Writing in Landlord Today,  Martin Sims Distribution Director at Molo Finance comments on holiday lets.

The full article can be seen here, and says that the potential changes in capital gains tax and the looming budget considerations under the new Labour government have indeed raised concerns among property investors, particularly those involved in holiday lets. However, the outlook for holiday rental investments appears more optimistic, supported by several key factors:

1. Rise in Financing Options

The mortgage landscape for holiday let landlords has improved significantly. According to Moneyfacts, there was a 23% increase in the availability of holiday let mortgages from last year, with the average fixed rate decreasing from 7.16% to 6.20% over the same period. The introduction of new lenders has expanded choices for landlords, offering over 400 holiday let products to cater to diverse needs.

2. High Consumer Demand

Domestic travel remains popular, driven by ongoing concerns about living costs and an increasing preference for eco-friendly vacations. Research from Go.Compare Travel Insurance revealed that 33% of Brits opted for staycations in Spring 2024, with spending on holiday rentals projected to hit £3 billion this year, as reported by Mintel. Additionally, the resurgence in overseas visitors is a positive sign, with 38 million holiday visits to the UK in 2023, reflecting a growing trend towards UK tourism.

3. Higher Yields

Landlords staying in the buy-to-let sector are witnessing robust yields. Hamptons noted that the average gross yield for new BTL properties in England and Wales has increased to 7.3% in 2024, up from 7.0% in 2023. Holiday let landlords can often achieve even higher revenue, especially in popular tourist areas, thanks to platforms like Airbnb that facilitate shorter stays during off-peak seasons.

4. Potential Tax Benefits

Currently, HMRC treats holiday lets as a business, which can offer some tax advantages. However, it’s important to note that starting from April 6, 2025, the government plans to abolish the Furnished Holiday Lettings (FHL) regime, which could eliminate current tax benefits for short-term rentals. While the legislation is still in draft form, landlords should remain informed and prepared for changes.

Conclusion

Despite the uncertainties surrounding potential tax changes and legislative reforms, the demand for holiday rentals is strong, and yields remain competitive. As long as landlords make informed decisions about their investments, holiday letting can still prove to be a lucrative venture. For those interested in the detailed statistics and forecasts surrounding the UK holiday rental market, resources from Moneyfacts, Go.Compare, and Hamptons provide valuable insights.