The UK Housing Market and Why Short-Term Lets Work
In our recent podcast, we’ve been talking about Short Term Lets and capturing our expert views at Residential Estates. Andrew Brassey, our resident economist and regional member of the Bank of England committee, joined Managing Director Michael Holliday to assess current opportunities for investors.
Overview
The UK housing market has experienced dramatic shifts over the past decade, with soaring property prices and evolving consumer demands reshaping investment strategies. Amid these changes, short-term lets or STL have emerged as a compelling alternative to traditional long-term rentals, offering flexibility and much higher returns for savvy investors.
Advantages of Short-Term Lets
One of the primary attractions of short-term letting is the potential for higher rental yields. By renting properties on a nightly or weekly basis, investors can often command premium rates, particularly in prime locations. This model is especially beneficial in cities like London or Edinburgh, where demand from both business travellers and tourists is consistently high. Other cities and towns such as Preston have considerable demand where buying is cheaper but overnight stay prices remain competitive. Moreover, short-term lets offer flexibility; property owners can decide to block off dates for personal use or for special events, and in doing so maximise the utility of their asset.
Additionally, short-term lets allow investors to adapt quickly to market fluctuations. During peak tourist seasons or major local events, such as festivals or conferences, the increased demand can translate into significant short-term revenue boosts. This dynamic pricing strategy can be more profitable than the steady, but often lower, income from long-term leases. Furthermore, the diversification of letting to both the holiday and business markets reduces dependency on a single revenue stream, spreading risk across different customer bases.
But the big city story is not exclusive for business travellers. I own and let two properties in Chester and the majority of those bookings are for working, business people. For guidance, my income is double that of a long term let and that’s what makes it so viable. But a word of advice, hiring a capable, reliable management company to run bookings and maintain and clean the property is essential.
Where Do Short-Term Lets Work Best?
Short-term letting thrives in areas with a robust influx of visitors. Major cities with vibrant cultural scenes, business hubs, and excellent transport links such as Manchester, Birmingham, and Glasgow are particularly well-suited for this model. Coastal towns and scenic rural destinations also benefit, attracting holidaymakers seeking a more personalised accommodation experience compared to traditional hotels.
In urban areas, proximity to tourist attractions, conference centres, and transport hubs plays a crucial role in the success of short-term rentals. Investors should consider properties that offer easy access to these amenities, ensuring a steady flow of potential renters throughout the year. One great example from our portfolio is Blackpool where you can acquire a studio for as little as £35k with NET yields of up to 16%.
Investment Example
The Wellington - Blackpool
The Wellington is a well-established and highly regarded development in the heart of Blackpool. This exclusive opportunity offers a unique blend of modern, self-contained accommodation in one of the UK’s most famous seaside destinations. With an enviable location just moments from Blackpool’s iconic attractions, The Wellington is perfectly positioned to cater to both holidaymakers and corporate tenants, making it an ideal investment for those seeking high-yield returns.
The Wellington offers a rare chance to invest in a fully operational, high-performing rental property in Blackpool. With prices from just £35,000 - £135,000 and NET returns of 16% projected, this is a standout opportunity for savvy investors.
Investment Highlights:
24 Aparthotel Studios
3 Residential 2-Bed Apartments
Established former hotel with a history of high occupancy
16% NET Yields Achievable
999-Year Lease
Share of Freehold
Prime Location:
- 5 Mins to Beach
- 10 Mins to Blackpool Tower
From £45,000
Issues and Challenges
Despite the clear advantages, short-term lets are not without some issues. Regulatory hurdles represent a concern, as local councils across the UK increasingly scrutinize and impose restrictions on short-term rentals to mitigate housing shortages and maintain community standards. Compliance with safety regulations, licensing requirements, and tax obligations adds another layer of complexity for landlords.
Seasonal fluctuations can also impact occupancy rates. In areas with pronounced off-peak periods, property owners might struggle with lower occupancy, potentially offsetting the gains made during high-demand times. Additionally, the wear and tear on properties used frequently by different tenants can lead to higher maintenance costs and refurbishments.
Conclusions
For those looking to buy, invest, and then let short-term, the UK housing market offers a major opportunity. By catering to both the business and holiday segments, investors can leverage the flexibility and higher returns of short-term lets and as interest rates drop and loans cheapen the UK market looks more opportune than ever.
However, success in this sector requires diligent market research, proactive property management, and an understanding of the evolving regulatory landscape. With careful planning and strategic location selection, short-term letting can be a lucrative addition to any property investment portfolio.
Your Next Step in Property Investment
Whether you're looking to expand your portfolio or make your first investment, we make the process effortless. With expert guidance, a hands-off management approach, and access to high-demand rental markets, Residential Estates provides everything you need to succeed in property investment.
Get in touch today to explore our latest opportunities and start building a profitable, stress-free property portfolio.
