Is the Honeymoon Period Over for UK Holiday Lets?

Investors in UK property have for many years been attracted to holiday lets. This type of investment rose further in popularity during the pandemic when international flights were grounded and holidaymakers sought out alternative holiday accommodation in the UK. Many developers and landlords seized what they saw as potential investment opportunities, buying properties to turn into holiday lets and expanding tourism in the country’s hotspots as a result.

The downside of this for people living in the affected communities is how challenging it has become to get on to the housing ladder.

The UK government has now stepped in and is introducing new controls on holiday lets that come into effect this summer. These changes mean that people may need to seek permission from their local council to turn their home into a short-term let. There will also be a mandatory national registration scheme, introduced to provide local authorities with information on short-term lets in their area. Existing holiday lets are not affected by the new controls (as these will be automatically reclassified), nor will the rules apply to people renting out their main home for less than 90 nights a year.

The government says the changes will make it easier to find somewhere affordable to buy or rent in places where there are a high number of short-term lets, preventing a “hollowing out” of communities.

It could be argued that these changes have the potential to make investors and lenders a little nervous about investing in the sector. Leeds Building Society, a leading lender in the holiday let space, is already trialling a ban on new holiday-let mortgages in parts of Norfolk and Yorkshire in a bid to improve the situation for local residents and it remains to be seen whether other lenders will follow suit.

However, professionalising any sector and adding greater structure can also be a good thing. Those investors who already own and operate a holiday let remain unaffected by these latest controls but may benefit from limitations imposed on the number of new properties introduced in any one area, possibly resulting in a more positive long-term outlook. It’s certainly an area to keep an eye on in the months to come.

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