Research by the Association of Residential Letting Agents (ARLA) and Capital Economics found that of the overall landlord population, 2.7% have changed from long-term tenants to short-term lets.
The number of active listings on Airbnb in the UK increased by a third to 223,000 in 2018 from 168,000 in 2017, the research showed.
The assault on the private rented sector over recent years and the increasing regulations in the long-term letting market was cited by two-fifths (38%) as the reason for the shift.
Over a quarter (27%) were encouraged to move to short-term lets because they thought they could achieve higher rents. However, nearly half (46%) of landlords that offer short-term lets do so to enjoy more flexibility in how they use their property.
Why make the move?
One of the main taxation benefits of short-term letting, compared to long-lets, is that it avoids being affected by the changes to mortgage interest tax relief, as furnished holiday lets are treated as trade by HM Revenue & Customs.
Previously, landlords enjoyed a tax break of up to 45% on mortgage interest. But from April 2017, full tax relief was removed. It has been reduced gradually and from April, landlords will be able to offset mortgage interest only at the basic rate of tax - 20%.
This shift to short-term letting is yet another symptom of the Government’s drive to make buy-to-let properties less appealing for landlords. The ultimate impact will be on tenants who will be forced to pay higher renting as landlords will look to recover their increased costs.
Based on the number of landlords considering a move to short-term lets, up to 230,000 properties could be left unavailable for tenants if landlords who said they were ‘very likely’ to move to offering short-term lets were to do so. If this included landlords who stated they were ‘fairly likely’ to make the move, the number of properties rises to 470,000.
Mortgages for short-lets
Buy-to-let mortgage affordability is usually calculated based on the projected income from a full year of letting a property.
So not all lenders will treat applications on properties intended for holiday lettings as a buy-to-let.
A mortgage broker can guide you to the right lenders that can help.
Whatever mortgage you have as a landlord, it’s worth ensuring you get the best deal on the market that you can access.
Interest charges eat into profits, so the less you pay, the more money in your pocket. Be sure to find a fee-free mortgage broker that will save you hundreds of pounds on charges.
