What investors need to know when moving into the holiday let market

It’s at those points that you’re quite willing to accept the notion of Twitter, Facebook, and the like, as ‘echo chambers’ – the equivalent of two bald men fighting over a comb. It happens, you take it for what it is, and you move on.

However, at other times, you can see that social media is reflecting what is going on at large. Take, for instance, a recent ‘spat’ I saw on Twitter over the summer where people appeared to be arguing over what a ‘staycation’ was.

Now, I appreciate it’s not exactly one of the great arguments of our time but it does reflect the fact that, due to the circumstances of Covid-19, more people not only had to holiday within the UK during our summer, but it looks likely that with quarantines in place around the world - and with people who travel to many countries having to self-isolate when they get back - this is a trend that is going to continue for some time.

Indeed, overall, there is a very strong likelihood that ‘holidaying at home’ will grow in popularity because, quite frankly, needs must. Not forgetting that there are many incredible places within these isles that could certainly benefit from more people visiting them.

So, what was the social media ‘argument’? Well some people believe a ‘staycation’ is when you don’t leave your home but instead carry out day trips, etc, from it, others suggest that a ‘staycation’ is when you holiday within the UK in any guise.

As mentioned, I’m not sure any of us will be losing sleep over this difference of opinion, but it does reflect the growing trend where more people will not be going on foreign holidays – at least not until we have a vaccine – and therefore demand for holidays within the UK is only likely to go in one direction.

Certainly, landlord clients are likely to be looking at this trend and perhaps are now much more inclined to be adding short-term let properties to their portfolios in order to make the most of it.

In fact, at Foundation we’ve already seen a growing interest here and – interestingly – we’re also seeing this from those landlords with smaller numbers of investment properties. In other words, the so-called ‘amateur landlord’ sector seems to be increasingly looking at short-term lets and advisers have been utilising our specific short-term let products to support them in this area.

Geographically as well, we can ascertain the areas of the country where short-term lets are likely to be more popular, and again in a changing world where many landlords have previously focused on City-based AirBnB-type properties, we are starting to see that trend change to one focused more on the ‘holiday areas’ of the UK. When Airbnb revealed the top ten seaside destinations in the UK, the largest year-on-year increase in early July bookings was for Colwyn Bay, on the north coast of Wales, behind that, Bridlington, on the Yorkshire coast, and Minehead in Somerset.

Thus, over the past couple of months we’ve seen a lot of short-term let purchase/remortgage activity focusing on regions such as the South West, the South East, Wales, Yorkshire & Humberside, and the North East.

That leads us to believe that landlords active in those regions have sensed the increase in demand for shorter-term lets, particularly one/two-week holiday requests, and are tailoring their property portfolios in order to be able to cater for it. During the summer you’ll recall a range of media suggesting that activity and bookings for UK holiday homes/cottages went up considerably, especially as holidays abroad became scarcer and/or got cancelled.

The fact is that people like to book their holidays in advance, and moving forward, it’s difficult to do that with confidence for foreign holidays which may not eventually go ahead, whereas the UK Government has been at pains to keep as much as possible of the domestic economy flowing by imposing only local lockdowns and encouraging spend where possible, meaning that booking a UK-based holiday purportedly comes with less chance of disappointment.

Perhaps far better to play it safe for the foreseeable future and book within the UK in order to make sure that you can take a holiday where and when you want to. I suspect that landlords will continue to reflect this in terms of how they diversify their portfolios, and the types of properties and areas which are popular with holidaymakers.

As with all property purchases, we want to ensure landlord borrowers are clear about their responsibilities and what is/isn’t permissible under a short-term let mortgage. Advisers who have landlord clients active in this area should work with our team to understand our product offering but also what criteria they will need to adhere to.

A successful short-term let purchase can add much to a landlord’s portfolio and we want to ensure both advisers and their clients get the most out of the financing options available and the growing demand for these properties.