The family have discussed it over the festive break. The pound is weak, the world is uncertain, saving doesn’t pay, foreign holidays are getting more expensive — so why not invest and get some pleasure out of life by buying a holiday cottage? How about a flat above the Rum & Crab Shack, in St Ives, Cornwall, or a colour-washed cottage in Aldeburgh, Suffolk?
That way, you could enjoy the things Britain is really good at, such as windblown clifftops, sandy coves and gourmet pubs, while at the same time capitalising on predictions for post-Brexit holidays. VisitBritain forecasts 38.1m trips to the UK in 2017, an increase of 4% on 2016, and a spend of £24.1bn, up 8.1% over the same period. Some of this flow of cash will find its way into the pockets of the owners of cleverly chosen holiday rentals.
Then there’s the staycation, taken by 71% of British holidaymakers in 2016. That’s up from 64% the previous year, according to Abta, and it can only become more popular. Barclays predicts that it will contribute more than £108bn to the economy in 2017, a figure it expects to rise by 25% over the next four years. The lion’s share will be trousered by London, followed by the southeast, the southwest and Scotland.
Yet there are issues that should be examined before you take the plunge. The market tends to be made up of individuals or families who want to have a second home in a place that they love, and let it so it pays for itself. This is not the same as buy-to-let, where the intention is solely to earn money. Holiday homes perform very differently from region to region, and there is no national data on holiday rental levels compared to house prices and capital growth.
“It is all about the pound against the euro,” says Jonathan Cunliffe, head of Savills estate agency in Cornwall. “If the pound stays where it is, it will be good for the staycation. Just don’t go thinking that you will make a lot of money — it is competitive now, and you spend your time forever upgrading the bathroom. But if you take a long-term view, you will be OK.”
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So should buy-to-let investors, stung by tax changes and stiffer conditions on mortgages, pile into the short-term market instead? “The holiday-let buyer is a totally different creature,” Cunliffe says. “People do one or the other. Most come into this sector because it justifies having a property somewhere they want to spend time themselves.”
Holiday lets are subject to the extra 3% stamp duty on second homes, but furnished ones are exempt from new rules — to be phased in from April — that ban buy-to-let owners from deducting mortgage interest costs from their tax bill.
Simon Tregoning, chairman of Classic Cottages and its smaller sister Boutique Retreats, agrees with Cunliffe that a holiday cottage is nothing like a buy-to-let. “We have few investment bankers,” he says. “It is a heartfelt buy.” Many do no more than pay their way, but the new chic niche does surprisingly well.
“The fisherman’s cottage, one bedroom, done up to the eyeballs, which we have in our Boutique brand, will probably be let to romantic couples almost all year round.” Across the board, he adds, early bookings show the staycation effect is strong.
There’s similar optimism from Alistair Handyside, chairman of Premier Cottages (premiercottages.co.uk). “We are predicting that 2017 will be a bumper year for self-catering,” he says. “Bookings are well ahead of this time last year.”
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Rental values are high, especially in the peak season, but he advises breaking them down to a price per night per person. “Prices have crept up over the past three years, but the standard of self-catering properties has also risen.”
A luxurious house with a pool, large enough for a family of six, at Higher Wiscombe, Devon — close to the Dorset Jurassic Coast and the South West Coast Path — will cost £2,100 for a week this summer. That works out at £50 per person per night. And the lower rental value for February half-term equates to £25 per person per night. The property is probably as comfy as a hotel, but costs a good deal less.
In Windermere, Cumbria, where people walk the hills adored by Wordsworth, Coleridge and Beatrix Potter, Humberts estate agency is about to open a new office. The strengths of the area, according to the Humberts partner Kathy Barlow, include the region’s application this year to be a Unesco World Heritage Site and the fact that it has four Michelin-starred restaurants: L’Enclume, in Cartmel; in Gilpin Hotel, in Windermere; Forest Side, in Grasmere; and the Samling, in Ambleside.
Gourmandising is now a big factor in the market. In the Cotswolds, Rupert Wakley, partner at Knight Frank estate agency in Stow-on-the-Wold, is already completing sales on holiday homes this year. “You can’t go wrong with a two-bedroom Cotswold cottage,” he says, “but there is a need for family houses, too. Londoners and international buyers are also looking.”
People who buy here want to be able to visit Oxford, Stratford and Bath, and to eat in all the renowned gastropubs. “It is important to buy in the village centre, not deep countryside, so that people can indulge their appetites.”
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Need to know
1 Buy in a hotspot with a boutique hotel or a celebrity-chef restaurant.
2 Think about how it will photograph. A single wonderful picture will sell the place for you.
3 Ask a holiday letting agent to estimate rental value before you buy.
4 Agents’ fees are steep — 12%-15%, or 20%-30% at the top end.
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5 If you go the Airbnb route, check that you are insured against thoughtless guests.
6 Remember that lucrative rentals in peak weeks are counterbalanced by voids in the winter.
7 You can’t get a buy-to-let mortgage on a holiday rental, although some specialists, such as the Leeds Building Society, will lend on these properties.
8 You can claim tax relief for some of the cost of fixtures, furniture, maintenance and mortgage interest, but not for works that increase the capital value of the property.
9 Profits count as earnings for pension purposes.
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10 The Inland Revenue expects a holiday rental to be available for 210 days of the year and to be actually let for 105 days, with no single let lasting more than 31 days.
Properties for sale
Devon £795,000
Binoculars and boating shoes at the ready: this flat in Kingswear, overlooking the River Dart, has three bedrooms and a balcony. 01548 800462, savills.co.uk
Wiltshire £1.5m
This is a portfolio deal: a four-bedroom barn conversion, five cottages, two fishing lakes, 10 acres and an annual turnover of £74,000. Devizes is five miles away. 01823 331234, humberts.com