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Post-Brexit property investment could move towards furnished holiday lets

Successful property investment means moving towards the next big opportunity, and there are a number of reasons why short-term lets and furnished holiday lets are pushing ahead right now.

Furnished holiday lets are nothing new, but they have been soaring in popularity recently as an investment option. Yields on a weekly basis are much stronger than with a long-term rental property, and there are other advantages which are coming to the fore at the moment, making them a particularly attractive choice. Below are some of the reasons why they are something property investors should consider.

1. Cheaper staycations since Brexit

Since the EU referendum back in 2016, the value of the pound has taken a hit. While the uncertainty has continued to affect a number of markets, this has had two outcomes for the furnished holiday let and short-term let market in the UK. First of all, poor exchange rates for UK holiday-makers has made staycations more attractive than ever. Secondly, it has made it cheaper for foreign nationals to visit the country, creating a boom in tourism. Hotels are no longer the go-to option for holiday-makers – according to Visit England, the number of people booking self-catering accommodation in England rose from 6.22 million to 7.23 million between 2015 and 2017.

2. Environmental issues

The UK – and the rest of the world – is becoming increasingly environmentally aware, with global governments focusing more attention than ever on reducing carbon emissions. The UK has already reduced its carbon emissions by 42%, according to government figures, and the number of individuals taking personal responsibility for the planet continues to increase. As a result, the number of people choosing to stay put rather than fly abroad is on the rise, leading to more staycations – and a boost to the holiday lettings business.

3. Tax advantages

Mortgage interest tax relief is set to be a thing of the past by the 2020/2021 tax year, as it is being phased out for buy-to-let landlords and replaced with a 20% mortgage interest tax credit (Section 24). While many landlords will be unaffected, or only slightly impacted, others might feel the hit, particularly those in the higher earnings bracket.

However, furnished holiday lets are considered a business, not an investment, so this is likely to not apply to this type of property. You may also be able to take off other expenses from your tax bill, including council tax, utilities, maintenance and cleaning costs, property management fees and advertising, and the value of the furniture, fixtures and fittings can also be taken into account. Furnished holiday let landlords can also claim certain capital allowances, rather than wear and tear allowances, and may be able to take advantage of entrepreneur’s capital gains tax relief when they sell the property. It is advisable to speak to a financial adviser to find out more about the tax implications of an investment.

Growth area

The increasing interest in holiday lets is backed up by mortgage brokers who consider the market a huge growth area and are appealing for lenders to give landlords more options.

Mortgage providers have traditionally been wary of lending on holiday let properties. The difficulty in assessing the potential rental income due to the seasonality and irregular income levels of the business has meant that many lenders have chosen to steer clear.

Some of the smaller building societies have been more active in adapting to the nature of the income of holiday lets, while some brokers believe there is the potential to look at higher loan to values on holiday lets because of strong rental yields. Overall, the industry is adapting.

To learn more about investing in furnished holiday lets, speak to one of our team.

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