High yields and low prices spark a boom in the UK holiday lettings market

Low house prices and interest rates have sparked a holiday home boom as investors swoop property at popular tourist locations all over England.

An estimated 245,384 investors now own a second home in England – and the figure’s likely to go up, says a survey by top people’s estate and letting agent Knight Frank.

High gross rental yields typically between 5% and 7% are attractive to investors, especially as these are often higher yields than properties let on shorthold tenancies attain and are much better than keeping cash in the bank.

The statistics also reveal:

• Knight Frank expects to see a further 2% rise in the total to more than 250,000 in 2010
• Forecasts by Deloitte and Oxford Economics suggest that between now and 2020 the amount of money spent by Britons holidaying in the UK is predicted to grow by 2.6% a year in real terms
• The amount of money spent by foreigners holidaying in the UK is predicted to grow by 4.4% a year
• Growth in UK tourism over the past three years has expanded beyond usual popular months with the highest growth in bookings seen in September and October, as well as Christmas and New Year
• Nights spent in self-catering apartments in the UK between 2007 and 2010 has increased by 67%

“There are several reasons for the faster rebound in demand for second homes following the recent recession,” said Liam Bailey, Knight Frank’s head of residential research.

“Interest rates are much lower than they were in the early 1990s, which has reduced both the cost of acquiring property and the attraction of keeping money in cash. While credit has been severely constrained for homebuyers requiring high loan-tovalue ratios, wealthy investors with large amounts of equity have been able to take advantage of low financing costs.”

The report highlights two holiday properties increasing in popularity –

• Serviced holiday lodges in managed holiday complexes that are an upmarket reinvention of caravan parks.
• Leasehold apartments in a managed holiday complex or part of a hotel.

Sales in these sectors are expected to grow, as the market for traditional cottages remains low because few buyers are putting them on the market.

Full report: http://resources.knightfrank.com/getnewsresource.ashx?id=f3f059db-d779-492d-a445-8ceee6fa1820&type=1

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