With the buy-to-let market facing a degree of upheaval following the Government’s recent regulatory changes, where should would-be residential property investors put their money?
One answer is holiday homes.
Here, Karen Gray, interior designer of Cumbria’s prestigious Twin Lakes Country Club waterfront homes development, explains why.
Why Invest in Holiday Homes?
Buy-to-let landlords are facing a squeeze on their tax relief and a change to wear and tear regulations. The upshot is that this market will require a more strategically-focused approach for anyone entering it.
“The profits may still be there, but landlords must work harder to achieve them,” suggests Karen. “Holiday homes may just turn out to be what property investors are looking for.”
“There are changing habits and shifts in the economy which favour holiday homes,” observes Karen.
“What investors must be mindful of are the individual qualities of a development which will differentiate it and add value”
One of the changes the fall in the value of the pound has brought about is a growth in the number of people holidaying in the UK. This includes both UK residents and visitors from abroad, attracted here by a more favourable exchange rate.
“If you take an average occupancy of 30 weeks, a holiday rental property can produce a healthy return on investment,” Karen suggests. “This is especially true of properties in popular, attractive locations.”
There are also tax advantages to this, with HMRC seeing holiday lets as a trade, rather than an investment. This can mean tax levied at 10%. This is providing the holiday home is classed as a Furnished Holiday Letting (FHL).
“Obviously, anyone intending to invest on this basis must first check that they will be able to meet the criteria, including that the property must be furnished and let on a commercial basis,” advises Karen.
Providing they meet all the criteria, owners of FHLs can enjoy benefits such as Capital Gains Tax Relief, plant and machinery capital allowances, and counting profits as earnings for pension purposes.
Location and Look
“Like any sound property investment, the location and look of the property must be right,” Karen emphasises. “Look at the exclusivity of the location, but also how the property itself fits in, and what unique features it has.”
The Twin Lakes Country Club development harmonises with its natural, lakeside surroundings, and with panoramic glass frontages, the properties maximise the benefits of natural light.
“There’s added value if you can provide amenities that give a holiday home a distinctive sense of luxury. For the Twin Lakes homes, they have a boutique country club setting, personal hot tubs, and even their own, individual rowing boat to use on the lake”
“It is achieving this balance, between an attractively designed living space and a perfect setting, that can transform a holiday home into something that truly stands out as a property investment opportunity,” Karen enthuses.
“The best properties have a real sense of soul to them, so that you’re investing in so much more than bricks and mortar,” Karen concludes. “You’re investing in a dream home from home for the lucky people who choose to stay there.”
For an accompanying read, please visit:
- Can Innovative Property Design Bring the Outside In?
- Property Investment: Can Bespoke Save Home Ownership?