Landlords look to holiday lets as PRS rules bite

Mortgage brokers are seeing more landlords consider holiday lets as changes affecting traditional buy to let reshape investment decisions.

And it is not just newcomers, with the research pointing to experienced and professional landlords among those reassessing their portfolios.

Cumberland Building Society’s inaugural Holiday Let Index found that 88% of brokers had seen an increase in holiday let mortgage enquiries over the past 12 months.

Nearly a third (32%), reported a significant increase, while just 8% said enquiries had fallen.

Experienced landlords eye alternatives

Mark Long, the managing director at Pegasus Insight, which carried out the research, said: “What stands out from the research is that this momentum is not simply coming from people entering property investment for the first time.

“Brokers are also seeing more experienced and professional landlords considering holiday lets, which could tell us something about how the sector is developing.

“As established landlords reassess their portfolios, holiday lets offer exposure to a different part of the property market, with a different income model to conventional buy to let.”

He added: “It will be particularly telling to see whether this continues as further changes affecting the private rented sector take effect.

“If more experienced landlords do move into holiday lets, we could see the borrower profile change with them, bringing different expectations of brokers, lenders and the finance available.”

Landlords reassess buy to let

Cumberland’s head of intermediary lending, Grant Seaton, said: “What’s interesting is that we’re seeing demand increase despite a series of well-publicised tax and regulatory changes affecting property investors.

“The assumption in some parts of the market has been that these changes would reduce appetite for holiday lets, but the research suggests investors are continuing to assess the opportunities available and the returns that can be achieved.”

He added: “We’re also seeing wider changes across the property investment space.

“As landlords review their options, many are taking a fresh look at holiday lets alongside more traditional buy to let investments.”

Higher yields attract landlords

Higher yields compared with traditional BTL were the leading reason clients were entering the holiday let sector, highlighted by 32% of brokers.

Regulatory changes affecting traditional buy to let were the second most common reason, identified by 16%.

The findings come as landlords continue to assess changing tax rules, compliance requirements and wider reforms affecting residential property investment.