Staycation spots are on the rise in the United Kingdom, and mortgage lenders are making their best attempts to meet the rising demand for them.
Do you think short-term lets are the new direction property lenders and investors should be eyeing for the next couple of years?
Before the onset of Covid-19, the UK holiday market was thriving in the face of world competition. British locals, along with foreigners, were taking advantage of the depreciating pound rate and booking more staycations than in previous years.
From a consumer’s perspective, environmental issues have become an important aspect when choosing a holiday destination. Research shows that a significant percentage of people are on a lookout for ‘more sustainable’ or ‘greener’ holidays in the future.
From the angle of a property investor, many factors such as long-term rentals and short-term lets, can motivate landlords to diversify their ownerships. The latter carry tax and financial benefits, including increasing demand from consumers and a more attractive business model for higher profit margins.
The outbreak of Covid-19 has restricted international travel, resulting in a rise in demand for staycations. While people are reluctant to go abroad for travel, they are on the lookout for closer and cheaper alternatives: A trend that is likely to survive until the virus subsides completely.
A number of Adapting to the times and new trends, mortgage lenders are giving more opportunities to borrowers. A number of companies such as YBS Commercial Mortgages and Teachers Building Society have attempted to profit off and open the market for staycations. YBS, for example, is now offering a buy-to-let product that targets holiday lets in the UK’s top tourist sites. The offer comprises a loan amount of £1m and the opportunity for a five-year fixed rate at 3.85% with a loan-to-value (LTV) ratio of 75%. Work out what a mortgage would cost you using our Mortgage Calculator UK.
On the other hand, Teachers Building Society has launched some products in which the lender offers a 3.49% three-year fixed rate and a 3.74% five-year fixed rate with a 75% LTV for borrowers. These products aim to meet the demands of new and pre-existing property investors.
Diversifying short-term lets is also imperative to its specific location along with the property on the market. Many believe that coastal resorts are a great option as these tend to be the most popular summer holiday destinations. However, seasonal-prone areas may not be the best choice when it comes to staycation lets.
One of the primary locations in the UK with the highest short-term let yields is Liverpool. Research shows that such city locations remain busy all year round, attracting business ventures and tourists. Most cities are geared up for hosting and attracting major sporting events, which automatically pulls people closer to the location. As mainland cities such as these have ideal transport links, restaurants and cafes, tourist sites, and employment hubs, they will continue to attract more people.
As the market trends continue to shift, the opportunities for lenders and borrowers alter as well. It is interesting to note how short-term lets thrive in the market, and if they will break traditional long-term rentals.