Short-term lets and furnished holidays lets have been growing in popularity as a property investment option. Despite the current pause, there’s still activity in the sector.
As an alternative to long-term rentals and buy-to-let, short-term lets have become a go-to option for investors. Due to a raft of changes in the buy-to-let sector, they can are increasingly being seen as a high-yield method to diversify a property portfolio. Likewise, even many “one-off” landlords have been choosing to use their properties as holiday homes.
Due to the events of the past couple of months, people are no longer holidaying in the UK. Therefore, for many operating in the short-term let industry, there is a pause in activity for now. Others are still using short-term accommodation as an interim option for those who need it, provided they adhere to lockdown rules.
Growth during lockdown
However, the Short-Term Accommodation Association (STAA) last week announced that it has welcomed 14 new members during recent weeks. The trade body has also seen a further 11 firms sign up for a two-month trial membership. This represents a 35% increase on its existing member base. Given the current lockdown situation, the rise in interest shows many are keen to continue within the sector.
The STAA, which was founded in 2017 as an organisation to support, develop and engage with the short-term accommodation market, has waived many of its membership fees until 31 May. Its new members, including Sykes Cottages and Firescape, are also joined by new affiliate members.
Graham Donoghue, chief executive of Sykes Holiday Cottages, said: “The work [the STAA] has done during these unprecedented times both representing the interests of its members and setting up the NHS Homes scheme, in which we are participating, has been truly impressive.
“I hope we can add a significant level of support and collaborate fully with the other members to make the STAA a strong and respected voice for our sector of the travel industry.”
Opting for a staycation
Before coronavirus arrived in the UK, landlords had been increasingly using short-term let options for their properties. Platforms such as Airbnb have seen vast amounts of growth over recent years, with around 150 million people worldwide now using the site.
In the UK, staycations have been making a definite comeback. People are more environmentally aware than ever, and staying local is a popular way of reducing your carbon footprint. What’s more, the pound’s fall against the dollar means the UK is now a cheaper place to come on holiday from abroad.
From city breaks to coastal retreats, people are also now more likely to choose self-catering accommodation over a hotel. Technology has also played a big part. With apps like Airbnb and booking.com, people can find short-term rentals at the click of a button. You can have a fully contact-free stay with remote access locking and all the information provided digitally.
People are currently unable to make non-essential travel in the UK, but the situation is temporary. Once the lockdown restrictions are lifted, it is likely that people will be keen to get away from their homes. Holidaying in the UK is likely to therefore become an even more popular option than travelling abroad, at least in the near term, meaning the industry could be in for a boom after the dip. The added benefit of a contact-free stay, compared to a hotel, will be a key asset.
Investing in a short-term let
For investors, aside from the rise in demand, there are many other benefits. From a tax point of view, a furnished holiday let is treated quite differently to a buy-to-let property. For pension purposes, profits count as “earnings”, and you can also offset your mortgage costs against your taxable gains. This is different with buy-to-lets (see this article on Section 24). Capital gains tax, which is 28% for property assets, is also treated differently when you sell. You are likely to qualify for entrepreneurs’ relief, rollover relief and holdover relief.
Yields have the potential to be higher, too. Liverpool was last year named the highest yielding place for short-term lets, with yields reaching 27.2% based on an occupancy rate of 50% of the year. London, Edinburgh, Manchester and Birmingham are also hotspots.
There is also greater flexibility with short-term accommodation. You can choose when and for how long you rent your property out. Further to this, there is still the option of converting it into a long-term buy-to-let in the future.
At BuyAssociation, we help homeowners and property investors find the right investment option for them. We have a range of short-term as well as long-term let options available. Get in touch for more information.
