Andy Soye, founder at Holiday Cottage Mortgage, said that it had been an “interesting journey” over the past few months as the potential abolishment of the furnished holiday lets scheme as part of the Spring Budget had led to a lot of uncertainty in February, March and April, as people looked to explore their options but were sitting on the fence.

“We were a free source of information. They wanted to know what was going to happen and what it meant to them. People weren’t serious in those first couple of months, there was a lot of activity but not a lot of transactions,” he said.

Chancellor Jeremy Hunt confirmed that the furnished holiday lets scheme would be abolished from 6 April 2024, so short-term and long-term lets will be treated the same for tax purposes, but the election has potentially thrown a spanner in the works as to whether this will be passed.

A parliamentary debate in May revealed that some MPs think the abolishment could have unintended consequences in different regions.

“It is all up in the air,” he said.

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Joe Stallard, director and adviser at House and Holiday Home Mortgages, said that there was “no doubt” that the recent government announcement had “spooked the holiday let market”, but the market still had to “wait to see what actions will actually come to light following some strong industry lobbying.”

He continued: “In reality, that’s led to an increased level of caution in the holiday let market, whilst investors hold their hand whilst details are finalised.

“We’ve had a number of clients look to switch strategy and invest via a limited company structure rather than in their personal name, with some even changing course mid-purchase.

“The facts remain that holiday let investing is still attractive to many, with the ability to utilise the property themselves as well as use it as a vehicle to plan for their future.”

Soye agreed, adding that the dip in activity has started to change, with potential borrowers coming in May and June having re-examined their business models and reconsidered their models, and are keen to progress.

“People have digested it, and enquiry levels are good. We are getting around 3-4 new business enquiries a day,” Soye added.

He also agreed that there had been a shift to limited company holiday let applications, and lenders in this space had been inundated with applications.

“It isn’t for everyone… it really suits a borrower who doesn’t want [to] take out their profit straight away and who wants to grow their portfolio,” Soye explained.

“The actual market for holiday letting is as good as it has ever been. Weathering the storm is important; the holiday let market is remaining strong.”

Soye noted that comparing the market to the boom period post-pandemic was disingenuous and the more normalised market of pre-pandemic was what should be expected, and what the market was returning to.

 

Some brokers believe holiday let heydays are ‘truly over’

Other brokers had different opinions about the holiday let market, with Kundan Bhaduria, property developer and portfolio landlord at The Kushman Group, saying that it believed the “heydays of holiday lets [are] well and truly over”.

He said: “The market for holiday rentals has been ruined by the tax disadvantage that now kicks in, thanks to Jeremy Hunt’s recently declared policies. Add to that the effect of a separate use class being brought in for holiday let use, and one quickly realises that this sector is going to get red-taped soon.

“But the real question to ask is why have landlords been gravitating towards seasonal income-producing holiday lets over bread-and-butter buy-to-let properties in the first place? The answer lies in the persistent persecution of landlords and housing providers by militant tenant unions, in addition to forced government intervention in the sector. If you bite the hand that shelters you, soon you will have no place to find another home. Stop punishing those that are putting private money to home those that can’t afford their own place, and you will see a return of good, responsible landlords willing to offer more options on the rental market.”

Clive Read, owner at Goldmanread, said that there had been a “definite downturn” in the holiday let market, having previously been “relatively buoyant”.

He said: “The previous favourable tax treatment of holiday lets combined with the effects of Brexit meant there was a mini boom in this area. However, increasingly negative media around holiday lets and that at least one major lender, Leeds Building Society, have withdrawn entirely holiday let mortgages in certain locations has meant that investors have started to feel more cautious about this investment class.

“Holiday let landlords are starting to face the same prejudices as the buy-to-let landlord. Given the extra management and complexity of holiday lets, our feeling is that although people will continue to invest in this area for the time being, holiday let has reached its nadir.”

 

Some views were gathered from Newspage.