The holiday let market has attracted plenty of headlines, particularly around the loss of furnished holiday let tax advantages. We wanted to understand how investors are responding: what they are buying, how they are borrowing and what they are doing to keep their properties profitable.
That was the thinking behind our first Holiday Let Index. By asking owners and brokers about their experiences, we wanted to get beyond the headlines and find out how investors’ decisions and day-to-day approach to running a holiday let are changing.
Our inaugural Holiday Let Index found that the investor profile is changing too. Among the brokers surveyed, 36% reported more experienced or professional landlords, while 24% said borrowers had become more cautious about taking on finance. You might expect experience to bring a greater appetite for leverage and expansion, yet we appear to be seeing the opposite: closer scrutiny of what investors buy, what it can earn and how much debt they are prepared to carry.
Perhaps that is the more useful way to define the modern holiday let investor. The number of properties only tells us so much; the judgement behind them can tell us far more.
Professional does not necessarily mean bigger
A better test of professionalism may be what happens after an investor collects the keys. How closely do they watch the numbers? How quickly do they respond when bookings change? Are they prepared to rethink what is not working?
We can see some of that in the response to the abolition of furnished holiday let tax advantages. Some 47% of owners have increased nightly rental rates, 46% have focused on increasing occupancy and 26% have changed their property-management approach.
These are fairly hands-on responses to a change that could easily have prompted some to question whether they wanted to remain in the sector at all. Instead, many have gone back to the nuts and bolts of the business, concentrating on the elements within their control.
The guest is part of the investment decision
There is another person in the equation who can sometimes be overlooked when we talk about property investment: the guest. Half of the owners we surveyed have seen more last-minute bookings, while 39% have experienced shorter stays and the same proportion have noticed greater price sensitivity.
For an investor, those changes quickly become practical questions. What do you charge outside the busiest weeks? How do you fill a Tuesday night in November? Is an empty property really preferable to taking a late booking at a slightly lower rate?
There is quite a distance between buying in a popular location and running a successful holiday let throughout the year. The latter requires an understanding of pricing, occupancy, marketing and guest expectations, because even a beautiful property with a good postcode still needs someone to book it.
That adds another dimension to what we mean by an experienced holiday let investor. Understanding the property is only half of the equation; they also need to understand who will book it, what they will pay and what that means for the income it can realistically produce.
Finance has to reflect how these properties work
Once you start looking at a holiday let in those terms, the finance cannot sit separately from the way the property earns its money. A broker’s input can make a real difference here, because the question is not simply whether a client can borrow enough to complete the purchase, but whether that borrowing stacks up against the income the property can realistically produce.
Lenders need to understand that relationship as well. When brokers in our research were asked what they wanted from holiday let lending, the leading responses included income assessments based on short-term rental performance, easier switching between holiday let and long-term residential letting, more realistic affordability assessments and faster underwriting.
Investors are being asked to think carefully about how these properties earn their money, so the finance supporting them needs to recognise how that income is actually generated.
So, what does today’s investor look like?
There will never be a single type of holiday let investor, and trying to create one probably misses the point. It could be somebody with one property, a landlord with a substantial portfolio or an investor holding holiday lets alongside conventional buy-to-let.
What connects them is found in the decisions around pricing, occupancy, costs, borrowing and, crucially, knowing when a property is worth buying and when it is better to walk away.
A professional holiday let investor might not be the person with the longest list of properties, but is instead the one who knows why a Tuesday in November can be just as important to the numbers as a Saturday in August.
