FEATURE
CHL MORTGAGES
Short-term lets: More than just a holiday Ross Turrell commercial director, CHL Mortgages
T
he coronavirus pandemic certainly played a major role in the UK staycation boom, which resulted in a rapid escalation in demand, and therefore prices, for holiday accommodation in tourist hotspots round the UK. Those rising prices are still proving highly attractive to people with second homes and to landlords looking to diversify their portfolios and maximise yields. Demand for holiday lets from a rental and ownership perspective continues at pace. Data released in April by Suffolk Building Society outlined that 17 per cent of adults in the UK contemplated buying a holiday let property during the pandemic. It was suggested that younger people led the trend, with those aged 18 to 34 most likely to have thought about buying a holiday let property within the past 24 months. Two urban areas had the highest number of prospective landlords, with those living closest to London at 32 per cent, followed by people in the West Midlands at 19 per cent. In addition, according to its inaugural holiday letting report, Sykes Holiday Cottages said it had experienced a 78 per cent increase in owner enquiries up to April 2022 compared to the same period in 2020. Thirty-nine per cent of enquiries in 2022 had been from those completely new to holiday letting, whilst nine per cent were experienced holiday let owners. As well, a quarter of UK holiday homeowners started letting during the pandemic, whilst nine per cent have been letting for 10 or more years. A quarter also used to run their properties as long-term lets. The top reasons given for buying a
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BUY-TO-LET INTRODUCER JULY 2022
short-term let included supplementing existing income and greater flexibility. In the longer term, the report said that it expected demand to return to larger cities, as people had opted for coastal or rural breaks during the pandemic. It added that the demographics were also shifting, with younger guests working remotely and travelling for longer periods, which it said would “increasingly drive the market forward.” This is certainly a shift away from the more traditional BTL market for many landlords and the appeal of much higher potential for yield over a shorter period of time continues to make this an attractive option for investors. While the ongoing popularity of UKbased breaks has been the driving force behind the rise to prominence of shortterm lets, it is certainly not the only factor. Short-term lets offer access to flexible accommodation, which can be a viable option for those waiting for their new homes to be constructed or refurbished after a sale, for contactors embarking upon projects away from home, or for people in a variety of other situations. The approach, criteria, and policies regarding these types of properties will vary from lender to lender, and that is a factor of which advisers need to be aware and on which they need to be fully versed. Here at CHL Mortgages, we define short-term let as holiday lettings and serviced apartments. Short-term lets are acceptable when the valuer confirms a few specific points, including the ICR calculation fits on the market rent based on an AST, and there is demand for the property from both owner-occupier and investor-buyers. Not all lenders have the underwriting capacity or appetite to offer shortterm lets, and so these largely remain the domain of specialist lenders and building societies that incorporate a manual underwriting process and
a flexible approach. As a lender, we recently took the decision to enter the short-term let marketplace on the back of adviser feedback with the introduction of a new five-year fixed product range up to 75 per cent LTV. This includes the provision of dual fee bands to help provide landlords with more control over upfront costs. The response to this launch has been overwhelmingly positive amongst our ever-growing band of intermediary partners. At this juncture, it’s prudent to point out just how important the advice process is for such product types. In addition, landlords also need to be realistic about the rents they can expect to achieve; the highs of the past two years will not necessarily be sustainable over the longer term, as the demand for international travel will inevitably grow. If you’ve seen and read some of the stories emerging from airports across the country in recent weeks, however, then you will doubtless agree that there are even more reasons for people to stay within the UK borders over the summer months and beyond. www.mortgageintroducer.com
