Alan Cleary - Managing Director of Precise Mortgages
It seems unusual to be talking about holidays in November – unless of course you’re lucky enough to be jetting off in search of some sunshine or taking to the slopes in the depths of British winter.
But I want to talk about holidays, the sort that Brits take at home. The past 18 months have brought more uncertainty to both the housing market and UK economy than we’ve seen for many years.
Since Britons voted in favour of leaving the European Union back in 2016, the value of the pound has sunk and the latest assurances on Theresa May’s government securing a good deal ahead of our exit in March 2019 (or later as it now appears could be a possibility) have done little to shore up confidence.
The government has also, simultaneously, stuck to its guns on the phasing out of tax relief on mortgage interest for buy-to-let landlords letting to tenants on assured shorthold tenancies. By all accounts, the strain is starting to show with the Ministry of Housing figures revealing landlords offloaded 3,800 properties a month in 20171.
Like the rest of the market, at Precise Mortgages we’ve seen more purchases through limited company structures as a result and increased appetite for investment outside the capital and in HMOs and multi-lets. There’s also been another, smaller scale shift in the buy-to-let market with landlords increasingly considering holiday lets as a logical move.
The most obvious driver of this is holiday lets’ exemption from the changes to tax relief; while landlords letting on ASTs must now pay tax on their revenues and then claim back a tax credit, holiday let landlords are still eligible for full tax relief on buy-to-let mortgage interest. The cost of furnishing holiday lets can also be written off for tax purposes against the remaining profit.
For landlords considering this route, there’s been at least some consolation in the pound’s poor performance and the ongoing uncertainty around the terms of Britain’s exit from the EU. More Brits are choosing to stay at home for their holidays.
Research conducted earlier this year by Travelodge2 suggested the average spend on this year’s stay at home holidays will be £823 – up 37 per cent from last year. According to Travelodge, 85 per cent of us now take three ‘staycation’ breaks a year on average and 38 per cent of Britons want to holiday in the UK rather than Europe in order to support our economy.
Part of our ethos is to help challenge the status quo in the market, within clear regulatory and risk parameters. The holiday market is one which has historically been underserved by lenders, but we think it makes a lot of sense for both landlords and for ourselves.
It’s a small chink of light in the buy-to-let sector, which has been fighting hard to deal with raft upon raft of regulatory change over the past few years, but, if done right, there’s money to be made and signs that it’s a market with increasing domestic demand.