With more than 40 million tourists expected to jet to the UK in 2018, property investors with holiday lets are set for a bumper year, as new research reveals just how much these investors can earn from short-term rentals in the UK’s biggest tourist hotspots.
In 2017, 39.2 million overseas visitors came to the UK – up 4% on the previous year – adding £24.5 billion to the UK economy. However, tourism chiefs expect 2018 to be an even bigger year for UK tourism, with overseas visitors topping 40 million for the first time on record, thanks to the draw of May’s Royal Wedding and continued Sterling weakness giving foreign holiday makers more bang for their buck.
According to research from specialist mortgage lender Together, this tourism boom represents a major opportunity for UK property investors that specialise in short term holiday lets, who can expect to make enviable yields of as much as 12% in some of the UK’s most popular tourism destinations.
The research shows that in York, investors could achieve potential yields of 12.2% if they rent out their flat, making the historic city one of the best bets for a potential investment opportunity.
Bath, with its Georgian architectural splendour, Roman Baths and literary links to Jane Austen, is also a major pull for both tourists and investors alike. Short-term lets in the Bath and North East Somerset area can achieve yields of 7.5%.
Stratford-Upon-Avon, the birthplace of William Shakespeare, has historically proved popular for tourists. Flats and maisonettes located within a few miles of the Bard’s final resting place in Holy Trinity Church, can achieve yields of 6.3% according to Together’s research.
Meanwhile flats near Windsor’s historic centre, which hosted the Royal wedding at Windsor Castle in May – viewed by a TV audience of 2 billion – can achieve yields of 4.4% Together’s latest analysis shows.
Daniel Owen-Parr, head of field sales at Together, said:
“Tourists from across Europe, the US, Japan, China and Canada have a long-held fascination with Britain, our Royal family and cultural heritage, so it’s not surprising that they’re still flocking here en masse, despite continued uncertainty around Brexit.
“These tourists are looking for good quality accommodation, both in hotels and B&Bs but also in short-term lettings such as flats in central locations or holiday cottages by the coast, which are easier than ever to find and rent thanks to the growth of websites like Airbnb.
“With the number of overseas visitors to the UK increasing every year since 2010, demand for holiday lets has grown and grown, representing an extremely lucrative opportunity for savvy investors in the market for holiday properties to rent out on a short-term basis.
“Holiday lets are widely regarded as attractive investments as they generally achieve higher yields than longer-term buy-to-let properties and in most cases are exempt from the tax hikes which hit buy-to-let investors last April.”
Buy-to-let investors can currently offset only a portion of mortgage interest, and this will fall to zero by 2020, replaced by basic-rate relief of 20% regardless of the landlord’s tax band. By comparison, owners of holiday lets can still deduct mortgage interest payments from the rent before calculating their tax liability provided they can satisfy certain tests Holiday let owners have the added benefit of being able to claim the full cost of furnishing the property, whereas buy-to-let investors can only claim for repairs.