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Holiday let mortgage options more than double as lenders eye the space

Holiday let deals have more than doubled over the past year to 186 options, and the sector is predicted to grow further fuelled by short-term rental demand.

According to research from Moneyfacts, buy-to-let mortgage options available for holiday lets have gone from 74 in August last year, to around 186 options.

The research showed that 25 lenders were now offering holiday-let deals, up from 14 in August last year largely boosted by building societies.

Yet the average fixed rate for a holiday-let product has grown from 3.53 per cent in August last year to 4.14 per cent in September this year.

The report also cited research from Hamptons which founds there were 1,404 new holiday-let incorporations in England, Scotland and Wales between January and June, which is the highest since records began in 2007.

Moneyfacts finance expert Rachel Springall said that it was “positive” to see the growth in product choice but it was still a relatively niche market with less than 200 deals available.

She said: “Whether the appetite for staycations falls in 2022 is unknown but for the moment it’s evident landlords are taking advantage of the opportunity to earn an income through holiday lets. Those who may have saved some additional disposable income during the UK lockdown, or are looking for alternative investment opportunities, may then be keen to get involved.

“Undertaking thorough research into popular locations, weighing up tax benefits, reading up on rules regarding residency periods and other potential expenses outside of utility bills can feel daunting, so seeking advice before entering an arrangement is wise.”

Holiday let demand expected to grow

Brokers overall said that they expected demand in the holiday-let sector to continue to grow, adding that they were already seeing an increase in enquiries.

Matthew Rowne said: “Holiday lets are going to be a big thing over the next three to four years, we have already seen a massive increase in enquiries.

“We are in a privileged position where a lot of lenders will come to us about where they sit in the market, so we know other lenders that will imminently come into it.”

He added that the sector is likely to continue to expand as people may not be comfortable with travelling abroad, therefore staycations would remain popular and appeal to landlords.

He added that a benefit of the UK holiday-let market was that it wasn’t as seasonal as traditional holiday lets in Spain, for example, owing to the popularity of city centre breaks in the UK as well as country locations which have more year-round appeal.

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Rowne added that the “incredibly high” pre-Covid yields for holiday lets had grown even higher.

Nicholas Morrey said that the boom in UK holidays would likely be around for a few more years as restrictions on travel and the impeded ability to go to Europe due to Brexit would encourage people to holiday at home.

He added that lenders had been reviewing their holiday let criteria to increase or maintain their market share, with some re-entering the space altogether. Although none of the big six lenders had stakes in the space currently.

“This year is not typical of the demand there will be in years to come”

John Phillips said that he had seen growing demand from clients but said that they should take a “note of caution”.

He said: “It makes sense that people want to enter the market as the returns on holiday-lets can be significant. The market this year is not typical of the demand there will be in years to come, however.

“With Covid there has been a huge demand for staycations, but once everyone can go abroad again, it is unlikely that as many people will look to the UK for their holiday.”

Phillips added: “Many of the people looking to buy are professional landlords, but even then, I would advise them to look at where the market is going and ensure that they can afford the property even when we return to a more normal scenario with the bulk of the population holidaying overseas.”

Morrey said that criteria was still restrictive.

He said: “What hasn’t changed much is the acceptance criteria which is still quite tight or onerous. In defence of lenders this is a relatively high-risk lending strategy since if or when holiday-let borrowers struggle to rent out these properties they will have to find hundreds of pounds every month until they do or sell up. As there are no assured shorthold tenancy in place the income streams could dry up very quickly indeed.

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“In a few years lenders will have to look at this as a possible outcome for the duration of the mortgage, which could be 20 years or more – not two or three.”

He added that Airbnb was still quite a contentious area for lenders, as the list of those who would agree it as an income route was “quite short but growing”.

Morrey said that it would be challenging for lenders to assess this variable income stream, but more work should be done to work with Airbnb as there is more data to support applications than there was a few years ago. He also noted that the data would show the effect of the pandemic, Brexit or other issues over a period of time.

He added: “Currently, given the sheer numbers of properties on Airbnb, I fear many second home-owners are using Airbnb without permission so I suspect the problem for lenders with borrowers breaking their terms and conditions is here already.”

By Anna Sagar

Source: Mortgage Solutions

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Demand for staycations see Holiday Let product numbers double in 12 months

Buy-to-let investors looking to the Holiday Let market for their next investment will find a greater choice of deals provided by a growing number of lenders than a year ago due to the rise in demand for domestic holidays.

According to analysis by Moneyfacts.co.uk, mortgage options for borrowers looking at holiday lets have more than doubled since August 2020, there are now 186 options available compared to 74.

More lenders have entered the market, there are now 25 different brands versus 14 in August 2020, the majority of which are currently building societies.

The number of holiday let companies set up between January and June this year was an increase of 83% versus the whole of 2020 and 119% more than in 2019 according to Hamptons International.

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Rachel Springall, Finance Expert at Moneyfacts.co.uk, said: “It’s positive to see a rise in holiday let product choice for landlords over the past few months, but the market is still relatively niche as there are less than 200 deals available. As the demand for staycations remains evident, it would not be too surprising to see more growth in this market in the months to come. In August 2020 only 14 lenders were offering a buy-to-let mortgage available to holiday let, whereas today there are 25 and many of these are building societies.

“The mix of uncertainties this year surrounding international travel has caused demand for holiday lets and, according to Hamptons International, there were 1,404 new holiday let incorporations in England, Scotland and Wales between January and the end of June 2021. They recorded this as the highest number since their records began in 2007, an increase of 83% compared with the number of holiday let companies set up in the whole of 2020 and 119% more than in 2019.

“Whether the appetite for staycations falls into 2022 is unknown but for the moment it’s evident landlords are taking advantage of the opportunity to earn an income through holiday lets. Those who may have saved some additional disposable income during the UK lockdown, or are looking for alternative investment opportunities, may then be keen to get involved. Undertaking thorough research into popular locations, weighing up tax benefits, reading up on rules regarding residency periods and other potential expenses outside of utility bills can feel daunting, so seeking advice before entering an arrangement is wise.”

Source: Property Reporter

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UK holiday homeowners could make ‘£3,000’ weekly if they pick the right property

UK HOLIDAY homeownership has shot up across the UK in the last year, with sales propelled by the popularity of domestic vacations are a result of coronavirus international travel restrictions. But how can those looking to buy be sure they’ve picked the right property?

According to Raoul Fraser, founder of UK holiday park provider Lovat Parks, those looking to purchase a staycation property “shouldn’t think of them as investments”. However, he does note that holiday homes in certain locations have the potential to help owners make money by renting them out.

In the last 18 months, Mr Fraser says some homeowners have managed to attract even more guests than normal, and earn enough money to help cover the costs of their staycation property.

He told Express.co.uk: “We’ve seen some customers rent their holiday homes for over 3000 pounds a week. We do not say that customers should think of these as investments, but if you think about that your payback can be up to five or six years.”

For Britons just dipping their toes into the world of holiday homeownership, however, the prospect of purchasing may seem daunting.

Luckily, Mr Fraser shared some of his top five tips to help homeowners pick the right staycation property.

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Research the holiday park you are purchasing a home within

Many holiday homes across the UK are housed on existing holiday parks, such as Lovat Parks.

Lovat Parks, for example, has eight holiday parks across the UK – seven of which offer the opportunity for people to purchase a holiday home within the park.

According to Mr Fraser, if Britons are hoping to buy a staycation property, it is vital they look into the park they are hoping to purchase from.

He explained: “I would always as the park operator if they are members of the two trade bodies, The British Holiday Park and Home Parks Association or the Caravan Council because they have rules and regulations that you have to abide by and I think that’s important.”

He continued: “We always say to customers, even if you don’t buy from us, when you’re thinking about it, buy from someone who is financially solvent.

“Buy from someone who treats their customers properly, because that is really important.

“Unfortunately, there are some operators like in any industry, who are often the customers.”

Mr Fraser also advises speaking to other customers on-site to find out what the holiday park is like to spend time on.

He said: “You want to go with a company whom you think does care about the experience and make sure you speak to customers on-site, so that you can hear of their experience and how it’s gone for them.”

Pick the right price point for your holiday home

The cost of holiday homes varies depending on the age, style, fixtures and fittings of the property.

As Mr Fraser points out, newer or custom-built properties can cost far more than a traditional caravan.

He said: “We have different price points on our park.

“You can buy a pre-loved caravan on our site in Kent for £30,000 pounds, or you can buy a new lodge in Cornwall or the New Forest for ten times that.

“We’d always say when thinking about buying a holiday home, make sure you can afford it, because every year, people have to pay site fees.

“That site fee is in return for maintaining the park, and that enables them to keep their caravan on a piece of land.”

Even if you have picked a property within your price range, Mr Fraser recommends thinking seriously about whether this is a long-term purchase you want to make.

He explained: “Just think about it long term. We always say to people, it’s a big decision, and really think about it, we’d never want anyone to rush into making decisions and not think about it.

“Is it something that you want to do long term? There is no point owning it for one or two years and then deciding you don’t necessarily want to own it anymore.”

Decide whether or not you want a custom or fully furnished property

Some caravans and lodges, particularly new-builds, can be kitted out with specific upholstery, appliances of features.

Mr Fraser says, if this is something customers are hoping for, they should think about it in advance.

He said: “If you buy a lodge which comes fully furnished, there is an opportunity to customise the lodge if you give us enough notice.

“In other words, you can literally pick the furnishings, the layout, but it does take longer than if you just buy one off the shelf.”

Pick your location wisely

The location of your holiday home is not only important for personal holidays but can also be crucial to homeowners who are looking to rent out their property in the future.

Mr Fraser explained: “We try and recommend people buy relatively close to where they live so that they can get the most out of it.

“That’s typically a two to three-hour radius. Cornwall is a little different because not many people live in Cornwall.

“For the New Forest, for example, there’s no point buying it and then hardly using it yourself.”

He added: “Generally people need to think about if they want to be closer to the beach or they happy to be inland. If they are inland are there nice pubs nearby or are you close to shops swell so that you’re not too isolated?”

Be prepared to wait

Given demand is sky-rocketing for properties, Mr Fraser says people need to be prepared to wait.

Some of the most popular parks currently have no availability, while those seeking new-build or customised properties will have to sit tight until their holiday home has been created.

He explained: “Because the demand is so high, we always say to customers you might have to wait for your caravan to arrive because the manufacturer is under real pressure to cope with demand.

“We ourselves, on some of our parks are waiting for some of our holiday homes to arrive, so just be patient.”

By AIMEE ROBINSON

Source: Express

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Holiday let incorporations hit a record high during staycation boom

As the holiday let sector goes from strength to strength, there has been a spike in the number of new holiday let companies being set up. What are the benefits of incorporating?

In recent months, there has been surging demand and high returns for holiday-let investments. Currently, appetite for staycations across the UK is stronger than ever before. More investors are entering the short-term rental sector or growing their investment in the field. At the same time, the number of holiday let incorporations has increased too.

During the first six months of 2021, there were 1,404 new holiday incorporations in England, Wales and Scotland. This is the highest figure since records began back in 2007, according to research by estate agency Hamptons. It’s also 83% growth on the number of holiday let incorporations in 2020. And it’s even 119% more than in 2019.

In the past year, the number of companies set up to hold buy-to-let properties has also increased. The sector continues to professionalise and adapt to tax changes. This includes changes to mortgage interest tax relief. However, despite this, buy-to-let incorporations is growing at only half of the rate of holiday lets.

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Benefits of incorporating

A property that qualifies as a furnished holiday let is considered a trading business. Because of that, there is no limit to the amount of mortgage interest the owner can offset against profits. This provides tax benefits whether investors incorporate or not.

Instead, the benefits of incorporating a short-term holiday let is predominately the fact that the owner pays corporation tax instead of income tax. Currently, corporation tax is 19%. And income tax can be up to 45%.

This makes incorporating particularly advantageous for higher-rate taxpayers. While sometimes investors can face limitations with how to withdraw money from a company, there is a dividend allowance every year.

Additionally, if a limited company is then sold to another investor, stamp duty is only 0.5%. Incorporating a holiday home can also help with inheritance tax planning.

Overall, incorporating a holiday let can be an important stepping stone to building a holiday let business. Holding your portfolio in one limited company means you can then use the profits from one property to buy another.

What to consider

Hamptons research shows that 93% of active holiday let companies have only one mortgaged property. For buy-to-let companies, this figure is much lower at 45%. There is often debate whether it’s better for investors to purchase property as an individual or limited company. It really depends on your specific situation and investment strategy.

There are pros and cons for incorporating. Tax advantages have often been big draws for investors. However, mortgage rates are usually higher for limited companies than individuals. A limited company structure can also create extra admin tasks.

It’s important to weight up the obligations and costs with any tax benefits and savings. Seek out professional advice to help you decide if starting a limited company is right for you. For further information, we can put you in touch with an independent tax expert.

By Kaylene Isherwood

Source: Buy Association

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Staycation boom prompts investment from UK holiday let owners

The UK staycation boom has seen more than nine out of ten holiday accommodation owners invest in their business during the pandemic.

Around 94% of hotel or cottage owners say they have made major upgrades to their properties since the government imposed a series of foreign travel restrictions following the beginning of the health crisis last March, according to data.

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The mutual says 55% of owners say they have carried out renovations, 45% have launched new services and 34% have put in new IT systems.

It added that 52% of these owners funded their investment from savings or an equity contribution, 41% used a business loan, 26% used insurance, 21% used external equity, 17% took up government-backed Coronavirus business interruption loan schemes or bounce back loan scheme loans, while 15% sought a remortgage.

Scott McKerracher says: “It is very clear from our consumer research that a UK holiday is by far and away the main choice for British consumers this summer and it seems that many UK accommodation owners have decided to invest in their businesses not only for the short term but also to make long-lasting positive change.”

James Wilkinson, who owns a ten-bedroom hotel in the Lake District called the Three Shires Inn, says: “We have found that this year, people are, on the whole, looking for more comfort and luxury with a growing demand for larger bedrooms.

“Like many UK accommodation owners, we have taken the time over lockdown to make long-lasting improvements to our property to meet the anticipated needs of consumers.

“For example, we had one suite before the pandemic, but we’ve developed two more of our bedrooms into suites recently, because that is where the demand lies among visitors, and because of course, these rooms generate higher revenues for us.”

Wilkinson adds: “We’ve found that the pandemic has slightly changed people’s perceptions of what they want.

“There isn’t as much concern about any extra costs involved, but a real requirement for relaxation and comfort.

“Developing the two new bedroom suites in our property was a significant investment for us, but we could see that that is the way the market is going.

“And because of the extensive lockdown, we had time to make these changes to the bricks and mortar of our business.”

The mutual’s survey found 38% of holidaymakers said they would pay more for a hotel, B&B or holiday let which has a Covid-19 deep cleaning service, while 31% would pay more for a property with clear instructions on its Covid-19 guidance.

Grant Seaton says: “The level of investment to which businesses are committing demonstrates optimism and resilience during a very challenging time and will hopefully be rewarded as consumer confidence and demand to holidaying in the UK continues to grow.”

By Roger Baird

Source: Mortgage Finance Gazette

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Surging demand and high returns for UK short-term holiday-let investments

Short-term holiday lets are continuing to see a boom with the rise in UK staycations. Where are the best locations for holiday-let investments?

As there is still ongoing confusion revolving around international travel, the appetite for UK staycations is stronger than ever. And this summer is especially busy with a surging number of bookings.

A survey by Sykes Holiday Cottages revealed 60% of respondents suggested they will remain in the UK for the main summer break this year. After analysing booking figures, revenue data and consumer research, Sykes also highlighted a 40% uplift in holiday-let bookings throughout the summer 2021 school holidays when compared to 2019 figures.

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Strong returns for short-term holiday lets

Prior to the pandemic, holiday-let owners that let their property through Sykes earned an average annual income of £21,000. This is expected to increase dramatically with the rise in bookings.

Holiday-let owners are forecast to earn an average income of £9,500 throughout July and August this year. This is a whopping 56% rise on the average summer income from the same period in 2019.

With the potential to earn more, new investor enquiries for short-term holiday lets have more than doubled in 2021 compared to two years ago. Second homeowners and investors are seeing the benefits of holiday-let investments.

Graham Donoghue, CEO of Sykes Holiday Cottages, says: “The entire travel industry has undergone tremendous changes and disruptions over the past year, but the UK staycation market has fought back, with the appetite for holidays at home now stronger than ever.

“A stronger UK staycation market will likely remain a fixture for years to come, meaning the long-term revenue opportunities for those considering entering the market now could be substantial.”

Top locations to invest in holiday lets

Location is key with any property investment but especially with short-term holiday lets. Finding sought-after locations can help investors earn strong returns.

Currently, demand for holidays in and near national parks is particularly high. Recent research suggests that national parks in the UK could have an excess of 100m visitors this year. This is providing opportunities for investors looking to buy their first holiday let or to expand their portfolio.

Analysis by Sykes Holiday Cottages revealed the Peak District is the fastest-growing holiday hotspot this summer. It’s also the most lucrative destination for holiday-let investors with an average annual revenue of £27,000.

Cumbria and the Heart of England follow closely with an average annual income of £26,000 and £25,000 respectively. Both are high up on the list of top destinations for holiday bookings this summer as well.

Additional research by mortgage broker Norton Finance revealed Snowdonia National Park and the Lake District as the top investment opportunities. The broker created a formula, which combined property prices, average monthly rental prices, gross rental yields and Google search data.

Featuring glacial lakes, rugged mountains and peaks and strong literary connections, the Lake District in Cumbria is seeing the highest average monthly search volume with 368,000. Demand is expected to remain high for short-term rentals in the Lake District in the coming months and years.

By Kaylene Isherwood

Source: Buy Association

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