The Impact of Increasing Demand for Holiday Accommodation in the South West

It is no secret demand for residential accommodation in the West Country has been and is currently well exceeding supply. According to Nationwide, house prices in the South West region have increased by around 20% since the first quarter of 2020 – before the COVID-19 pandemic – and the beginning of 2022. Rightmove reports an overall average house price of £342,712, an increase of circa 16% on 2019 when they averaged £294,624. Property Investments UK report rent rises in the South West were faster than anywhere else in England and Wales during a period last year. They say rents rose 4% and landlords earned an average of £703 a month from each property.

Over the past 18-24 months, there have been persistent reports of buyers from the South East acquiring residential homes they may not have physically seen and local tenants being given notice to make way for seasonal Air BnB occupiers. In February 2022, Luke Pollard, MP for Plymouth Sutton and Devon was quoted in Plymouth Live saying too many tenants have been turfed out to make way for holiday lets and second homes, which can sit empty for much of the year. In 2021, Anthony Mangnall, MP for Totnes, was quoted by Inside Housing saying there were 19 long-term rentals available in the whole local area compared with more than 900 rentals advertised on Airbnb. This was echoed throughout the wider South West, with many property owners vacating their homes for the season or letting individual rooms to capitalise on the hype to visit the region.

Since the easing of some restrictions in July 2020, Vickery Holman has seen an increase in demand for valuations of residential properties, particularly in areas which typically attract high levels of holiday makers, such as St Ives, Padstow, Salcombe and Woolacombe; the traditional coastal beauty spots of Cornwall and Devon. These valuations have been for a variety of purposes, including secured lending, most commonly where properties are being acquired for commercial investment purposes (i.e. for holiday letting).

The South West market for leisure property remained strong even through the increased economic and sociological changes brought about by the COVID-19 pandemic. With travel restrictions to many international destinations and concerns about the safety of travel abroad, this increased demand for UK staycation breaks, which we were already seeing after the impact of Brexit.

Unlike the ‘core’ commercial property sectors, the leisure sector is based on consistent consumer demand which has traditionally been more complex and unattractive, however, leisure property has become more mainstream and increasingly attractive to those who are looking for a different type of investment and the potential to occupy as a second home. Consumer demand for self-catering accommodation in the West Country is higher than it has been in recent years and accommodation tariffs have generally shown signs of growth. This is one of the driving forces which has led to the increase in demand for residential and holiday accommodation, together with the experiences of national lockdowns, the ‘Stamp Duty holiday’ and the new-found flexibility driving the trend to work from home.

The South West has traditionally been an area in demand for second homes and holiday investments. With the incentives offered over the past 18 months, travel restrictions and a want to ‘escape to the country’, this has further fuelled the holiday investment and development market. Vickery Holman have been advising on many holidays resort developments across the South West, including the recent extension and development of the Hillside and Lakeside area at Retallack Resort and Spa, which once complete will add an additional 300 holiday lodges to the site. Una, St Ives are also offering holiday villas for sale with a guaranteed 4.5% investment return in addition to six weeks’ private holiday use. We have seen similar schemes repeated further east, including Roadford Lake Lodges, near Lifton and Dylan Coastal Resort, Laugharne.

Developments such as the extension to Retallack Resort and Spa, where the development has been restricted to holiday use only, support the Cornish economy, bringing additional jobs to the local community and have little impact on residential property values. However, in areas such as St Ives, the Neighbourhood Development Plan introduced a principal residence policy in a bid to reduce the number of residential dwellings being purchased for use for holiday letting, with towns such as Fowey, Mevagissey, Lynton and Salcombe following suit. The impact of this policy has started to show as demand for second hand, unrestricted properties has increased, which due to limited supply has uplifted property values of this nature. The policy is intended to make homes more affordable and available for local people, but relies on new viable development, which is currently being impacted by rising build costs and a shortage of labour. Together with inflated property prices, the Government has recognised the impact of second homes with recent policy adjustment to their taxation, to ensure owners make a fair contribution to the local community. However, many of these, particularly when assessed for business rates, will qualify for relief, falling below the £15,000 rateable value threshold and being the owners only business premises.

The second homes market is part of a wider structural housing supply crisis across the whole of the UK. Whilst we anticipate the speed and level of demand will likely ease in the short to medium term, until the availability and supply of housing increases, it will likely be those not already on the property ladder who feel the hardest impact.

Vickery Holman are a South West based property consultancy firm who offer all aspects of general practice and building surveying, through to management of commercial and residential property, across four strategically positioned offices. The Company specialise in development and lease consultancy, business rates negotiation and mitigation, valuation, dispute resolution and commercial agency. We would be pleased to hear from anyone who requires advice on a commercial or residential property.

By Rebecca Cook BSc (Hons) MRICS, IRRV (Hons)

Associate, General Practice Surveyor