Staycation boom: is it time to invest in the UK holiday property market?

5 February 2021 | Investment

Self-catering holidays, which typically provide space, safety and privacy – some of the must-haves of the moment – have largely weathered the storm caused by the pandemic and emerged in prime position to capitalise on the much-anticipated staycation boom.

Beach Retreats, a holiday letting agency for coastal self-catering accommodation, argues it’s not just staycations that are having an impact; Brexit is also boosting the appeal of UK holiday property investment.

While the UK promises healthy occupancy figures, UK-based property investors in Europe face the uncertainty of currency fluctuations, larger mortgage deposits and possible changes to taxes on capital gains and rent, the agency says.

For Mr Jephson, owner of Point House – a holiday home near the historic harbour of Charlestown in Cornwall – the UK holiday property market ticks all the investment boxes.

He launched Point House in March 2020 – just before the country went into lockdown – but says he has no regrets, with Point House eventually successfully securing back-to-back bookings for the remainder of 2020.

“Even under changing restrictions and guidelines, income levels were secured,” Jephson said. “And we already have 26 weeks filled for 2021, equating to a gross income in excess of £55,000.”

Point House is one of 185 coastal properties in Beach Retreats’ portfolio within walking distance of the beach in Cornwall. The company has witnessed bookings surge as the likelihood of overseas travel this summer gets ever-slimmer, and it kicked off 2021 having already taken 70% of a typical year’s reservations.

It says key periods such as Easter, May half-term, July and August are up to 90% booked. This follows on from a buoyant 2020, where occupancy was nearly at 100% from July until the end of October.

With the appetite for a UK break soaring – as a result of Covid, Brexit and other factors – the firm is keen to triple its portfolio by 2025 to keep up with growing demand. This is set to include expansion into other coastal regions of the UK. 

“2020 was a year of stark contrast; in July we went from zero bookings to being completely full overnight and thankfully the interest hasn’t waned since,” Andrew Easton, managing director of Beach Retreats, commented. “In the past 15 years, I haven’t seen the holiday market perform so strongly in the South West, especially for long lead time reservations. We will soon be opening 2022 for reservations to reflect demand.”

He added: “Expanding our portfolio is a natural and customer-driven move for us and coincides with a time of high yield results for holiday let investment.”

Chris Clifford, of Savills Cornwall, shares Easton’s optimism. “Prime property sales in Cornwall and the wider South West intensified over summer 2020 with new buyer registrations up 153% compared to the previous year, as people activated decisions made during lockdown. We expect to see this trend carry through 2021, and with the value of coastal property rising by 3.9% year-on-year, property investment continues to prove to be a favourable asset,” he said.

One potential spanner in the works is the move against holiday home and second home owners in parts of Cornwall, with Padstow – best known for being host to Rick Stein’s restaurant empire – recently stating it may ban the sale of new builds to second home buyers.  

This follows moves by other councils in Cornwall to limit the number of second home and holiday home owners, which they argue both drive up prices for local people and take away housing from those based there all-year round.

Six benefits of investing in a holiday let

Despite the challenges of local hostility, there are many possible benefits to investing in a holiday let – now more so than ever. It has the potential to provide a lucrative second income and has the extra advantage of being a bolthole for investors themselves – a place to escape to for some much-needed peace and quiet every now and then.

Below, Easton shares the six main advantages of a holiday home over a domestic rental. 

Favourable tax rates

For holiday let properties that are considered a ‘furnished holiday let’ and rented out for 105 days or more a year (which is comfortably achieved across the Beach Retreats portfolio), there are a number of allowances and tax reliefs to be had.

You can deduct costs such as mortgage interest and letting agency fees from your pre-tax profit and there may also be tax advantages relating to any capital you spend in kitting out your property. 

Goodbye council tax (for some)

As a furnished holiday let owner, you’ll need to register for business rates which are generally cheaper than council tax. What’s more, if your property qualifies for Small Business Rates Relief, you’ll be treated to a 100% exemption.

Someone else can do the hard work for you

This is where an agency like Beach Retreats comes in. Our support starts before you’ve even purchased a holiday let. We know what works and what offers the greatest return and will pass all this juicy knowhow onto you; we’ll even introduce you to appropriate estate agents.

Once you’ve found the perfect property, you can tap into our interior design advice and then our award-winning marketing comes into play to secure those bookings and ensure guests have a quality experience. We’ll also provide a complete property management and changeover service so you don’t have to lift a finger. 

An investment you can enjoy

Many of our owners are drawn to Cornwall with memories of childhood holidays. So owning a holiday let, which provides a base for their stays, with a healthy return on investment on an appreciating asset makes sense.  

A low-risk strategy

With frequent checks between stays, the property is maintained to a high standard. And with payment upfront, there is no financial risk of non-payment compared to long lets.

Good returns

We’re seeing returns of between 4% and 6% for owners after all costs, while a strengthening market for the right property in the right area means an appreciating asset.

The increasing attractiveness of holiday homes

Meanwhile, one of the biggest holiday home rental agencies in the country – Sykes Holiday Cottages – has revealed the number of people searching for a summer staycation soared last week, probably in reaction to the UK tightening border controls.

The company revealed that last week searches on the website for UK holidays in July and August were up 129% year-on-year, surpassing pre-pandemic levels this time last year.

Likewise, bookings were up 126% year-on-year last week for the summer period, with ‘confidence in a summer getaway clearly returning as more Brits than ever look to take a staycation this summer’. 

Unsurprisingly, Brits are in particular dreaming of staycations in Devon, Cornwall and Cumbria – three ever-popular tourist destinations – with these three locations seeing the greatest growth in bookings for summer 2021. 

Graham Donoghue, chief executive at Sykes Holiday Cottages – which offers over 19,500 holiday homes from property owners across the UK, Ireland and New Zealand – said: “We’ve seen a significant increase in bookings for later this year, showing that confidence is returning and just how eager we all are to take a much-needed break away this year.”

“With millions more Brits now choosing to forgo foreign holidays in favour of UK breaks, not only is it a huge boost for the UK economy, but it is also adding to the attractiveness of holiday letting as an investment opportunity.”

He added: “We’ve witnessed a strong pipeline of enquiries in recent months from those who are new to holiday letting or wanting to rent out their second home to make the most of this staycation boom in Britain. Offering an average income of £21,000 per year, the revenue opportunities in the years ahead could be substantial.”

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