The pandemic has had a lot of consequences, from accelerating our use of technology, to making us rethink what’s important when purchasing a home, and for some, enhancing our ability to save.
In the commercial market, one of these consequences is the creation of the holiday lets or staycation boom, as prospective holidaymakers were unable to get away, and looked for closer-to-home alternatives for a much-needed break.
Holiday lets mortgages have been gaining popularity in recent years but the pandemic put them on a whole new level, particularly once restrictions were lifted making it possible to travel to other parts of the UK.
Portfolio landlords recognised this increase in demand, capitalising on it to diversify their portfolios and benefit from the higher returns promised by a holiday let. Lenders also saw the opportunity, and more holiday lets products appeared on the market, including our own, which we launched in July 2020.
Whilst all of this is great for the UK economy, with consumers spending their money at home rather than abroad, the question remains, what happens next? As we get ‘back to normal’, whatever that looks like, is the staycation boom here to stay?
My view is that the answer to this question is complex. The uncertainty around overseas travel, the threat of self-isolation upon return, and ever changing red, amber and green lists is likely to persist for the short-term. This means that it may take a while – perhaps even 18 months or so – before foreign holidays really start to kick off again – and this means buoyancy for the UK holiday lets market in the meantime.
There’s also a knock-on effect of pent-up demand, as those who couldn’t go on their staycation in 2021 due to restrictions have had their booking re-arranged to 2022 – further prolonging the demand for UK breaks and likely music to the ears of those invested in the market.
Longer-term, and as things settle down after Covid, we’re likely to see a resurgence in the overseas travel market, as consumers resume chasing the guaranteed sun offered by foreign climes. That said, I don’t think that this has to spell a downturn in holiday lets. UK residents may have been reminded just how much their own country has to offer them, right there on their own doorstep, without the hassle or cost of overseas travel involved. There’s also the environmental impact – which is something, as a nation, we’re becoming more aware of as the climate change conversation heats up.
However, as great as this all sounds for the UK economy, there’s another angle to consider. It’s good news for those purchasing second (or more) homes as holiday lets – but the consequence of this is increased house prices, as demand for properties is pushed up in popular tourist areas, potentially meaning that those at the bottom of the housing ladder, like first-time buyers, an already struggling sector, are priced out. As an industry we need to be mindful of this and do what we can to help them. This might mean developers including affordable homes as part of their planning submissions, brokers ensuring they have awareness of the government schemes available, and lenders embracing these schemes, as well as looking for product innovations geared towards first-time buyers.
As to the future of the holiday lets industry, perhaps the longer-term picture will be a sort of hybrid situation, similar to the approach many employers are adopting with home verses office working. Overseas travel will inevitably return, but consumers also now have a fresh perspective on UK breaks, and all the benefits they bring. And this can only remain good news for the holiday lets market.
Allan Griffiths is regional lead at YBS Commercial Mortgages
