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Why investors are turning to holiday let properties

Jay Howard

With the scrapping of the wear-and-tear allowance and the curbing of mortgage interest relief, landlords haven’t had an easy ride in recent years. Nonetheless, buy-to-let is still remains attractive in the UK, with figures showing in November 2017, there were some 6,600 new buy-to-let house purchase mortgages.

As Paul Smee, head of mortgages at UK Finance, said:

“The data shows housing market activity remains buoyant, despite November’s rise in the base rate.”

Part of this buoyant housing market activity is the rising trend of investing in holiday homes. As The Guardian notes, investors are increasingly turning to furnished holiday lets, taking advantage of the tax benefits that no longer apply to traditional buy-to-let.

HMRC views holiday lets as a trade, rather than an investment, thereby mortgage interest costs are able to be deducted from the income earned from the trade. Capital allowances are also available which are considerably more generous than the wear-and-tear allowance that was allowed on buy-to-let properties.

The rise of the staycation

Asides the tax benefits, another reason for the growing appeal of investing in holiday lets can be pinned on the rise of the staycation in Britain. According to data analysis, in 2017, staycation searches and bookings in Britain increased by almost a quarter compared to the previous year.

The rising trend for people to holiday in the UK instead of going abroad is being partly owed to the unfavourable exchange rate in the wake of the decision to leave the European Union. As Ellie Frances, a financial services administrator from East Sussex told The Independent:

“The pound to euro exchange rate is so much drastically worse following Brexit, and things here are costing me more day to day so I have less disposable income for holidays.”

With more and more people choosing to take their holiday on British soil, holiday homes are in higher demand, thus making them a more lucrative choice of investment.

If you are looking to invest in property in 2018, whether it’s as buy-to-let or as a holiday home, you could find the property you are looking for at Auction House London’s well-attended property auctions.

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