The UK has long been a major tourist destination. It not only attracts numerous overseas visitors, but also has a substantial domestic-tourism market. This latter has been growing over recent years and looks set to continue growing over the long term.
Location, location, location…
As is usually the case in the property market, location is key. Coastal and rural properties offer high affordability, but many investors prefer to target the city-break market. Possibly this is because it gives them more flexibility to change their approach at a later date if they wish. City properties can be more expensive, for example, according to Zoopla in February 2020, average house prices in Manchester stood at £203,196 to which must be added to any mortgage costs.
Yields, however, can more than justify this. For example, for the residential-lettings market, average lettings in Manchester offer 5.55% return with the M6 and M3 postcodes offering yields of 7.43% and 7.89% and the M14 postcode offering yields of 11.25%. By contrast, Manchester’s two, best short-term rental areas Hulme and Levenshulme can offer yields of 15.1% and 13.6% respectively and that’s assuming 50% occupancy.
Domestic tourism in figures
According to data from Travelodge, 2019 saw a massive 69% of Britons take their summer break in the UK. This was up 12% from 2018. The average trip lasted 8 days. A huge 85% of adults opted to replace the traditional “two weeks away” with one holiday of a week and three shorter breaks at different points in the year.
Beaches remain the most popular destination with 45% of people heading to the coast for their summer break and also 45% of people taking in a beach as part of a multi-location holiday. The other two key locations being somewhere rural and a city. City breaks came in a respectable second with 29% of adults planning on taking one and while rural breaks came in third, the fact that 24% of adults said that they were planning a break in a rural location shows that the market is still very strong.
Factors driving domestic tourism
It’s probably fair to say that, at the moment, domestic tourism is being given something of a boost by Brexit. The pound has been very weak, raising both expenses and concerns about the effects of currency fluctuations. There are, however, other factors at work, which support the view that the market is perfectly sustainable over the long term. Here are some of them.
- People are becoming more environmentally conscious.
- People want to avoid the hassle of dealing with airports.
- People want a cost-effective way to spread out their holidays throughout the year.
What domestic tourism means for property investors
While the standard residential lettings market remains strong, increasing regulation and unwelcome tax changes have left some property investors looking for alternatives. Although the holiday lettings market is also subject to extensive regulation (including by-laws which vary by area) and property investors do still have to consider practicalities such as mortgages and insurance, the yields, plus the potential for capital appreciation in the right areas means that holiday lettings can be a very interesting option for many property investors.