"We’ve seen record levels of lending across our semi-commercial division, and there’s good reason to expect this area to continue to grow."
FR: More people than usual are holidaying in the UK rather than heading abroad. As a lender involved in the holiday and short-term let sectors, how has the pandemic affected interest in this area?
The ‘staycation’ is nothing new; millions of Brits like to take at least one holiday within our shores each year. And over recent years we’ve seen a substantial increase in interest from landlords in holiday lets to supplement their existing buy-to-let portfolio.
But the pandemic, and its impact on international travel, has understandably boosted demand for properties to let for a short period within the UK, and made the appeal of a holiday let even stronger for a wider range of investors.
FR: How do the returns compare between traditional buy-to-lets and short-term lets?
Holiday lets can prove a lucrative option for investors, with the potential to deliver a significantly higher yield over a shorter period of time.
Invest in the right property, in the right area, and a let can bring in as much in a week as a traditional buy-to-let property might manage in a month.
However, it can be something of a rollercoaster, with the performance of those lets differing noticeably month by month and this is a factor which lenders need to consider carefully.
FR: Do these short-term lets only appeal to investors looking to tap into the holidaymaker market?
It’s easy to assume that tourists are the only people that rent these short-term let properties, but that isn’t actually the case. There are plenty of other scenarios where someone might want to only rent a property for a short period, such as being a contractor working at a nearby site for a couple of months, or families who simply need a base for a short period while they are in between permanent homes.
It’s important for lenders who want to operate in this market to take a common sense approach here and ensure that they can consider cases where the investor isn’t simply hoping to purchase a property that will be popular with those looking for a domestic break.
FR: How is the lending process different for a holiday let compared with a traditional buy-to-let property?
There are lots of different factors that we have to take into account here. Location is always crucial with any form of buy-to-let lending, but flexibility is also key. Can the property be adapted if need be?
We work with local letting agents so that we get a greater understanding of occupancy rates and seasonality for different regions, and in fact for the different types of properties within those regions, so that we have the fullest picture possible. We want to be confident that each transaction is working as hard as possible for our borrowers.
FR: HTB has reported an increase in interest in semi-commercial loans recently. How has the pandemic affected this area of the market?
That’s absolutely right; we’ve seen record levels of lending across our semi-commercial division, and there’s good reason to expect this area to continue to grow. Investors are enjoying strong yields, good cash flow and the value of the assets they are purchasing are holding up well, despite the pressures of the last year and a half.
There’s no question that the pandemic has created challenges for businesses in this space, particularly when it comes to assessing the quality of a tenant. Businesses that may have thrived a couple of years ago may have spent much of the pandemic closed, while others have had a far more fruitful time. Takeaway restaurants have become the pinnacle of assets to lend against, which may have been difficult to believe back in 2019 even for the biggest fans of fast food chicken.
This is an area where I think specialist lenders have really set the bar, as we go into detail on each and every case to understand not just how the business has performed to date but what the future prospects are too. That approach has meant that we’ve been able to lend against property types that have been particularly underserved, from barbers, pubs and even a casino.