Are holiday lets a good investment? | ERE Property
Are holiday lets a good investment

Thursday 30 June 2022

Before we dive into the benefits of a holiday let, it would be helpful to define what one is: a holiday let is a property that is rented out by holidaymakers for short periods at a time, from as little as one night, right up to a few weeks.

Following the pandemic, the staycation market experienced a boom. Not only is the demand for staycation properties still there, but it is growing. Holiday Cottages reported that 2022 started strongly, with bookings up over 400% compared to a year ago, and forward bookings are already over 80% ahead of where they were in 2020.

The BBC recently reported that the number of holiday-let homes in England has increased by 40% in 3 years, from 19,543 in 2018 to 27,424 last year. The sharpest rises were seen in areas where staycations were already popular, indicating the rising demand in the market over the last 3 years.

Higher income than long-term lets

The first benefit to owning a holiday let is the significantly higher income. As holiday lets benefit from flexible and often daily pricing, as opposed to long-term lets which typically adopt strict monthly pricing strategies. If your holiday let is successful, it is entirely possible for you to earn a much higher income return than if you chose to let your property long-term.

Tax benefits of a holiday let

Another considerable benefit is that a holiday let is classed as a business. With this in mind, you could potentially see significant tax benefits.

We cannot provide any financial advice and encourage everyone to consult an accountant to find out exactly what tax advantages a holiday let could offer you.

However, as HMRC considers holiday lets to be a business, there are certain benefits you could claim such as Mortgage Interest tax relief, Business Rates relief, and Capital Gains tax relief, and you could also potentially claim all the running expenses of your holiday let including bills and maintenance costs.

Additionally, if your property is fully furnished, there may be other tax advantages.

To qualify for any tax advantages, your property must be available for holiday letting by paying guests for a minimum of 210 days in a year and must be let out for 105 of these days.

The key to a successful holiday let

The key to successful property investment is location, and this is even more important with short-term holiday lets. Sought-after locations can help investors earn stronger returns.

Sitting on the edge of the River Tone, the county capital of Somerset is a delightful town with a great mix of shops, restaurants, and bars. The town has a great mix of old and new architecture, and, due to its central location, is the perfect base from which to explore all of Somerset’s wonders. This central location is a significant driver of the high levels of demand from holidaymakers.

The Guardian has previously identified Taunton as a holiday let hotspot. The town topped Halifax’s UK house price growth table with a 21.8% increase to £315,759. In 2021, Taunton had the fastest growing population in Somerset.

Taunton has good access to the M5 at Junction 25. Taunton railway station has services to Bristol, Exeter, London Paddington, the Midlands, and the North. Exeter can be reached in 30 minutes by the M5 or 20 minutes by train from Taunton, and so is popular amongst those who work in the Exeter area.

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