Investment in staycations in the UK or outside


Investment in staycations in the UK or outside

16 Jul 2018

A weaker pound is attracting foreign investors to get staycations in the UK, where they can earn from renting holiday cottages and buy-to-let at popular vacationing cities. The best investment is in a place where the weather is favorable. The cities along the coastlines and countryside cottages are most suitable for holiday rental markets. In 2016, the total income from such staycations in the UK was about £3.1 billion, and as per the data collected by Second Estates- it is assumed the rents will increase by 23 percent by 2021. 

In general, holiday home business requires a proper understanding of the tourism, facilities for booking holiday homes, running costs, cleanliness, and yearly maintenance. Investors can buy such property at famous tourist destinations, or seek opportunities in undervalued properties close to popular locations. Proper management of such properties can get sufficient returns. Many companies in the business of staycations impose double the standard rates of rooms, and even after giving discounts, they are able to earn more than the regular rates on the rooms or cottages. Last year the change in regulations regarding property ownership led to rising in buy-to-lets and there are many places where people seek short term rentals.

Residential Buy-to-let vs. Holiday homes 

In the UK, foreign interest in private rentals in some specific regions, student buy-to-let and office rentals continue to grow. Private rentals own the major share of property markets and the share of holiday buy-to-let is smallest. The holiday home can be a second home and there are some investors seeking second home along the seaside or cottages in the countryside. Some are buying properties abroad.


Buying a second home offers opportunities to earn through buy-to-rent but the additional property is subjected to additional taxations and surcharge. The second home or cottage can be bought individually or as a share, and depending on the share worth – tax is applied. In the first half of 2018, 18 percent of the properties on rent in the UK were bought or rented by companies, rather than individuals (Hamptons International reports). 

Other legal regulatory compliances include insurance and stamp duty.   

Regulation for buying properties overseas

The region or country where the property is bought has state buying regulations, which implies on foreign investors. One can even get a mortgage to buy such properties and sometimes, the country where you are buying property provides options to get mortgage locally. 

Many countries have restrictions on foreign ownership of land, and regulations to prevent investments in a holiday home or residential apartment. 

The UK inheritance tax implies properties inherited abroad - if the property belongs to parents or grandparents who were the domicile of the UK. If the inheritance tax is not paid, one will have to pay a 200 percent penalty on tax IHT – to correct the RTC. 
The property purchased by domicile of the UK overseas is not protected by local regulations such as the Financial Conduct Authority in the UK and one may not get protection under the Financial Services Compensation Scheme. 

Holiday home available in the UK for more than 210 days is subjected to tax advantage and are categorized under the furnished-holiday-let.  The tax also implies on rental income where the non-domicile resident is taxed on remittance. 

To find out some more about buying staycations and holiday cottages, click Hamilton International Estates (www.hamiltoninternationalestates.com).

 

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