With a rise in staycations as a result of Covid-19 and the restrictions it has placed on overseas travel, investors will no doubt be keen to know where they can get the best returns when it comes to buy-to-let or holiday homes.
The latest research by lettings management platform Howsy has provided the answer, examining where across the UK offers the best rental yields for a buy-to-let investment when it comes to staycation potential.
Howsy analysed the current rental yields available across 12 of the most popular city staycation locations, the 12 most popular coastal staycations and 12 of the best spots for a countryside staycation.
There was a clear winner where rental yields are concerned, with the 12 most popular city staycations home to an average rental yield of 5.1%, just above the current UK average of 5% overall.
Glasgow (7.9%), Newcastle (5.6%), Manchester (5.5%), Nottingham (5.4%), and Leeds (5.2%) are amongst the best for above-average rental yields at present.
The next best buy-to-let investment location is a coastal staycation, with rental yields standing at 4% overall. While the majority of areas come in with a rental yield below the UK average, Blackpool bucks the trend with a current rental return of 6%.
At 3.9%, the average rental yield across the top countryside staycations is marginally lower than those found on the coast. Although none of these locations see current rental yields surpassing that of the UK average, Oxford (4.8%), Glencoe (4.5%) and Inverness (4.5%) make for the best countryside investments in the buy-to-let market.
Calum Brannan, founder and chief executive of Howsy, commented: “There’s one clear winner when it comes to a staycation buy-to-let investment, and that’s the city. Of course, not all city locations are as profitable as the likes of Glasgow or Newcastle. Still, they do tend to benefit from higher demand due to the larger population living, working and visiting them.”
He added: “Not only does this high demand tend to result in a better rental return, but it generally means shorter void periods which can also have a significant impact on profitability.”
“That’s not to say you can’t turn a profit when investing in the country or by the coast. As always, finding the right buy-to-let should be based on a range of factors above and beyond the yield available.”
Buy-to-let and holiday home investors were given a boost last week when the Chancellor announced a stamp duty holiday for the first £500,000 of all sales in England and Northern Ireland until the end of March next year.
While the additional 3% stamp duty surcharge still remains in play, investors only have to pay 3% up to £500,000, rather than this rising to 5% and then 8% depending on the price of the home.
This means investors could make a double saving – no stamp duty up to £500,000 when it comes to the normal rates of stamp duty, and a lower level of surcharge on a more expensive home worth up to £500,000.
An investor buying a home for £350,000, for example, will now pay £10,500 in stamp duty instead of £18,000 before the holiday was introduced – a not insubstantial saving.
Labour, however, has called the stamp duty holiday a bung for landlords and has called on Rishi Sunak to reverse his decision to ‘give a tax break to second homeowners’.