New technology has helped change the holiday property sector, enabling owners to find renters more easily, boost efficiency and, most importantly, increase profits. We find out why.

Digital technology has created a new generation of

income-seeking second home owners, says leading international real estate agent, Savills.
New technology

In the 10 years Savills has been surveying the global second home market, new technology has enabled accommodation to be searched for, let an

d managed more quickly, cheaply and efficiently, according to the Second Homes, Global trends in ownership and renting report.
New breed of second home owners

It says, “The availability of digital solutions and the ease of letting property have generated a new breed of second home owners. Economic change has also made these owners more likely to want an income from their residential assets at home and abroad, as well as the lifestyle pleasures of owning an additional home.”
Cheaper, high-yield properties

More buyers are looking for cheaper, high-yielding and easy-to-manage new-build apartments, especially beach properties with balconies. Two-bed apartments are most sought-after.
 Broadband is a must
Appropriately for the digital age, broadband availability is a must-have feature for both international property buyers and renters.
Income top priority

The average purchase price of a second home in 2017 was US$291,000, 37% lower than a decade ago. Since the global financial crisis, more holiday home buyers have prioritised income, particularly as interest rates are low.  In 2017, the average annual rental income was US$21,000 and homes are rented out for 17 weeks a year, on average, says the report. Gross short-let yields average 6.4% (3.9% net, before taxes) and one-third of owners make a profit from letting.
Most popular locations

The revived Spanish residential market is again the leading market for second home buyers across Europe and beyond. Spain is the top foreign destination for future investment, followed by Portugal, France, the United States and Italy.
Spain accounted for just over 21% of sales within Europe last year, almost double the low of 11% in 2011. British, Dutch, Germans, Italians and Portuguese buyers, among others, all target Spain as their top foreign destination for their next investment.

house on the sand beach near sea - Halo Financial

Brits no longer top buyers in the Med

British property buyers are no longer the leading foreign purchasers in the Mediterranean. Germans, Dutch and Scandinavian buyers are growing faster. The average buyer is aged 51.
Role of low-cost airlines

The market for second homes expanded rapidly in the early 2000s, fuelled by available credit and growing tourism. Low cost airlines opened up new regions to buyers, especially the British.
The financial crisis hits

When the global financial crisis hit in 2007, national housing markets suffered, personal finances were squeezed and demand for second homes fell, with the Spanish market particularly badly hit.
How has the market for holiday homes changed?

In recent years, growth has resumed, but the second home sector now looks very different. Here are the main reasons for the changes:
Growth in online booking

Online short-let rental services have expanded rapidly and are increasingly competing with the hotel sector. Instant booking, mobile platforms, feedback and rating systems make these services appealing to tech-savvy millennials, time-poor business travellers, and globally mobile students and professionals. This has helped diversify and broaden  beyond the traditional holiday rental market, providing more opportunity for owners to let on a full or part-time basis.

Buy-to-rent demand has grown, with most buyers today purchase their property with the intention of renting it out in some form. The ratio of buyers intending to use their property solely for their own use has fallen from over 90% in 1971 to less than 40% today.
Market intelligence

Almost half (45%) of owners want their property to at least earn its keep when they are not using it. They want to know about achievable rates, letting voids and operating costs in advance of purchase. They are also an increasing source of demand for letting and management services (both digital and conventional) as well as on-the-ground hosting/hospitality/housekeeping services.
Budget properties

As lending has opened up again with record low rates, demand for budget property has risen. In 2017, 37% of sales were of home priced under $200,000. This has gone hand in hand with the expansion of the apartment market, which accounted for 34% of the properties purchased in 2017, compared to 26% in 2007, says the report.
Global second homes market

British buyers dominated the European second home market before the global financial crash, accounting for 29% of second home buyers in 2007, according to Savills’ survey. Today, a much wider range of nationalities are participating in the global second homes market. In 2017, the British

share dropped to 17% of buyers. British activity is now back to where it was a decade ago, but other national groups have risen faster. The number of Dutch purchasers has doubled over the same period, for example.
Importance of flight routes

Air routes continue to have a profound impact on where people want to go, buy property and rent. While the opening up of new routes can have a strong positive impact on local property markets, closures can have the opposite effect. This is an important factor for anyone looking to buy a holiday home and rent it out.
Home sweet home

A major trend has been the tendency for buyers to purchase in their home country rather than
abroad. This is particularly true of British and American buyers. In the last three years, some 39% of Brits in the survey bought their short-let property in the UK. Only 14% bought at home in the years preceding the 2007 GFC.
Buying with a mortgage

Almost half of home owners (45%) self-finance their second property and do not need a mortgage, the survey suggests. But well over half (59%) of American owners took out a mortgage in some form, usually in the United States rather than the country of purchase.
Spanish owners have more mortgages (52%) than their European counterparts, often putting their main residence up for security. Southern Europeans are generally more likely to have inherited their second homes.
Summer rentals most popular

The summer months remain by far the most popular time for short-let accommodation, while Spring travel has emerged as a more important travel period, for the British in particular. This varies slightly between nationalities, and is dictated in part by school holidays in the home country.
Major travel times for Americans coincide with spring break and the June/July school holidays. The French are overwhelmingly likely to rent in August. They take 28% of all their trips in this month.
The British are the least seasonal among the major national groups, and more likely to travel during the ‘shoulder seasons’. This is a marked change since 2011, when the British made over half their trips during the summer.
Average occupancy

The average annual occupancy of a second home (across all countries) stands at 29 weeks out of 52, This includes rental and time spent in the property by the owners.
UK properties are the most fully occupied, averaging 40 weeks a year. Properties in the US also average a high rate of occupancy, at 34 weeks annually, helped by long seasons in locations such as Florida and California.
Void periods are expected to further fall in future as digital tools enable owners to maximise the take-up of their residences.

Summer terrace house - Halo Financial

Rental demand is increasing

The survey shows that bookings have increased over the last 12 months for 37% of vacation home owners and have remained similar for 43%.
Cyprus, Greece and Portugal are rising in popularity, with half of owners seeing an increase in bookings over the prior year, according to the report. Although the prime letting season in these markets can be relatively short, rising popularity means owners can charge higher peak season rents.
The rise in bookings may be due to increasing demand for ‘safe’ summer sun destinations. On the other hand, uncertainty and concerns over safety in Turkey, for instance, has resulted in 57% of owners suffering a fall in bookings.
Long term objectives
Most international property owners intend to hold onto their second home for a long time. Just 8% of owners intend to sell within the next year, and 12% in the next two to five years. Around 20% of the market is potentially available for sale in the next five years. The survey suggests the average owner is likely to hold onto their property for around 25 years.
Top tips to boost rentals
To help maximise rental income, the National Association of Realtors provides top tips from Hugh Barton, President of Luxury Vacation Homes Global in New York City.

  1. Year-round luxury

To help boost off-season rentals, make sure your home stands out with year-round luxury amenities, such as a hot tub, sauna, cinema or games room. Mr Barton says, “Make sure your amenities are of the highest calibre. This will make any guest feel like they are on vacation, no matter the season.” 

  1. Find new audiences 

You may need to find new audiences to increase rental rates. Perhaps your home is suitable for corporate clients, arts and craft events or yoga breaks? Just make sure you have the relevant permissions and insurance to cover these facilities.

  1. Fun and festivals

Make sure you are making use of the festivals and local events throughout the year, particularly the festive period. Team up with local providers of seasonal fairs, rides and food and drink providers, so you can create an unforgettable experience for clients.
To learn more about the short-term rental sector, see Halo Financial’s feature on How Airbnb has changed overseas property rentals.

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