With the vaccine programme speeding ahead, there is growing optimism that some kind of travel will be permitted sooner rather than later. The popularity of breaks within the UK is set to continue with staycations – or simply holidays as I like to call them – likely to remain high on the agenda of many people, if and when they are allowed.
Another reason behind this shift is the rise in environmental awareness as overseas travel has widely been acknowledged as a major contributing factor behind escalating carbon emissions. When combined with ongoing uncertainty around international travel and the short-term extension of the stamp duty ‘holiday’, greater numbers of investors and landlords could be tempted to dip their toe in the holiday let marketplace over the coming weeks.
This is an area of the BTL market that has been underserved in recent years and while we have not exactly seen a flood of new options emerge, activity levels do appear to be rising. For example, in light of anticipated demand, Leeds Building Society has just expanded its holiday let range, adding two five-year fixed rate products with no product fee. The lender experienced its biggest-ever month for holiday let purchase applications last September and it expects the post-lockdown holiday market to offer more opportunities for investors. In addition, West One Loans has also reduced rates on its short-term/holiday let products.
It’s easy to see the appeal of such properties, especially for those landlords looking to diversify their portfolios and seek alternative tax-efficient vehicles. Yields remain attractive although it’s prudent to point out that restrictions do apply depending upon locations and property types. It is a complex area in terms of lending scenarios, financing and tax implications and with the government set to respond “shortly” to its consultation on changes in taxation for holiday let properties, this is an area not to be entered into lightly. This is a statement which came following a written question about whether it would be applying HMRC guidance on furnished holiday lets to the business rates criteria for self-catering accommodation and which follows a consultation published by the Ministry of Housing Communities and Local Government (MHCLG) considering the issue in November 2018.
The outcome should be closely monitored by everyone operating in and around the BTL sector and whilst opportunities will continue to present themselves, I urge landlords and investors to seek good, professional advice and ensure they complete a robust due diligence process when evaluating these kinds of options.
