Home Property Holiday homes commanding premiums of 488% as tenants struggle across nation’s hotspots

Holiday homes commanding premiums of 488% as tenants struggle across nation’s hotspots

by LLP Finance Reporter
24th Jan 24 4:41 pm

The latest research by Zero Deposit, the tenancy deposit alternative, has revealed that it’s not just homebuyers being pushed out of their local housing markets across England’s holiday home hotspots, with many tenants also struggling as the average holiday home rents for 292% more per month – although in some areas this climbs as high as 488%.

Zero Deposit analysed the top 30 holiday hotspots across England that are home to the highest number of holiday homes as a proportion of total dwellings stock using ONS data from the 2021 census. Zero Deposit also looked at the rental price premiums landlords are able to secure across these areas, by renting their properties as holiday homes rather than to traditional tenants within the private rental sector.

South Hams home to the most holiday homes

The research shows that across these top 30 holiday hotspots, there are over 41,000 holiday homes which account for 1.4% of total dwellings stock, although this proportion climbs as high as 4.4% in South Hams alone – home to the desirable Devon holiday destination, Salcombe. While this may not seem a lot, nationally across England, holiday homes account for just 0.24% of total dwellings stock.

Holiday home for sale stock

What’s more, there are almost 5,000 homes currently listed across the market in these 30 holiday home hotspots specifically targeted at investors looking for short-term let investment opportunities.

This equates to as much as 7% of total homes currently listed on the market, a significant proportion of stock that could instead be utilised to help buyers and private renters. Again, to put this in perspective, nationally these holiday investment listings account for just 2% of total homes listed across England.

Holiday home rental price premiums

Further analysis by Zero Deposit shows that the average monthly rent for a private rental property averages £849 per month across these top 30 hotspots. However, the average monthly income from a short-term holiday lets sits at a huge £3,325 per month based on an average monthly occupancy rate of just 58% – 292% more than the rental income available via the traditional PRS.

Across Westmorland and Furness in the North West, holiday homes already account for 2% of total dwellings stock and, what’s more, the area is home to the highest holiday rental price premium. Holiday homes in the area command £3,978 per month based on a 68% occupancy rate which comes in 488% higher than the average PRS rent of £676 per month.

East Suffolk (+484%), Great Yarmouth (+437%), East Riding of Yorkshire (+405%) and Northumberland (+399%) also rank within the top five areas with the highest holiday let rental price premiums.

In traditionally popular areas such as Cornwall, the Isle of Wight, Dorset, South Hams, Cotswold and the New Forest, higher average rental prices within the private sector mean holiday let premiums aren’t quite as steep. Despite this, they still command between 224% and 327% more per month compared to the average privately rented property.

Holiday home stock driving up PRS rents

Not only do holiday homes command higher rents, but by removing these homes from the private rental market, it further reduces available PRS stock, pushing up private rents for ordinary tenants.

In fact, the analysis by Zero Deposit shows that in the last year, the average private rent has increased by 5.1% across England. However, across the nation’s 30 top holiday home hotspots, this annual increase climbs to 6.4%.

In Arun, this annual increase is as high as 22.6%, with Folkestone and Hythe (+19.8%), Bournemouth, Christchurch and Pool (+12.3%), Chichester (+11.9%) and Torridge (+10.3%) also seeing far higher rates of rental price growth.

Sam Reynolds, CEO of Zero Deposit said, “Much has been said about the severe disadvantage many homebuyers face as a result of holiday home purchases driving up house prices in popular holiday hotspots. However, tenants in these areas are also facing a significant disadvantage when it comes to both the availability and affordability of rental market stock.

Holiday home purchases not only take much needed housing stock away from potential buyers, but they also reduce the level of available rental properties in a market where demand already outweighs supply substantially.

On average, holiday homes across the top 30 areas we analysed are occupied for just 58% of the time and for many tenants, a short-term agreement just isn’t what they are looking for. Even if it was, they would face paying a hugely inflated price for the pleasure, with the average holiday home commanding 292% more per month in rental income which simply isn’t realistic.

At the same time, many of these areas have seen a higher rate of rental price growth in the last year versus the national average, driven by high demand from ordinary tenants and a lack of PRS stock to satisfy them.

It really is a tough situation and one that you need to understand from both sides.

Landlords have seen the profitability of their buy-to-let portfolios dwindle in recent years as a result of numerous legislative changes from the government. So you can understand why many are turning to the short-let model in areas where demand is high.

Of course, this doesn’t help local tenants who are ironically the ones impacted most as a result of government changes designed to help them.”

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