The holiday let market is set to be upended once again. First, we witnessed a staycation boom as the pandemic cancelled international holidays. To many people’s surprise, demand for staycations continued even as the world opened up again.
Many investors and homeowners tried to take advantage of this, and capital flooded into the local property markets of places like Cornwall, the Lake District, and Snowdonia, at the detriment of local residents. In an attempt to balance out the market, tax incentives were tinkered with.
Fast forward, and Jeremy Hunt announced the furnished holiday lettings (FHL) regime would be completely abolished in his recent budget. The previous rules allowed qualifying holiday let owners to claim capital allowances on certain investments such as furnishings. At the same time, he cut capital gains tax (CGT) rates for residential properties.
The idea behind all this is to encourage transactions in our holiday hotspots. The hope is to bring more long-term PRS stock to the market.
We’ve already seen landlords sell up in the face of a challenging market and hostile environment. As such, this latest bit of news may see even more deem the market no longer worth it. But, it could also lead to opportunities for timely investors.
For MFS’ Q1 research, we surveyed 2,002 UK adults, filtering out those who had some form of property investment. Of those property investors, many (53%) had a confident outlook on their assets.
Also, looking ahead, holiday lets may still prove attractive for these investors. We asked our sample to select up to three real estate assets that would be the most desirable to invest in this year. Holiday lets ranked towards the top (16%), sitting alongside BTL assets, student accommodation, and residential property (not to be let).
So, while some holiday let owners may end up selling up over the coming months, chances are there will be plenty of property investors ready to take those assets off their hands. For buyers, the question remains, where should they be looking?
Fortunately, recent analysis from the Office for National Statistics (ONS) revealed exactly where the prime holiday let markets across the UK are at the moment. By crunching the numbers from Expedia Group, Booking.com, and Airbnb, the ONS found that the local administrative units (LAUs) in England with the highest number of total guest nights in Q3 2023 were in Cornwall.
The LAUs with the highest share of guest nights in Wales were in the county of Gwynedd (19.1%).
Ultimately, investors looking for their next holiday let opportunity could spread their view across our green and pleasant land. Spots near coastlines, rolling hills, pristine forests, and the like may have a multitude of options for buyers.
Also, should Jeremy Hunt’s plan work and we see more transactions in the holiday let scene, we’ll likely see a wave of sales emerge. If it becomes a buyers’ market, where sellers are desperate to offload their stock, prices could drop.
This could all happen very rapidly, and so specialist lenders who can keep up with it all will have a crucial role to play. At MFS, we’re primed and ready to deliver a range of specialist lending solutions for entrepreneurial property investors. Regardless of whether they’re buying an Airbnb in St Ives, or a chalet in Wales.
