UK Holiday Homes In Hot Demand

The UK holiday home market has been one of the strongest performing property sectors through the recession and now into the recovery, according to Knight Frank's new-build second homes report 2010.

New build homes in the UK aimed at the holiday home market continues to attract strong demand from second home hunters.

After a decline of 0.4% in 2008 the number of second homes in Britain increased 2.6% in 2009, to reach record levels of 245,384 and Knight Frank projects further growth of 2% rise in total to more than 250,000 holiday homes in 2010.

Forecasts by Deloitte and Oxford Economics suggest that between now and 2020 the amount of money spent by Britons holidaying in the UK could increase by 2.6% a year.

The amount of money spent by foreigners holidaying in the UK is also tipped to appreciate by well over 4% a year. Growth in UK tourism over the past three years has also expanded beyond the usual popular months with the highest growth in bookings witnessed in September and October, as well as at Christmas and New Year.

Investment yields have also increased on the back of greater demand. Good quality holiday lets typically offer between 5% and 7% gross rental yields.

Liam Bailey, head of residential research, Knight Frank, commented: "There are several reasons for the faster rebound in demand for second homes following the recent recession. Interest rates are much lower than they were in the early 1990s, which has reduced both the cost of acquiring property and the attraction of keeping money in cash. While credit has been severely constrained for homebuyers requiring high loan-to-value ratios, wealthy investors with large amounts of equity have been able to take advantage of low financing costs.

"The recovery from the recession has coincided with a trend for taking holidays in the UK despite a succession of three damp summers between 2007 and 2009. The fashion for ‘staycations', as holidaying in the UK has been dubbed, has been inspired partly by a weak pound and partly out of environmental concerns. Holidaying in the UK is now widely considered a ‘green' option, especially when compared with long-haul destinations.

"The potential investment returns from holiday lets is also a huge draw. Increased demand for self-catering accommodation throughout the year has enabled buyers to look upon a second home as an investment rather than a luxury. Investing in second homes has been made easier and more attractive by the emergence of managed holiday home developments. Owners do not have to manage lettings themselves: this can be organised for them along with cleaning and maintenance. And buyers can still use the property for their own use for several weeks of the year so get the best of both worlds."