Are holiday lets the new buy-to-let as landlords seek new opportunities? has reported a 23% increase in its holiday property portfolio over the past year, which could in part be attributed to an increasing number of landlords investing in holiday lets over traditional buy-to-let properties.

The increasing popularity of domestic tourism and the “staycation” has encouraged landlords looking for new avenues of investment, amid changing regulations and squeezed profit margins in the private rental sector.

Bournecoast, a specialist holiday lettings agent in Bournemouth, has seen an increase in the number of landlords enquiring about the advantages of holiday letting. Des Simmons managing director said, “Property investment is a very serious business, with a number of choices available to unlock the true value of a property.

“The best investors we deal with are those who explore all the options available to maximise their income, and realise that with the help of property experts the best option can change over time for the same property.”

Holiday lets are classed as businesses

It’s not hard to see the opportunities for landlords looking to maximise their returns. Income from furnished holiday lets is considered ‘earned’ by HMRC as long as its criteria is complied with. While residential buy-to-lets are classed as investments and are taxed on the full amount, holiday lets are classed as businesses. As long as the property is available for at least 210 days a year and let for at least 105 days, landlords can claim mortgage tax relief; plus earnings can also be invested in a pension, with tax relief.

Holiday let landlords can also claim capital allowances, rather than the wear and tear allowances that long-term letting landlords receive, and take advantage of entrepreneur’s capital gains tax relief when they sell the property.

Brokers view holiday lets as a growth area

The increasing interest in holiday lets is backed up by mortgage brokers who consider the market a huge growth area and are appealing for lenders to give landlords more options.

Mortgage providers have traditionally been wary of lending on holiday let properties. The difficulty in assessing the potential rental income due to the seasonality and irregular income levels of the business has meant that many lenders have chosen to steer clear.

Currently, only a small number of providers cater to the investment holiday let market. It’s the smaller building societies that have been more active in adapting to the nature of the income of holiday lets according to David Hollingworth, associate director of communications at brokers L&C Mortgages, who sees the standard buy-to-let market splitting into many different segments.

Mortgage broker at AK Partnership Dean McCormack, also thinks that there is the potential to look at higher loan to values on holiday lets because of strong rental yields.

The mortgage market is responding

Most recently, West One Loans announced that it aims to be a ‘meaningful player’ with the introduction of a range of buy-to-let mortgage products, including Airbnb and holiday let properties. Marie Grundy, West One Loans sales director, said: “Holiday lets are currently exempt from the changes in tax relief, therefore we could see more demand in this area…and we believe that our specialist, case-by-case approach can help”.

It was Leeds Building Society that paved the way as the first lender to launch a dedicated holiday let mortgage range in 2013.  Matt Bartle, director of products at Leeds Building Society, said: “Demand has been growing for our products since then and we saw an almost 10% increase in holiday let mortgage applications in 2018 when compared with 2017, as landlords look to diversify their portfolios.”

Like every other property investment a holiday let carries its own risk, but for landlords looking to diversify their portfolio, it could be a profitable addition.

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Are holiday lets the new buy-to-let as landlords seek new opportunities?   


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