A holiday lets and short-term lettings market boom can be put down to a combination of four reasons, according to specialist broker Commercial Trust Limited.
The firm says that as more people elect to holiday nearer home and investors realise the opportunities this presents, a combination of market demand, tax differences, impressive yields and better rates are fuelling a market boom.
Cottages.com recently reported a 23% increase in its holiday property portfolio over the last 12 months, while Savills research shows 39% of Brits who purchased holiday lets in 2018 did so in the UK, compared to 14% in 2017.
Meanwhile, Leeds Building Society reported a 10% increase in holiday let mortgage applications in 2018 when compared with the previous year.
Andrew Turner, chief executive of Commercial Trust Limited, says that Brexit and economic uncertainty have created a market of Britons choosing the staycation option in 2019.
"Passport and Customs uncertainty has led many people to elect to stay in the UK, rather than head to mainland Europe," he says.
"These people have joined the huge influx of international tourists coming to the UK and benefitting from the weaker pound."
"The net result is an enormous market of people looking at short-term lets for their travels."
With the market for investment clearly there, Turner says there are also tax benefits available.
"With furnished holiday lets (FHLs), landlords can still claim 100% of the interest paid," he explains.
This is in contrast to traditional buy-to-let mortgage interest tax relief, which is being reduced to a 20% tax credit by 2021.
"What’s more, they can claim capital allowances on wear and tear and furniture replacement, while also potentially qualifying for capital gains tax relief as a business," adds Turner.
"HMRC rules require the property to be available to let for at least 210 days and it must be let for at least 105 days in order to qualify for mortgage tax relief."
"With many landlords seemingly using property as a savings vehicle for their future pensions, income from FHLs can also be invested in a pension where tax relief might be available."
Turner adds that, subject to circumstances, yields for holiday lets can outperform traditional buy-to-let properties.
A holiday property fund, Second Estates, suggests that the average holiday let yield is 10.3%, with some locations achieving up to almost 12% over a 12-month period.
"Yields will be dependent on a number of factors, including property value, the going rate for rent and the number of bookings, which also ties in with demand in the area," says Turner.
Turner explains that there has also been a rise in the number of lenders offering dedicated mortgages for buy-to-let holiday properties.
"We currently work with 13 lenders and rates start from 2.44% for a two-year fix or 2.75% for a five-year fix. The above rates are at 60% loan to value, although most lenders will expect you to put down a minimum 25% deposit."
"Undoubtedly circumstances have created the present situation and many buy to let landlords, feeling the effects of government changes, are looking to new, resourceful ways to maintain a profit," concludes Turner.