According to its inaugural Holiday letting report, Sykes Holiday Cottages said it had experienced a 78 per cent increase in owner enquiries so far this year compared to the same period in 2020.
It added that 39 per cent of enquiries in 2022 had been from those completely new to holiday letting, whilst nine per cent were experienced holiday let owners.
It said that a quarter of UK holiday home owners started letting during the pandemic, whilst nine per cent have been letting for 10 or more years. A quarter also used to run their property as a long-term let.
Around 84 per cent of owners said bookings were stronger than ever and they expected this trend to continue over the next five years.
The top three reasons to buy a short-term let include supplementing existing income, having the property for personal use and greater flexibility.
The most popular areas for new owners were North Wales, Cornwall and the Lake District.
Out of holiday homeowners surveyed, 35 per cent said that they intended to buy another property and 38 per cent wanted to install new features to their current property.
Average income, top-earning regions and key investment areas
The report said that the average income for a holiday let owner was £28,000 in 2021, up from £21,000 in 2019.
Cumbria and the Lake District was the top-earning region, with a two-bedroom holiday lets bringing in £25,000 in revenue and a four-bedroom property netting £44,000 in revenue.
This was followed by Devon, where a two-bedroom property brought in £20,000 in revenue and a four-bedroom property’s revenue was pegged at £35,000.
Dorset came third, with a two-bedroom property netting £20,000 in revenue and a four-bedroom bringing in £32,000.
The report said that the average annual revenue for a one-bedroom property was £14,000, a two-bedroom was £17,000, a three-bedroom property came to £20,500.
For four-bed properties the average annual revenue was estimated at £28,000, whilst for five bedrooms or more the average annual revenue was £65,500.
The report said that the average running cost of a holiday let was £11,500, which includes costs like council tax, utilities, cleaning costs and property maintenance.
It said that Blaenau Gwent and Rhonda Cynon Tad in South East Wales, as well as Denbighshire in North East Wales, were its three top picks for staycation accommodation investment. This is because they reported strong house price growth and their gross annual holiday let income was significant.
The report said that its three top investment areas in England were Tyne and Wear, Lancashire and Shropshire, whilst in Scotland the three top areas are Bute, Fife, Dumfriesshire.
Holiday let demand expected to grow
Sykes Holiday Cottages said that in the short-term it expected the return of international travel from Europe and US to the UK short-term rental market. It said that it may take longer for market further away to return to the UK.
It continued that 2022 had already got off to a strong start with 4.2m UK nights booked in January, according to AirDNA, which is double the figure in the same period last year and five per cent higher than 2019. This demand is expected to continue for the rest of the year.
The report said that there had been a shift in the types of houses booked, with larger houses and villas and higher quality homes with more amenities becoming more popular, which had pushed up average daily rates by 12 per cent in 2021. This is predicted to continue.
In the longer term, the report said that it expected demand to return to larger cities, as people had opted for costal or rural breaks during the pandemic.
It added that the demographics were also shifting, with younger guest working remotely and travelling for longer periods, which it said would “increasingly drive the market forward”.
The report said that supply of properties could be an issue that could hold back the sector, but unique property types like tiny homes and castles were bucking the trend.
City breaks and new purchases key trends
Joe Stallard, sales and market director at House and Holiday Home Mortgages, said that since the end of the first lockdown it had had consistently high levels of enquiries and had nearly tripled its team from three to eight to meet demand.
He said that enquiries typically came from Cornwall, Devon, the Lake District and the Cotswolds, but this was becoming more diverse. He cited Yorkshire, Northumberland and Norfolk as areas that had experienced an uplift in business levels.
“As clients are taking their own holidays in new spots of the UK, they’re learning about different pockets of the country and spotting opportunities for a variety of different holidays, from the traditional coastal stay to walking holidays and city breaks,” he explained.
Stallard said that the lifting of Covid restrictions would lead to an increase in foreign holidays but he was confident that a UK break once or twice a year would still appeal to people.
He continued: “Holiday let mortgages are still fairly niche, with limited numbers of lenders offering them and all having their own criteria quirks. Generally speaking, if a client has an earned income, clean credit history and owns their own residence then they’re in a good position.
Stallard said that the focus was then on the property, and affordability was driven by rental potential. He said that factors such as unusual construction, restricted usage or occupancy, solar panels, septic tanks were key considerations for lenders so “specialist advice is a must.”
Andrew Soye, director of Holiday Cottage Mortgages, said year-on-year enquiries were up 35 per cent and it had to disable its normal marketing channels.
Soye said that it had seen a shift to more inland areas, not solely the coast, and Wales and North East had “incredible properties and very reasonable prices”.
He said that Cotswolds, Cornwall and the Lakes were very popular holiday let areas but prices had grown massively during the pandemic.
Soye said that most lenders only offer coast and country locations but this “mode of thinking needs reviewing if lenders want to remain current”.
He explained that city breaks were an “important and growing part of the market”, barring London where properties cannot be rented out on Airbnb for more than 90 days a year.
Soye said there was also an interesting mix of transactions, with 92 per cent of enquiries coming from new purchases.
