Is it all doom and gloom or are UK holiday lets still worthwhile, high-yield investments for individual and portfolio landlords?
Rise in financing options
Mortgage options for holiday let landlords are on the rise. Compared to last year, August 2024 saw a 23% increase in holiday let mortgage availability, according to Moneyfacts.
It also says that within the same period, the average fixed rate available for holiday let mortgages dropped from 7.16% last August, to 6.20% in August 2024.
A further two lenders have entered the market in the past year, bringing landlords a choice of 34 lenders and more than 400 holiday let products to suit their needs. Among these options, Molo’s innovative digital-first approach provides first-time buyers and landlords.
High consumer demand
Consumer demand is still high for domestic holidays.
Many UK households continue to consider elevated living costs problematic, and are likely to continue to do so for a while, as we acclimatise to them.
For some, a staycation also has the feel-good factor of being more eco-friendly than flying to another country, which is hugely polluting. So choosing a sustainable holiday in the UK is a great way to reduce the negative impact we have on the natural world.
Domestic holidays proved popular in Spring 2024, says research from Go.Compare Travel Insurance, when a third (33%) of Brits said they were opting for a staycation this year instead of international travel. According to Mintel, the share of Brits staying in a holiday rental property has reached its highest level ever, with spending estimated to reach £3 billion in 2024.
According to the Office for National Statistics , overseas holiday-makers are also on the rise. 15.9 million holiday visits to the UK by overseas residents accounted for 42% of the total number of UK visits which also include, for example, business visits.
In 2023, the number of overseas visitors rose to 38 million compared to 31.2 million the year before. While this is still 7% lower than pre-pandemic levels of 40.9 million, I don’t think it would be unreasonable to suggest that 2024 figures will continue the upward lift.
Higher yields
According to Hamptons research, landlords who remain in the buy-to-let (BTL) business are finding yields strong and in some cases have even improved. The research shows the average gross yield for new investors buying BTL properties in England and Wales this year to be 7.3%, which is up from 7.0% in 2023.
Compared to regular lettings, however, holiday let landlords can earn significantly more revenue – particularly if they’re in a desirable location or holiday hotspot.
The Mintel survey found holiday rentals to show the highest growth potential of any accommodation type surveyed.
While holiday bookings are seasonal, online businesses like Airbnb and local tourist boards can help increase bookings, as they offer third-party endorsement for people unfamiliar with the area. With Airbnb, for example, landlords can also arrange for shorter lets during off-peak season or during slow periods.
Potential tax benefits
Unlike a traditional residential buy-to-let property, HMRC currently views a holiday let as a business rather than an investment, so landlords may receive some tax breaks.
Be aware though, that on 6th April 2025, the government will abolish the Furnished Holiday Lettings (FHL) regime for income tax and capital gains tax (CGT).
This will remove the current tax advantage for landlords who let out short-term furnished properties as opposed to those who let out residential properties to longer-term tenants. Legislation is still in draft, however.
Ultimately, with demand for holiday rentals remaining strong, yields being maintained well and the real potential for capital growth on property, holiday letting remains a highly lucrative investment that offers substantial returns, when chosen wisely.
Outlook for 2025
The latest data from a prominent holiday letting agencies is providing a glimpse into what 2025 might hold when it comes to staycation trends for the year ahead.
Joby Mussell of Holidaycottages co.uk says "bookings are looking healthy for 2025 with holidaymakers already on the front foot, looking to secure their desired properties for their UK staycation, with a series of travel trends already standing out for the year to come. When looking at the number of nights booked per property for 2025, accommodation that sleep eight people or more, are already up by more than 25% for this year in comparison to 2024, and by more than 10% compared with three years ago.
Larger properties are bucking the trend for bookings further in advance, with groups now willing to plan further ahead. This suggests the typical booking mindset and profile of a customer is returning to a more historical norm, following the uncertainty caused during the pandemic. Christmas may have passed, but larger group bookings for the holiday season are already booking up fast and we’re seeing growth in customers who are immediately rebooking these properties for the following year too. We believe this growth is due to seasonal occasions and big milestone birthdays becoming more of an important opportunity for families to come together with one another.
Additionally, larger properties are on the rise for multi-generational families, where the property itself is the ‘destination’, rather than the location itself, weather or local attractions being the major focal points. This shows that more holidaymakers are looking to our properties as not only a base, but where quality time is spent, and new memories are made.
We’re seeing more people looking to discover hidden gem locations within the UK such as New Quay in West Wales and Debenham in Suffolk. The mindset for a proportion of customers is changing. People are looking to explore quieter, peaceful locations to really allow them the chance to unwind from their day-to-day lives. Additionally, they’re also looking to get away during those more “off-peak” times of year to avoid the hustle and bustle. We suspect that this could also be down to customers looking to make a saving, while visiting areas a bit different to the norm.
Another trend we are certain will no doubt continue this year and beyond, is our love for holidaying with our dogs. Pet ownership in the UK has increased significantly in recent years, and as a result, dogs remain a really important factor when exploring accommodation for a staycation. Our 2025 bookings which include a dog are marginal in comparison to 2024. It’s clear to see that a property accepting dogs remains one of the biggest differentiators in booking performance, so much so that those properties which accept dogs typically see +18% in bookings verses those who do not.
As well as people wanting to go off the beaten track by discovering hidden gems, people are searching for more quirky and unusual properties."
Data from holidaycottages.co.uk shows that bookings for quirky properties are on the rise. Bookings for unusual properties are already up by a quarter (25%) compared to this time last year for 2024.
High-quality properties – no matter the type or size – will continue to perform well, but we are predicting that we will see growth in the likes of glamping and alternative accommodation as guests want something different when they go away in the UK.
Holidaycottages.co.uk foresee that staycations will get shorter, with off-peak weekend stays likely to prove popular for those seeking that all-important balance between work and leisure or wanting to take advantage of multiple shorter stays across a year, rather than one week at a time. Overall, we have seen a 16.6% increase in the number of bookings for one-to-three-night short breaks for 2025. Our booking data also shows that 29.4% of off-peak bookings for 2025 are short breaks, compared to 25.2% for 2024 at this time last year.
They also anticipate there will be a continued trend where many holidaymakers will continue to leave bookings to the last minute for those more spur of the moment shorter breaks.