Holiday lets hold up despite taxation changes

Holiday lets are seeing higher profits despite recent taxation changes, according to Cumberland Building Society.

Cumberland’s inaugural Holiday Let Index found that 48% of landlords surveyed said their profitability had increased since the abolition of Furnished Holiday Let tax advantages, while a further 19% reported broadly unchanged profits.

The findings show how owners have adapted their approach following the tax changes, with 47% increasing nightly rental rates and 46% focusing on increasing occupancy.

The index also found that 86% of owners are achieving gross rental yields of 5% or more.

Some 44% reported yields between 5% and 6%, while 34% are achieving between 7% and 8%. A further 8% reported yields between 9% and 10%.

Looking ahead, 61% of owners are positive about future yields, while 30% intend to purchase another holiday let property in the next 12 months.

“Owners are having to work for their returns,” said Grant Seaton, head of intermediary lending at Cumberland Building Society.

“They are looking much more closely at pricing, occupancy, finance costs and how each property is run, rather than assuming demand alone will produce a good result.

“The owners who perform well over the longer term are therefore likely to be those who understand the numbers behind their property and are prepared to adjust when conditions change.

“For brokers, that makes the conversation much broader than simply asking what rent a property might achieve.”

The Cumberland’s Holiday Let Index was coordinated by Pegasus Insight through a quantitative online survey of 125 respondents, comprising 25 mortgage brokers, 50 private landlords and 50 homeowners from across the UK.