New market analysis has revealed which holiday let rental hotspots provide a better investment opportunity when compared to the more traditional rental properties in the area.
Worthing tops the table for the highest rental premiums
The research found that the seaside town of Worthing in Sussex is home to the highest holiday let rental price premium with an average holiday let generating a rental income of £1,530 per month, which is 72.3 per cent higher than the £888pcm income from a regular rental property in the area.
Porthcawl in the South of Wales ranked second highest with the average holiday let securing income of £879pcm versus £515pcm for a traditional rental property in the area – that’s a rental price premium of 70.5 per cent! Llandudno in North Wales came next, with holiday lets generating a 65.6 per cent premium over regular rentals; this was followed by Bakewell in the Peak District (44.8%) and Southsea in Hampshire (44.3%).
Llandudno generates the largest rental yield difference
When looking at the difference in the average rental yields, Llandudno in North Wales scored the highest with an average holiday let rental yield of 4.4 per cent, which is 1.6 per cent higher than rental yields from traditional rental properties in the area.
Worthing ranked second, with holiday let yields 1.4 per cent higher than regular rentals, while Amble in Northumberland and Porthcawl in South Wales came joint third (+1.2%).
However, not all holiday let destinations secured a higher yield in the research.
For example, in Exeter, the average holiday let yield of 5.3 per cent is actually -1 per cent lower than the wider rental market. Holiday lets in Ripon (-0.6%) and Buxton (-0.5%) in the Peak District also were found to have lower holiday let rental yields than non-holiday let rental properties in the area, while holiday rental yields in Ashbourne in Derbyshire and Weymouth in Dorset were found to be on par with the wider market.
While the research found that the initial cost of investing in a holiday let home is over £30,000 higher than the average rental property (at £353,015), the current average yield of a holiday home sits at 3.3 per cent, 0.5 per cent more than the average of 2.8 per cent for a property within the traditional rental sector. So property investors need to factor this data in and property price increase differences when making their calculations.
Almas Uddin, Founding Director of Revolution Brokers, which conducted the research, commented: “With the government waging war on the buy-to-let sector it’s hardly surprising that more and more investors are looking to the holiday let space.
As our research demonstrates, not every area will return the same increased yield when compared to the regular rental market and, in some cases, the far higher cost of investing may even return a lower yield.
It’s a fine balancing act, as you need an area with robust and consistent demand for holiday rental homes, but one that hasn’t already seen property prices rocket due to this high demand.”
