Holiday lets may be popular, but buy to let remains king

Holiday lets may be popular, but buy to let remains king

With what might charitably be considered chaotic travel advice from the government, many in the UK are planning to spend their holidays this year inside the country’s borders.

That’s entirely understandable, of course, given that the government’s plan for foreign travel, so far, seems very susceptible to change and potential disruption.

A few weeks ago, the government revealed their ‘traffic light’ system, in which countries would be assigned a colour for how strict travel restrictions would be following the government’s presumed May 17th date for the resumption of foreign travel.

If the country is in green, travellers will be required to take a test before travel and upon their return but won’t be required to quarantine upon their arrival unless they subsequently test positive. If the country is placed on the amber list, quarantine at home for 10 days upon their arrival, as well as take a pre-departure test, and a PCR test on day 2 and day 8 of their isolation period. Finally, if the country is placed on the red list then travellers will be required by law to quarantine in government approved hotels for 10 days, at their own expense.

For people unable to work from home, the risk of coming back from an amber country is too great, and so they’re in a position where they need to holiday in the UK. This has resulted in a boom in UK holiday bookings and has led many investors to ask; how does this investment compare with buy to let?

UK buy to let remains strong

Whilst holiday lets can be lucrative, there are a few downsides that are unlikely to trouble the buy to let market anytime soon.

Gaps in bookings, maintenance costs and the relative tax inefficiency mean that, in order to make a good or relative profit, you need to be quite experienced in the market.

Comparatively speaking, buy to let remains an extremely low maintenance, easy to enter market which has much easier profits and much more stable returns.

For example, property price rises last year alone were over 8% across much of the country, and rental demand meant that average rents have risen along with yields.

Key, however, is the fact that it’s much easier to get finance and a mortgage for a standard buy to let in the UK thanks to the booming market environment and the fact they’re so much easier to manage.

Whilst a boom in UK holiday lettings may be here in the short term thanks to the current economic conditions, the residential market has been growing quickly for some time, going back some years now, and most expect it to continue to do so into the next decade.

The lingering effects of the pandemic are unlikely to make holiday lets continue to turn impressive profits beyond the next two years, whereas there’s now extensive economic research to suggest that the Private Rented Sector (PRS) and buy to let more specifically, are going to benefit for years to come with changes in demographics.

The market in the UK is also set to grow sustainably, too, so 2021 is set to be the year of the buy to let landlord, however, this is likely to last into the foreseeable future too.

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