Everyone is looking forward to 21 June when (if all goes well) most, if not all, coronavirus restrictions will be lifted, as per the government’s roadmap out of lockdown.
But with continued questions surrounding foreign travel, many people are planning their summer holidays in the UK rather than jetting off abroad.
Since 12 April, when lockdown restrictions began to ease, UK holiday companies have reported huge demand for cottages, luxury camping (or ‘glamping’), city break flats, domestic UK cruises and any other type of holiday accommodation under the sun.
With so much demand, you may be thinking about buying a holiday let of your own. Perhaps a place you can occupy a few weeks or months of the year and rent out the rest of the time. Or perhaps you are purely interested in investing in a burgeoning market, particularly as the buy-to-let market has become less attractive for many in recent years.
Whichever option you choose, there are a number of vital considerations to think about. So, is now a good time to buy a holiday let?
Holiday let mortgages bounce back
The holiday let industry suffered in 2020 due to lockdown restrictions which affected the housing market and prevented people from going on holiday. As a result, many lenders withdrew their holiday let mortgage products from the market.
However, recent research shows that the holiday let mortgage market has bounced back, with the number of products on the market increasing in April 2021 to 149, just 13 less than in March 2020.
A greater number of lenders are also offering holiday let mortgages. Although rates may be slightly more expensive than last year, many lenders advertise generous rates of return which only appear set to improve. For example, some lenders suggest that the holiday let market is forecast to grow 4% year-on-year.
A wider range of mortgage products on the standard residential mortgage market also provides greater choice for people who choose to remortgage their main residence to pay for their second home.
For those wondering whether to buy a holiday let with a dedicated holiday let mortgage or by remortgaging their own home, it is essential to speak to an independent mortgage broker or financial advisor to make sure you are getting the best deal.
Supply for holiday lets outstripping demand
Despite the growing choice of holiday let mortgage products, demand appears to be outstripping supply.
Anticipation for a staycation boom combined with other factors, such as the Stamp Duty holiday which allows second time buyers and investors to take advantage of reduced Stamp Duty rates, mean that buyers are snapping up properties faster than they go on the market.
Property website, Rightmove, also recently reported that the number of properties for sale is down by 21% annually.
Tips for buying a holiday let
If you are thinking about buying a holiday let in 2021, here are our top tips to get started:
Find an independent mortgage broker and seek independent financial advice
Only someone qualified to provide financial advice can help you work out whether purchasing a holiday let is a solid financial decision. They will also be able to help you access the best possible deals from lenders that may not be available on the open market.
Such advisors will also be regulated, providing extra protection for you should something go awry.
Think carefully about location
Coastal areas are popular locations for holidaymakers and as such, property agents are reporting a major uptick in interest in such locations.
For example, Rightmove recently reported that Cornwall has replaced London as the most searched for place to live. Correspondingly, the HM Land Registry UK House Price Index shows that average house prices in Cornwall have risen from £236,555 to £263,014 between March 2020 and May 2021 – around a 10% increase.
However, these areas are popular for a reason – you could see lucrative returns by buying in a well-sought after area. You will need to carefully balance the cost of buying in various locations with the potential returns.
Budget for Stamp Duty
If buying in England, you may be keen to move quickly to benefit from the Stamp Duty holiday. Even as a second-time buyer, you could benefit from reduced rates if you complete before the end of September 2021.
However, with such a booming market, it is likely that any transaction started now will miss the first deadline in June 2021. You may be complete before the end of September, but conveyancing can sometimes be unpredictable and delays are always possible even in the most straightforward of transactions. As such, make sure you budget to prevent being caught out by a surprise tax bill.
Read more about the Stamp Duty holiday here. Remember that as a second home buyer, you will continue to pay higher rates of Stamp Duty – 3% of the purchase price for residential properties worth up to £500,000.
Instruct your conveyancing solicitor early
When you instruct a conveyancing solicitor, there will be some initial admin to take care of such as identity checks and review of terms & conditions. So, make sure that your solicitor is ready to start before you find your perfect holiday let, so the conveyancing process can get underway as soon as your offer is accepted.
Get expert advice about buying or selling a holiday let
At Bird & Co, we are specialist firm of Law Society accredited conveyancing solicitors who help people across the UK buy and sell property.
Get a conveyancing quote online to see how much your transaction is likely to cost, then a member of our conveyancing team will be in touch shortly.
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