Everyone's talking about the property market right now and the holiday let property market is all part of that. When it comes to getting a mortgage on a holiday property, knowing what the market is like, and what lenders are looking for is vital.
In this episode, Mark talks to his son, Joe Stallard, director at House and Holiday Home Mortgages, about exactly what's going on in this pocket of the UK economy right now.
Much of what they discuss is the kind of information you won't hear anywhere else!
Transcript of the show:
State of the Holiday Let Market.
Joe, good morning. lovely to be in Winchester on a bright spring morning. It's a long time since we got together and talked about the holiday let market. Absolutely. And, so I thought it was a good opportunity to just go over what's happening in the marketplace since what was a very busy period for everybody. So, tell me about, let's start and talk about the panic the pandemic ended. Where, where do you think we are now, Joe Holiday, that market wise?
Sure. So, yeah, so I guess the, the pandemic was obviously very busy in the, in the holiday, that world. It was, , everybody jumping on the the boom of, of staycations, as it were really. So where are we now? Well, we're March 23, so things have settled a bit. We seem to have mainly come out the, the other end of it but obviously we've had the cost of living stuff that, that's occurred sort of between the real boom and, and now, I don’t know about you, but how you found that with, with your clients and how that's impacted things.
Yeah. I think Joe, the answer to that is, is I think the people who really want to do this are still in the market. They still want to go at, they still want to find the properties that they're looking for. I think the people that read in the newspaper, it was a good idea to own a holiday let, I think they've probably somewhat evaporated away.
So, I think it's, we've got the professionals now, to be fair. Yes, I think I'd, I'd probably echo those sentiments. I think, you know, we have lots of conversations with people looking at, at properties, looking at costs and understanding stuff, but perhaps they're a little bit more hesitant to, to pull the trigger on something than they were previously.
And I think it, to a degree, might have professionalized. Sector a little bit. Yeah. I don't think, I don't think the number of inquiries we've got has actually gone down perhaps as much as I thought it might do. I think the cost-of-living thing is, a big challenge. I think that with has prices, you know, still high in certain , and still high in that sort of Devon and Cornwall areas that we work.
Obviously I still think that there's a challenge there for people to make the numbers work. Do you agree?
I do. I do. I think though, you see, you know, one of the biggest agents in the country -- cottages.com, they came out with their figures and said that that January bookings were up 33% year on year.
So, obviously, going from one of the biggest years in holidays -- that's last year-- to still rising this year. I think that's a good sign. I think the cost of living is probably a challenge, but actually what it's probably done is it that the UK holiday, without all those additional costs of flying abroad, of central airport problems, cancellations of being able to take the dog with you on holiday and not put it in kennels for, you know, 300 pounds a week or whatever it would be on top of your normal holiday. I think there's still a, a desire for people to still want a break and get away. Yeah. I spoke to a client only last week and she said that they used to go abroad every year, but they don't go abroad now.
They went during pandemic, they went to Yorkshire, they discovered Yorkshire, they found how beautiful it was, and they're now looking to buy a large property in Yorkshire, for themselves and, and to let out as well. And I think that actually mirrors many people. I certainly did two airport trips last year and I wouldn't really relish with any great gusto again.
It wasn't pleasant, it wasn't fun. I think you touched on something there as well, that people have discovered little pockets of the UK that they might not have gone to before.
And I think even if moving forwards, the UK holiday isn't their main holiday, which I think it will be for many, but I think it will still be those long weekends, those short breaks as a bit of a change of scenery and.
Exploring some of the the stuff the UK has to offer. Yeah. Okay. So let, let's talk for a minute and Joe, about lenders. Have we got new lenders in the marketplace? How are our lenders? And what's it like out there?
Yeah, so I think, you know, we've been quite slack on recording these, so, since, since the last one, we have a quite a lot of new entrants into the, into the holiday lending market, which is, which is great. I think lenders, in the holiday let space, we tend to get the smaller building societies who are, who are really specialists at what they do. , and that means perhaps they're a little slower to come into the space than, than we would've liked during the boom and actually doing things a bit different.
So yeah, we've had multiple new entrants, which is ultimately good for, for clients and competition. I still think there's a, a bit of a lack of true product innovation in the space. Yeah, and by that I mean people considering doing multi-unit holiday lets the mixture of a, a home and a holiday, let property on the, on the same title.
So, I still think there's definitely room for a few more entrants and, and a bit more product innovation, but generally it's been good to see people come in and test the waters.
Yeah. I'll, I'll pick up on that. What, what we think we ought to see more of in a second, let's go to your first point. anybody who knows, Joe and I, , know that we're fiercely competitive, , in what we do together.
And, , Joe had a little dig at me there about not doing enough podcasts. , listen, we're going to do lots of podcasts in the future. We've got the technology. We've got the desire, we got really busy, and I did these podcasts, did five of them, and I'm still astonished that I still get phone calls about those podcasts and people asking me questions and doing business on, on the back of those podcasts.
So I'm glad that you, you like them and just to say we're going to do plenty more and, you know, if you have any ideas, please let us know.
And also do the usual thing, like, and review and share and all that kind of. Joe now, what, let, let's just really look at what we've got and what we haven't got lender wise.
So, in, in very simple terms, what would you consider is straightforward for a, a buyer? And what taxes us, what kind of inquiries tax us do you think, more than any others? Sure. So I think generally speaking, there's not too much that. However, it's when you start stacking different criteria points that it can get really tricky.
So, by that, what are most lenders looking for?
Where they're looking for you to be a residential homeowner. Already they're looking for a level of earned income. Varies from lender to lender, but generally 20 to 40,000 pounds over that you're going to be in with a good pool of lenders. Good clean credit history.
And then the, the property you are looking at, really, the more standard the better. You know, if you could live in it as a home, typical brick and tile, construction, whatever it might be in an area where there's a demand for holiday letter, but there's also a demand for residential that is going to be your most straightforward case.
Right? And the higher the deposit the better, basically. Right? Right. So where does the customer stroke us struggle? So the, the first one that springs to mind is really anything with any usage or occupancy restrictions. And by that I mean anything in the, the legal side of the property that restricts how you can use that property.
Yeah, it sounds a bit weird to say it, but even something that can only be used as a holiday. Makes it harder to get holiday letting. , and that's I think predominantly because lenders asse the worst of people. They assess they're going to have to repossess properties and they want stuff they can sell on quickly to as wide an audience as possible.
So there's still more lenders can do, I think, to get good at proper true holiday led properties, and, and that leads on to an idea about construction as well. Okay, it's more and more properties getting built with these modern methods of cons, and I think lenders can do more to understand and, and be on top of that side of things too.
Okay. Can I just throw the limited company holiday lap ball into the park now? So this is a, an area that we constantly get asked people to assess that it's the right thing to do and in many cases it is. In some cases it's not a limited company holiday. Let, , what we can't do and what we won't do, what Joe and I won't do is tell you on this podcast whether it's better to do a limited company holiday.
Let, because every circumstance is different. And to be frank with you, it's not an area where we are comfort. Or regulated to advise on that is a real accountancy matter. So you need a good accountant to talk you through with that, the one general point I'd like to make, and I'll let Joe come in a second, the one general point I'd like to make about limited company holiday lets, is that you are narrowing your field of lenders right down to perhaps two or three. So, all those other criteria points that Joe then talked about, sometimes they will make the thing fall. So, Joe Limited company holiday, that's what's your impression?
Yeah, it's, it's funny, like you say, it's very important to get that proper specialist property tax advice up front.
I think, you know, they will be able to talk to you about your longer-term strategy, because if you want to move anything from a limited company to an individual name or vice versa, there's a whole lot of complications that come with that further down the line. So, I think getting that tax advice, understanding on what your long-term play is and doing it right from day one is, is the most important thing.
Now, that said, I still don't think there are enough lenders doing the, the limited company holiday le offering. Great. It still is, still is rather specialist in that regard and that restricts things and can make things harder and or, or more expensive potentially, depending on circumstances.
So, yeah, I'd agree that's definitely an area that, that we'd like to see some innovation and development in from, from lenders. , yeah, and, and likewise, you know, lending north of the border in Scotland, yeah, that's, that's something that only a handful of lenders do, and a number of the really good holiday let lenders don't do. So actually look into, to lend across the whole of the UK I think would be really beneficial for, for people as well.
Maybe we'll talk about regulation and change of rules that have come into place in Scotland and Wales and, And how that might affect things too. Yeah, and I just, I think I'd like to finish on the, the holiday limited company holiday that we said, get an accountant, make sure it's an accountant that understands the whole holiday, let scene.
You wouldn't take your brand new electric car to a Backstreet garage for a service, just as a, I wouldn't want you to go to a bookkeeper. Nothing wrong with bookkeeper of course, but I wouldn't want you to go to a bookkeeper to get advice about tax breaks on, on limited company holiday nets. Use a specialist please.
It really does help. Joe let's move on. Let's talk about city breaks, cause I certainly get many more inquiries now about, towns that you think lenders might not help in , the rise of the city break. What do you think about that, Joe? Yeah, a little bit like you. It's, I don’t know if it's because, you know, you have more traditional holiday lit areas are, are sort of full of, of holiday, lets now, but there's definitely been arising in the inquiries we've seen around these city based properties, you know, Liverpool's, Manchester's, Nottinghams, , these have all come up recently and, and for, for different reasons, different attractions in those locations. And I think the good thing is that lenders are starting to get it. I think they could still better, but there are a few out there that if you go with the justification as to why you are looking at a certain area, they're starting to get better at, at understanding that.
Yeah. Actually, for a, for a short-term break, these are attractive places and they can do some really good numbers and. And work for people. Yeah, I was asked to do a holiday let in Port Talbot in Wales. Now my geography goes back a long way and I think of Port Tolbert as being a steel making town, and I didn't really understand.
Why someone would want to do a holiday night in Port Talbot. How wrong was I? Port Talbot is indeed the, mountain biking capital of Wales, if you like. So it was a very, very good reason for wanting to go to Port Talbot. And, we've been asked for Stoke on Trent, , and there's nothing wrong with Stoke on Trent. They made some fine pottery in their day, but Stoke on Trent is all about Alton Towers and the Peak District. So as Joe said, I think the lenders are getting it too, sometimes the calculations don’t. They don't quite marry up in the fact that we're looking for a low, medium and high season. 10 weeks, 10 weeks low, 10 weeks medium, 10 weeks high.
And a lot of these places are weakened in, in what they do. But they are so successful that, you know, it, it will work, , for the right place. I think you make an interesting point there as well, just to, just to jump in on that, is actually, you know, finding a, a holiday lesson agent that understands that area.
Yeah. Sometimes that is that real specialist view of a local area could be really, really important to getting a clear understanding up front of the numbers of properties going to achieve, which is, you know, important to, to you as an investor, but equally important to reflecting it correctly to a lender when putting an application forward.
Can I, Can I ask you about London? Joe, what's your thought? What you’re thinking about London?
Yeah. London is one you've got to be careful on, isn't it? Because now why is that? Well, you've got a, a 90-day restriction generally speaking in, in letting out short-term properties throughout, throughout a year.
Most, most places, without licensing, without the right rules and agreements in place, you are looking at a maxim of 90 days. So obviously that needs to come into account and. Play on the fact that lenders are going to look at that upfront as well, so, Yeah. And the, and the other thing I think with London and a lot of the cities, London, equal flat, flat, equal lease, lease, sometimes equal, not available, not allowable for holiday, let lending.
So if you're thinking of doing that in a city or a town or anything with leasehold, please do check that your lease, , will allow holiday net because we come across this time and time again. Lots of leases won't even - the Devons and the Cornwalls of this world as well. Yeah. That's an area that people really can save themselves a lot of time and money on if they are looking to buy something, is getting the vendor to, to dig out that lease and actually looking to see if, if is permitted or, or not, as it, as it might be.
Sure. And, and Joe just talk, let's talk about areas for a second. Where are you seeing at the moment? What, where are your inquiries coming from or. Well, yeah, I think that the city break has obviously meant that perhaps there's more of a, a year-round capability of letting that property. And I think we've actually seen that outside of cities as well.
You know, there's the Yorkshires, the Northumberlands, and the Norfolks, which have really cropped up on, on my inquiry radar quite a lot recently. Yeah. Because, you know, they've still got that, that summer attraction. But equally the rambling holiday, the walking holiday, that can be done all year round and it.
Attracts a little bit of a different demographic to your traditional seaside location. Yep. Yeah, I'm just in, I'm looking at one in Windsor as we speak, so, you know, goes along with what you're saying. Right. Let's get a little bit boring just for a second. , regulation Wales and Scotland. Let's make this as juicy and nice as we can.
what's going on in Wales and Scotland? Yeah. Okay. Well, I think to make this as timeless as possible, I think the key takeaway for people is that, wherever you are looking, go and really understand what is allowed in that area. Be it national regulation or be it local council regulation, you know, council tax in, in Wales, on, on second homes and properties of that nature is, is doubled for example, recently, and I think, you know, restrictions are out there that might not have been there before. So, without getting too specific into to individual areas, really do your homework on anything you're looking to invest in and understand. Ultimately, what can I do? What can't I do, and what are the costs that are going to be associated with it?
But it is an area I think that is potentially regulation's going to be an ongoing issue and regulation is not always bad. Ladies and gentlemen. Got a lovely customer in Norfolk who says is the best thing to happen because there are too many people who have second homes playing at letting them, and they don't have the correct co2 monitors, they don't have the correct fire hazard safety hazards and all that, that kind of stuff in, in the properties. And they are basically downgrading the people who are doing it properly. So, regulation's not always bad. I think that's interesting cause I think, you know, there has been press around second homes and, and the benefit or not of second homes.
And I think to some degree this will be a kind of self-regulating market in the fact that it'll be the people who are doing it well and properly and really understanding their target audience and, and catering their property out for that, that get the success and get the continued business. And to some degree, if people are dabbling at this they, they will fade away and those properties will, will come back.
Conversely though, I think a lot of the, the negative press around second. Most of these second homes that, that I see certainly wouldn't be suitable for first time buyers. So, I think there is a lot of noise in this area around these clogging up property markets. And actually I think there needs to be more done to, to build new homes for, for local residents and more done to encourage employment and opportunities in these areas rather than just looking at second homes as a, as a bad thing. Yeah, no, I, I agree entirely. Alright, let's just, start to wrap up, Joe, let me just get you to put your, your fortune teller hat on, where are we going?
What's, what, what do the customers want? What do you think will happen? What do we want?
Yeah, I think I kind of foresee this being a fairly steady near future. I think it's one of those that I think good holiday lets will continue to do well. And I do think there will continue to be a demand for holiday letting in, in the UK especially whilst there is that, that cost of living crisis, you know, people do need a break. They do need to get away from, from work and everyday life. So, perhaps that makes the UK break more attractive for the, for the time being. I think on a lending point of view, we're probably going to see a bit of stability, and actually we're going to see, you know, lenders just monitoring what's going on. There's still a good range of products out there, albeit a little bit more expensive than it, than it was before. , so yeah, it'll be one that I think is, I'm still seeing enough inquiries anyway, to, to suggest that this is going to be a good year.
And, and as we're hearing from letting agents with booking figures up, Hopefully that that continues. Yeah, I, I, I always ask the lenders, we obviously, Joe and I work very closely with these lenders now, and we know them very, very well. And I always ask them, have they got any trouble with their book, their holiday let book?
And the answer is always no. They're always performing really, really well, the properties are, the lenders are cautious. That's, that's the nature of the beast. But they are telling us that. Their book is good. Okay, well I hope that's been useful. That's the first, apology net podcast for a while. , we're just going to going to get into the groove with now and do, do a lot more of these. And do get in touch, do ask us questions, and much more content coming shortly. Thank you.
