Many Britons had to ditch foreign holidays due to the pandemic and instead descended on mass to the UK’s tourist hotspots.
But with the travel ‘red list’ being cut down to just a handful of destinations, going abroad is now easier than it has been for months.
Those seeking to buy a holiday let in the UK have faced tough competition since ‘staycations’ became the norm, and prices were pushed up to new highs in a blisteringly hot market.
The market for holiday lets in the UK has been extremely busy over the past year and a half, as the pandemic forced holidaymakers to take ‘staycations’ rather than heading abroad
According to analysis from estate agent Jackson Stops, there has been an average 17 buyers per countryside property over the last 12 months, while coastal locations have been even more in demand, with an average of 22 buyers competing for each property that hits the market.
But with foreign trips back on the menu, and the colder weather dampening the appetite for UK breaks, could this autumn and winter be an opportunity for would-be holiday let owners to buy more cheaply and with fewer delays?
One of the pinch points in the market over the past year has been speculative buyers, who made enquiries with agents and brokers out of curiosity and without any intention to make a purchase – delaying the whole process for serious applicants.
In some cases this gave sellers a false sense that there was more interest in their property than there really was, giving them an excuse to push up prices even further.
Data from specialist holiday let mortgage broker, Holiday Cottage Mortgages, saw enquiries increase by a staggering 108 per cent between August 2019 and 2020.
But at the height of the frenzy it August 2020, its data showed that almost three in five mortgage assessments requested were from buyers that 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 said: ‘Deciphering between those who are serious about buying and those who are browsing has been extremely difficult at times, particularly when you are trying to be efficient with time.’
But Holiday Cottage Mortgages says that now, the number of ‘browsers’ has reduced by nearly half and 66 per cent of those who made enquiries with them last month were ‘actively pursuing’ a holiday let.
Other brokers report that demand has calmed down from its summer peak, which is good news for those looking to buy.
‘The number of enquires we have received for holiday let mortgages has fallen rapidly over the past few months,’ says Joshua Gerstler, chartered financial planner at The Orchard Practice.
‘With people now able to travel overseas again, perhaps the shine has been taken off this sector.’
Purchasing a holiday let out of season in October, November or December, when the market is less busy, can mean buyers get a better deal according to property experts
While holiday lets in attractive locations are still very appealing, renewed interest in foreign travel and the start of the off-season means there are bargains to be had for savvy buyers.
‘There will be discounts out there which may be worth considering, particularly if investors are looking to purchase out of season in October or November,’ says Matt Kelly, buy-to-let product specialist at mortgage lender Together.
This is Money asked property experts for their tips on saving money when buying a holiday let in the UK.
How to cut costs when buying a holiday let
1. Buy in the off-season
Andrew Soye, founder of Holiday Cottage Mortgages, says that buyers will have the least competition if they start their search in November or December.
He says: ‘Historically we tend to see good levels in September and October. Whilst it is difficult to say for certain why this is, it is likely to be as a result of people being more focussed on going on holiday and having a break during the summer.
‘Then when autumn comes, they get back into ‘work mode’ and execute plans.
‘We see this pattern following throughout the year too, as we see lower levels in November and December when people’s attention shifts to Christmas planning.’
Planning permission is not required to use a home as a holiday let in most cases, so most homes on the open market can technically be converted into one.
However, leasehold properties may have covenants which ban sub-letting, and some local councils have put restrictions in place regarding short-term lets on websites such as Airbnb, so it is essential to check.
In addition, homes on holiday parks may have restrictions around when in the year the property can be occupied, with some sites closing for the winter.
These locations have the largest amount of buyers chasing one property
Chester (also covering north Wales) 76:1
Bridport (Dorset) 29:1
Sherborne (Somerset) 26:1
Oxted (Surrey) 26:1
Truro (Cornwall) 26:1
Chipping Campden (Cotswolds) 22:1
Burford (Cotswolds) 20:1
Source: Jackson Stops
2. Avoid the very busiest markets
Well-trodden holiday destinations have seen unprecedented levels of demand over the past year or so.
By looking at fringe locations of popular towns and villages, or areas that are less well-known, holiday let buyers can dodge some of the competition and potentially pick up a cheaper home.
However, they will want to ensure that their property is still within easy reach of the attractions that make the area desirable, whether that is a picturesque beach or a scenic walking route.
This will be essential if they want 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 to see demand spill over into locations previously reserved for those that live and work in the area.
‘The villages surrounding Sherborne, for example, are continuing to attract buyers, in particular younger families, who are keen to enjoy more nature-based activities.’
3. Find a property with year-round appeal
While some holiday let buyers use their bolthole mainly for themselves and consider income from the odd week renting it out as a bonus, those who view their property as a business will consider making a good rental profit very important.
A strong first year of bookings can help offset the outlay of buying the property, and key to this is keeping demand high all year round.
Choosing a property that is just as desirable for a cosy winter getaway as it is a summer holiday will help to boost their income.
Being close to all-weather or indoor activities can help with this. 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: Choosing a holiday home that is as suited to winter getaways as summer breaks can help to keep rental income going strong throughout the year
4. Take on a restoration project
Restoring a property that is in need of some TLC is another way to buy a holiday let more cheaply.
Says Kelly: ‘Buyers may be able to get an even better deal by finding a property which is in a poorer condition and needs restorative or structural work.
‘Holiday lets located in seaside towns, for example, tend to be more susceptible to damage caused by floods, salt air corrosion, storms and rotting wood.
However, buyers would be wise to check that the costs of both doing the initial work, and keeping it in good condition in the long term, will not eat in to their rental returns too much.
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.
‘Anyone hoping to scoop a post-pandemic bargain by investing in a doer-upper would be wise to measure the upfront cost against the yearly upkeep,’ Kelly adds.
“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.’
Mortgage rates – including those on second homes – could be on the rise if the Bank of England increases its base rate from its current level of 0.1 %, as is predicted later this year
5. Take advantage of cheap mortgage rates – while you still can
A mainstream residential mortgage can’t be used on a property that is rented out.
Even if they intend to spend a lot of time staying there themselves, holiday home buyers who don’t have the money to buy in cash will need to get a specialist holiday let mortgage.
They will also need to pay a 3 per cent stamp duty surcharge, as the property is classed as a second home.
Holiday let mortgages have historically been tricky to get, as they are not offered by the great majority of mainstream lenders.
While that is still the case, the range of holiday let mortgages has widened significantly. Options have more than doubled since August 2020 and there are now 186 options available compared to just 74, according to MoneyFacts.co.uk.
And the increased competition for holiday lets has driven down rates across the past year, meaning those buying now could get a cheaper deal than those in the initial wave of buyers 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 says: For short term let holiday apartments, investors can currently benefit from record low borrowing rates, though likely not for long, as I expect rates may rise soon.’
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.
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