UK Holiday Home Investment: Is it Worth it

Is UK holiday home investment the way to go in 2024? Things look starkly different in comparison to the pre-pandemic world that existed before 2020. Back then inflation was incredibly low. Interest rates were at historic lows and, historically at least, things were pretty peaceful.

Four years down the line we are now in a cost-of-living crisis. We are experiencing high inflation. War ensues in Ukraine and in the Middle East, and economies across the G7 are facing significant issues.

This has meant that many have had to adjust plans for protecting and growing their wealth. Attempting to diversify an investment portfolio now requires a lot more work than previously, with classically successful investment strategies facing a lot more difficulty.

That in itself has opened avenues previously considered quite niche. An example would be holiday home investment, which is now gaining popularity.

Increase in UK holidays and staycations

According to Statista people in the UK are now taking an average of 2.3 domestic holidays per year. This marks an increase of 0.5 since 2018. That number stayed stable at 2.3 through 2021 and 2022 and is the highest average since 2011. The same figures show an enormous £165 billion worth of spending on domestic holidays in the UK in 2022 alone.

Clearly, since the pandemic, there has been a huge focus on domestic holidays in the UK. We can see a huge uptick in Airbnb and other services offering domestic stays.

This could be spurred on by the increased cost of flights to Europe and other popular destinations in recent times. Prices are also higher because of an explosion in demand following the pandemic, which now appears to be subsiding.

Willie Walsh, the current director general at Lata and a former chief executive at British Airways, has spoken to The Guardian, stating that we will continue to see an increase in the cost of flying for the next decade. ]

Walsh says, “certainty in the next 10-15 years that we’re looking at a significant increase in fuel costs”. Unless “there’s some compensating reduction in other costs.” which he doesn’t see happening “then people have to expect that there will be an increase in average fares as we go forward”.

Do holiday homes normally increase in value?

Whilst there is no guarantee that any investment will increase in value, you should always plan accordingly. We can look at general trends and rules of thumb as a way to inform on the likelihood of our assets appreciating.

Holiday homes usually hold and increase in value over time. They offer flexibility without a restriction to holiday let use whilst being a residential property in the future. Furthermore, the location of such properties tends to be in high-demand areas. These areas will attract demand regardless of market forecasts.

Every property is unique but, in general, yes, they tend to increase in value.

What average returns can you expect on holiday lets?

Your average return on a holiday let depends on the investment you make. For properties that we sell as investments such as Rookery Manor, we offer 10% assured NET returns over 5 years.

The wider picture is broadly the same. Landlord Today reports that holiday lets provide “30% more yield than a buy-to-let”. Holiday lets can bring a “return of 8% annually and an average profit target of 30%. This rising to “50% on properties without mortgages and letting fees”.

Alongside “increased tourism to areas such as Scotland and the Northwest, holiday rental prices have increased by 41%”. This reflects “the growth and profitability of the holiday-let market.”

These are impressive figures given the current picture of the UK and Western economies. Few alternatives are offering stability and strong returns that the UK does.

If you’re interested in a UK holiday home investment, then why not get in touch today?