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The long and the short of it
The economic climate means holiday lets are booming by Kirsty McLuckie
Like other parts of the property market, buy-to-let investors have experienced a rocky couple of years. But does the economic climate at the beginning of a new decade suggest an alternative to long-term letting? At least one rental agency believes that investing in homes for the short-term or holiday market could provide a better income than homes which are traditionally let for a minimum of six months or a year.
Dickins Self-Catering Apartments agency is based in Edinburgh and deal exclusively with short lets, everything from three days upwards, which takes in people on weekend city breaks, academics coming to the city for a couple of weeks or months, or corporate lets to several colleagues on a training course, for example.
Louise Dickins says that looking at their occupancy rates for 2009 suggests that such investment properties are not only seemingly immune from the effects of the recession, but could actually be benefiting from the economic climate. Their records show that occupancy levels in one-bedroom apartments has increased by over 16 per cent and by over 20 per cent in two bedroom properties. Many of these smaller apartments achieve occupancy rates of 85 per cent and higher and the company have found themselves having to turn potential customers away due to no availability during peak times.
It makes sense, says Dickins. "The weakness of the pound has encouraged visitors from other countries to come on city breaks to the UK and tightening belts at home means a rise int he fashion of staycationing, where British holidaymakers choose to stay in the UK for a break rather than go abroad."
She believes there is a corporate budgeting influence too. "Companies may not be so willing for employees to spend money on expensive hotel bills when a self-catering equivalent can be just as good."
For the property owners, there is an obvious advantage over investing in properties that are let long-term. Dickins says: "Most of our owners will use their flats at some time or other themselves which you can't do or might not want to do with a long-term let. But if you have a one bedroom pied a terre in the city, it is lovely to be able to come and use it from time to time if you live out of town."
Dickins also believes that the sluggishness of the property sales market has had a knock-on effect. "Short term lets are being used by many people whilst looking for a new home after they have sold theirs and have still to find one to buy. It's possible to extend by just one week, so it fits perfectly with people's changing circumstances."
Not every area or property type will be successfully let. The research from Dickins shows that smaller flats in very central areas have the highest occupancy levels. Dickins says: "If you are talking about people who are likely to move their jobs around the country and require a base for a few weeks at a time, it is likely to be an individual or perhaps a couple, rather than a family, from a logistical point of view. We do have larger properties, for instance a townhouse in Northumberland Street which is popular for larger family groups, perhaps coming to Edinburgh for a wedding and wanting a base to entertain whilst here, but on the whole the smaller properties have the highest occupancy rates."
She gives the example of a bijou flat in Thistle Street, which is one of their most popular, having a combination of location and value.
"The New Town is definitely good, even places such as Leith will not have the same appeal."
And she believes that it isn't necessary to spend a hugh amount of money to get a good return. "The types of properties we are having the most success with are probably selling for anything between £160,000 to £215,000." Their rental prices start at just £275 for a week in the low season for a studio flat, but August and the festive can reap big rewards, with a well placed two bedroom property bringing in £2,500 for the four weeks of the festival and about £60 per night in the low season. From this you have to subtract the agent's fees, which with Dickins is 19 per cent.
Simon Donaldson, of Simpson and Marwick, says that they have many clients looking for dual purpose properties. "They want something that they can use, but that will bring a rental income when the aren't there." He agrees that the location of the property is key. "The size doesn't matter so much as long as it is within walking distance of the centre. The budget they give us can be anything up to £400,000 but many people are looking for a well located, compact flat." Simpson and Marwick are currently marketing a studio flat in Northumberland Street for offers in the region of £165,000 which Donaldson says would suit the purpose well.
Louise Dickins says that if investors want to get it right, they have to take advice before they buy and not just go with something that they want to stay in themselves. "To get the best returns, you need to buy a good flat in a good area, but that doesn't have to mean that it is the most expensive. We often advise our clients before they buy on the suitability of a property. If you are prepared to put your owner needs second and look at it as an investment, short term letting can work really well."
