Holiday let investors are adapting their businesses rather than leaving the market following tax and regulatory changes, according to the inaugural Holiday Let Index from The Cumberland Building Society.
The research found that 48% of holiday let owners surveyed reported increased profitability since the abolition of Furnished Holiday Let tax relief, while 19% said profitability had remained roughly the same.
Investors have responded by changing how they operate their properties. Some 47% have increased nightly rental rates and 46% have increased occupancy, while 34% have reduced maintenance or capital expenditure and 26% have changed their property management approach.
A further 19% have switched to an interest only mortgage, 15% have reduced their portfolio size and 11% have transferred properties into a limited company.
Rental yields remain a significant factor for investors, with 86% of respondents reporting gross yields above 5%. This included 44% achieving yields of between 5% and 6%, 34% between 7% and 8%, and 8% between 9% and 10%.
The research also suggests landlords remain interested in further investment. A quarter of respondents intend to expand their holiday let portfolios, while 61% plan to maintain their existing holdings and 3% intend to exit the market.
Separately, 30% said they intend to purchase another holiday let within the next 12 months. Some 61% were positive about future yields and 57% were positive about future capital growth.
However, policy changes continue to influence investment decisions. Council tax premiums were cited by 72% of landlords as having an influence, followed by mortgage interest relief at 70%, the abolition of the Furnished Holiday Let regime and capital allowances at 67% each, and compliance requirements at 62%.
Borrowing costs could also affect landlords' plans. The research found 54% would experience a moderate or significant impact from a 1% rise in mortgage rates, while a further 40% said such an increase would have a minor impact. The report summarises this as 94% of landlords being affected by a 1% mortgage rate rise.
Potential planning restrictions could have a more significant effect on investment. Some 56% said they would be very or somewhat likely to sell their holiday let if a proposed C5 planning use class was introduced.
Guest behaviour is also changing how properties are managed. Half of respondents reported more last minute bookings, while 39% had seen shorter stays and 39% greater price sensitivity. Competitive pricing was the most commonly cited strategy for maintaining occupancy, selected by 33% of respondents.
The Cumberland's Holiday Let Index was produced with Pegasus Insight and is based on a May 2026 survey of 125 respondents. These comprised 25 mortgage brokers, 50 private landlords and 50 homeowners who owned at least one mortgaged holiday let property.
Grant Seaton, head of intermediary lending at The Cumberland Building Society, said: "Given everything the holiday let sector has experienced over the past few years, it would have been easy to surmise that investor confidence had fallen sharply. What our research actually revealed was a much more nuanced picture, with several findings that challenged some of the assumptions surrounding the market. That’s exactly why we wanted to produce the Holiday Let Index.
"We wanted to hear directly from the people who know the market best. By bringing together the views of brokers, landlords and homeowners, we’ve been able to build a clearer picture of what’s happening across the sector today, how recent changes are shaping decisions and where opportunities continue to exist.
"As a mutual, listening has always been an important part of how we work. Every conversation with a broker or borrower helps us better understand the market and the people we support, and this research is another extension of that approach.
"We hope our inaugural Holiday Let Index becomes a valuable point of reference for brokers, investors and anyone with an interest in the holiday let market. More importantly, we hope it encourages further discussion about where the holiday let market goes next."
