremely difficult at times
Many of these, it said, had enjoyed a staycation in a UK destination and got excited about the idea of owning a holiday let there – without thinking through all the costs and responsibilities renting out a property brings.
Leigh Glazebrook (office head at Knight Frank’s Stow-on-the-Wold Office in the Cotswolds) stated: “Deciphering who is serious about buying from those who are browsing has been extremely challenging at times, especially when you are trying be efficient with your time.”
Holiday Cottage Mortgages states that the number and activity of holiday lets ‘browsers has dropped by almost half. 66% of holiday lets ‘actively pursuing a holiday let’ were made enquiries last month.
Others brokers report that the demand has slowed down since its summer peak. This is good news for anyone looking to buy.
Joshua Gerstler, chartered financial advisor at The Orchard Practice, says that ‘the number of inquiries we have received regarding holiday let mortgages is falling rapidly over the last few months.
“With people now being able travel overseas again, maybe the shine has been lifted off this sector.”
According to property experts, buyers can get a better deal if they buy a holiday let out of the season in October, November, or December when there is less competition.
Although holiday rentals in attractive locations are still appealing, there are some bargains available for savvy buyers.
Matt Kelly, a specialist in buy-to-let products at mortgage lender Together, says that there will be discounts available which might be worth looking into, especially if investors are looking to buy out of season in October and November.
This is Money asked experts in property to share their tips for saving money on holiday rentals in the UK.
How to save money on holiday lets
1. Buy in the off-season
Andrew Soye is the founder of Holiday Cottage Mortgages. He says buyers will have less competition if they start their search between November and December.
He stated that historically, good levels have been seen in September and October. Although it is hard to know why, it is likely that this is due to people being more focused on summer vacations and taking a break.
“Then, when autumn arrives, they get back in ‘work mode’ to execute plans.
“We see this pattern following throughout all of the year as we see lower levels during November and December, when people’s attention shifts towards Christmas planning.
You don’t need planning permission to use a home for holiday lets in most cases. However, most homes listed on the open marketplace can technically be converted to one.
However, leasehold properties might have covenants that prohibit subletting. Additionally, some local councils may have placed restrictions regarding short-term lets on websites like Airbnb.
Additionally, holiday park homes may have restrictions about when they can be occupied. Some sites close for the winter.
2. Avoid the busiest market
Over the past year, well-known holiday destinations have experienced unprecedented levels of demand.
Holiday home buyers can look at the fringes of popular villages and towns to find cheaper homes.
They will want to make sure that their property is within easy reach of all the attractions that make the area attractive, such as scenic walking routes or picturesque sights.
This is essential if they wish to keep their bookings calendar full.
Nick Leeming, chairman of estate agent Jackson Stops, says: Demand remains acute in countryside and coastal locations, and this is even more noticeable as stock has become depleted in desirable locations following the frenetic market activity of the last 18 months.
“In the West Country, we continue seeing demand spill over into places previously reserved for those who live and work there.
“The villages around Sherborne, for instance, continue to attract buyers, particularly younger families who want to enjoy more nature-based activity.
3. Find a property that appeals year-round
Some holiday let buyers will use their bolthole only for themselves, and consider the occasional week of rental income as a bonus. However, those who view their property more as a business will see a high rental profit as very important.
A strong first-year of bookings can offset the expense of buying the property. It is important to maintain high demand all year.
A property that is as appealing for a cozy winter getaway as it is for a warm summer holiday will increase their income.
This can be achieved by being close to indoor or all-weather activities. Dale Anderson, managing director of property consultancy Fabrik Invest, suggests that buyers may want to consider a property on a holiday park – though they should check out any service charges first as these can be costly.
‘While typical holiday apartments may slow down as we decide to go on holidays to Spain, Greece and the like, the holiday park model – with lodges and a range of facilities for wellbeing and outdoor living – is set to continue to grow at pace, serving people in search of weekend getaways, city breaks and countryside landscapes,’ he says.
Hot property: A holiday home that is equally suited for winter getaways can help you to maintain a steady rental income throughout the year.
4. Do a project of restoration
Another way to get a holiday rental is to restore a property in dire need of attention.
Kelly: “Buyers may be eligible for a better deal if they find a property in a less desirable condition that requires structural or restorative work.
For example, holiday let’s located in seaside communities are more vulnerable to flooding, salt air corrosion storms, and rotting wood.
Buyers would be wise to verify that the costs of maintaining the property and the initial work involved will not affect their rental returns.
It helps if the buyer has the know-how to do some of the work themselves – and they should also make sure they have the time to complete it before the lucrative summer season commences.
Kelly states that anyone who wants to get a bargain after a pandemic by buying a doer-upper home would do well to compare the upfront cost with the annual upkeep.
“For holiday let landlords looking to take on a renovation project, it will be better for all the work to be completed in the off-season, so the property is ready to be listed on the holiday let market from spring onwards.
‘Those looking to do this now would have to bear in mind that they’d miss out on the lucrative Christmas and New Year period for holiday lettings, whereas a ready-made property would not require that consideration.’
If the Bank of England increases its base interest rate from its current level of 0,1 %, which is predicted to increase later in the year than it currently does, mortgage rates, including those on second homes could go up
5. Get low mortgage rates while you can
A property that is rented cannot be eligible for a mainstream residential mortgage.
Even if they intend on spending a lot of their time there, holiday home buyers that don’t have enough money to buy cash will need to obtain a specialist holiday loan mortgage.
A surcharge of 3 percent stamp duty will be charged to the purchasers as the property is considered a second home.
Holiday mortgages are difficult to obtain because they are not offered by most mainstream lenders.
Although this is still true, the range of holiday mortgages available has expanded significantly. MoneyFacts.co.uk reports that options have more than doubled from August 2020 to 186 options, compared to 74 in 2018.
And there has been increased competition for holiday let properties, which has resulted in lower rates. This means that those who buy now could get a better deal then those who were part of the initial wave in summer 2020.
But they will need to act quickly, as the widely predicted rise in the Bank of England’s base rate at the end of the year could begin to drive them back up – one more reason why snapping up a holiday let this winter could be a shrewd move.
Anderson states: Short term holiday rentals can be financed at record low rates. However, this may not last long as I expect rates to rise in the near future.
Rates are now available as low as 3.5 per cent, though this is still much higher than many residential mortgages – so it could be cheaper to remortgage your main home and use the equity from that to buy the holiday home in cash.
