The long summer days of 2017 find the expanding rental department in Horncastle moving to new premises, the new offices housing the residential lettings department, with five staff members on the ground floor it seems an appropriate time to consider one trend in the current rental market.
Buy to let landlords are being squeezed with changes to allowable tax relief. The reduction in relief is being phased in between April 2017 and 2020 and will be replaced by a 20% tax credit. From April 2017 landlords can offset only 75% of their mortgage interest against their profits. This falls to 50% next year, 25% in 2019 and zero in 2020. In addition, landlords are no longer able to deduct 10% of their rental income as wear and tear before tax.
Having spent last weekend on the coast at Sutton on Sea and walked through Sandilands to the promenade on Saturday morning, Saturday is clearly change over day in the holiday let market. With this in mind are holiday homes a realistic alternative to the traditional buy to let.
Research in Guilford has suggested that the annual gross yields are potentially as much as three times higher than with traditional buy to let and in the summer months a return for a week may be as much as a month on traditional buy to let. As a note of caution however the biggest potential cost is any void periods so the choice of location of holiday let is important. With the current expansion in staycation and city breaks however there may be untapped holiday let markets in the non-traditional holiday locations.
To qualify as a holiday let a property must meet the rules, the key one being the availability to let for at least 210 days of the year. Holiday let owners can refurbish properties to a luxury standard and claim the cost as tax deductible expense. Holiday makers will generally require a higher level of amenity to be provided than a traditional buy to let, expecting WIFI and satellite tv as a minimum, these costs along with the costs involved in attracting sufficient tenants, employing cleaners and paying the utility bills all eating into the potentially higher gross yield.
In summary, it may well be worth landlords in appropriate locations considering holiday let as an option to the traditional buy to let market as the Government continue to put the squeeze on the traditional buy to let Landlord.
Residential Sales Valuer
Robert Bell & Company