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Property Investors Prioritise Renting Over Holiday Homes

Overseas property investors are now prioritising rental income over holiday homes for themselves, as the international market for second homes has transformed in the last few decades.

In the 1970s, 90 per cent of homeowners kept their holiday homes for themselves. As recently as the year 2000, eight out of 10 owners had never rented their own properties out, according to research from Savills and holiday rental firm HomeAway.

However, vast changes have affected the market, and now over two thirds of owners let their second homes for at least one part of the year in order to cover their costs. This change is motivated by the perceived potential for profit, with a number of owners now holding properties purely as rental assets. However, this is a sharp contrast from the early 2000s when just 14 per cent of additional homes were purchased purely to be used as rentals.

The credit crunch changed this slightly, with the figure rising to 19 per cent. Today, a third of all additional homes are purchased as rental properties rather than holiday homes. Now, for the first time, the primary motivation for ownership and investment is rental returns. This has now taken over holiday homes as the key driver for second home purchases.

It was found that British second home buyers shop more widely than all other nationalities. They own just 24 per cent of second homes in the UK and otherwise prefer to invest overseas. The top three location choices by international investors are The Algarve at 5 per cent, the Costa del Sol at 4 per cent and the Costa Blanca also at 4 per cent.

Associate director at Savills world research, Paul Tostevin, said: ‘In a low interest rate environment investors are seeking out income generating assets. Today’s second home buyers want properties to work for them financially and they’re increasingly looking not just to cover costs but to turn a profit.’

He continued: ‘Global tourism continues to grow, with international tourist arrivals up by 7 per cent last year to a record 1.3 billion. At the same time, the rapid expansion of online holiday home platforms, such as HomeAway, opens up the market to new target groups and makes it much easier for owners to make their properties income-producing.’

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