Hundreds of thousands of buy-to-let landlords are considering switching to short-term lets, according to a new report.
ARLA Propertymark, the professional body for letting agents, says embattled investors are turning to holiday letting sites such as Airbnb, in a move that could have a major impact on the rental sector.
Here, Which? explains the reasons landlords are switching and offers advice on the financial implications.
The estate agency body says one in 10 landlords are tempted to join the 46,000 investors who have already made the move.
Landlords with five or more properties said they were considerably more likely to take the plunge.
This comes at a time when the number of listings on Airbnb is soaring.
ARLA says listing numbers on the lettings site rose by a third in 2017-18 to reach 223,000, with London (77,000 listings) the most popular area.
Edinburgh saw the biggest growth, with listings tripling between 2016 and 2018 to reach 32,000.
Nearly half of landlords told ARLA they had begun offering short-term lets to enjoy greater flexibility.
Two in five investors cited the impact of increasing regulations in the rented sector as their reason to switch.
A further quarter said that short-term lettings simply offered bigger profits.
ARLA says a major increase in short-term lets could be bad news for tenants, as a fall in the number of available properties will result in rents increasing.
It has made a number of proposals to prevent an exodus of long-term landlords.
ARLA says the government should seek to ensure an even playing field in terms of regulations and taxes for long and short-term landlords and must consider the impact of any future regulations which incentivise short-term lets.
The growth in short-term letting has led to some cities imposing restrictions.
For example, in Amsterdam, the maximum number of days in a year that homeowners can let on Airbnb was halved from 60 days to 30 days last year.
The following rules apply in the UK:
In this respect, the system works the same as for standard buy-to-let landlords.
Changes to mortgage interest tax relief have proved very unpopular with landlords, and from April 2020 all investors will only be able to claim a basic 20% credit against their mortgage interest payments.
Buy-to-let mortgage affordability is usually calculated based on the projected income from a full year of letting a property, and holiday lettings aren't designed for this purpose.
The short-term letting sector is growing, but landlords will need to be savvy about where and what they're investing in to make a profit.
A new report by the rental agency Luxury Cottages claims that short-term rentals generated £4.2bn in 2019.
Landlords using short-term rental platforms made an average of £23,000, and benefited from average yields of 9.8%.
Luxury Cottages says the best yields came in areas that combine regular tourism and relatively cheap housing.
Coastal areas enjoyed the highest yields, along with cheaper cities such as Liverpool and Newcastle. High property prices meant London finished bottom of the table.
|Location||Region||Average purchase price||Average rental income||Yield|
|Leiston||East of England||£247,000||£79,000||32%|
|Saltburn||Yorkshire and the Humber||£105,000||£31,000||30%|
Source: Luxurycottages.com. Analysis based on data from 2,170 postcodes in England and Wales, using Land Registry and AirDNA data.