The latest market analysis by Revolution Brokers has revealed which of the nation’s holiday let rental markets provide the best investment option when compared to the more traditional rental market and the yields on offer.
Revolution Brokers analysed the average rent secured on a holiday let in 21 areas of the UK, the cost of investing in such a property and the yield available. They then compared this to the wider buy-to-let market to find both the rental market premium of a holiday let and the difference in the average yield.
The research shows that on average, a UK holiday let will pull in a monthly rental income of £972, a 29.4% premium when compared to a regular rental home.
However, at an average of £353,015, the initial cost of investing in a holiday let home is over £30,000 higher than the average rental property. Despite this higher initial cost, the current average yield of a holiday home sits at 3.3%, 0.5% more than the average of 2.8% for a property within the traditional rental sector.
Highest rental premiums
Worthing in Sussex is home to the highest holiday let rental price premiums, where the average rental income of £1,530 per month is 72.3% higher than a regular rental property.
Porthcawl in the South or Wales also ranks high with a holiday let rental price premium of 70.5%, followed by Llandudno in North Wales (65.6%), and Bakewell in the Peak District (44.8%) and Southsea in Hampshire (44.3%).
Largest rental yield difference
When looking at the difference in the average rental yield available, Llandudno trumps worthing, with the average holiday let rental yield of 4.4% coming in 1.6% higher than the regular rental market.
Worthing does rank second, however, with holiday let yields 1.4% higher than regular rentals, while Amble in Northumberland comes in third (+1.2%) along with Porthcawl (+1.2%).
But while every holiday let destination analysed may be home to a holiday let rental price premium, not all secure a higher yield.
In Exeter, the average holiday let yield of 5.3% is actually -1% lower than the wider rental market, with Ripon (-0.6%) and Buxton (-0.5%) in the Peak District also home to a below-par holiday let rental yield, while in Ashbourne, Derbyshire, and Weymouth, Dorset, holiday rental yields are on par with the wider market.
Almas Uddin, Founding Director of Revolution Brokers, commented: “With the government waging war on the buy-to-let sector it’s hardly surprising that more and more investors are looking to the holiday let space. While a holiday let may set you back more initially, the available rental income tends to carry a substantial premium versus your average rental home.
"But as with any investment, you can’t just assume that this will be the case and location is essentially the most vital aspect when looking to invest in a holiday let rental home. As our research demonstrates, not every area will return the same increased yield when compared to the regular rental market and, in some cases, the far higher cost of investing may even return a lower yield.
"It’s a fine balancing act, as you need an area with robust and consistent demand for holiday rental homes, but one that hasn’t already seen property prices rocket due to this high demand.”
