{"id":52654,"date":"2022-07-21T08:00:00","date_gmt":"2022-07-21T08:00:00","guid":{"rendered":"https:\/\/finsbury-associates.com\/?p=52654"},"modified":"2023-01-11T04:23:55","modified_gmt":"2023-01-11T04:23:55","slug":"are-holiday-homes-worthwhile-investment","status":"publish","type":"post","link":"https:\/\/finsbury-associates.com\/are-holiday-homes-worthwhile-investment\/","title":{"rendered":"[3-min read] Holiday Homes: Worthwhile Investment or Not?"},"content":{"rendered":"\n[et_pb_section fb_built=”1″ _builder_version=”4.14.8″ _module_preset=”default” custom_padding=”15px|||||” global_colors_info=”{}”][et_pb_row _builder_version=”4.14.7″ _module_preset=”default” custom_padding=”20px|||||” global_colors_info=”{}”][et_pb_column type=”4_4″ _builder_version=”4.14.7″ _module_preset=”default” global_colors_info=”{}”][et_pb_text content_tablet=”

Further to our market update webinar on the 7th February 2022, please find below some further commentary from one of our discretionary portfolio managers Quilter Cheviot on the Russian & Ukraine conflict published on the 24th February.<\/strong><\/strong><\/h4>\n

<\/strong><\/p>\n

Published on 24th February 2022<\/em><\/p>\n

<\/strong><\/p>\n

Investors have had a lot thrown at them in recent months, with the emergence of the Omicron variant, rising inflation worries, and the prospect of higher interest rates. To these concerns, we can now add the Russian invasion of Ukraine which, aside from the likelihood of human suffering, poses geopolitical dangers for the West and threatens to make our inflation problems worse. Clearly, it is a fast-moving situation which could change very quickly but, at the time of writing, Russia\u2019s military has launched air and missile attacks across Ukraine as well as land incursions in some areas. This followed Vladimir Putin\u2019s formal recognition of the independence of the breakaway republics in Eastern Ukraine and their request for military support.<\/strong><\/p>\n

<\/strong><\/p>\n

Markets have been volatile in the build-up to the crisis with geopolitical tensions exacerbating investor concern about the prospect of higher interest rates. Central banks look set to end years of quantitative easing and ultra-low rates as they attempt to get a grip on rising inflation, taking away what has been an important support for markets. There had been some light at the end of the tunnel, with economists forecasting that the peak in inflation was around the corner as the impact of the pandemic wanes. However, this peak could get pushed back if oil, gas and other commodity prices continue to rise on the back of the Ukraine crisis. Clearly, one of the big risks would be an interruption in the Russian gas supply to Europe.<\/p>\n

Volatility is likely to continue in the coming days, though history does give us some comfort that markets should eventually shrug off these geopolitical concerns and recover. During the Crimean annexation of 2014, investors experienced some volatility, but global equities soon resumed their upward trend as the crisis subsided. Going<\/p>\n

back further, global markets had a difficult time in the run-up to the US-led invasion of Iraq but bottomed about a week before the troops went in and spent the rest of the year going up steadily. And even further back, there was a big drop in bourses during the Iraqi invasion of Kuwait in August 1990 when the oil price doubled but markets soon stabilised afterwards. Clearly, all geopolitical events are different and this one is particularly serious, but we are confident that markets will bounce back once tensions subside.<\/p>\n

In terms of what we are doing in client portfolios, we continue to take a long-term approach and favour a broad mix of internationally diversified equities alongside lower risk alternatives and fixed income. We have been gradually rotating into sectors that should benefit from higher interest rates such as banks as well as energy companies. However, we continue to favour longer-term growth companies with strong franchises and will look to take advantage of any prolonged volatility. While we are still cautious on bonds our fixed income holdings remain focused on liquidity, security and providing diversification from equities. Rest assured that we are monitoring developments closely.<\/p>\n

<\/p>\n

Disclaimer:<\/span>
\u201cInvestors should remember that the value of investments, and the income from them, can go down as well as up and that past performance is no guarantee of future returns. You may not recover what you invest.<\/span><\/p>\n


Quilter Cheviot and Quilter Cheviot Investment Management are trading names of Quilter Cheviot Limited. Quilter Cheviot Limited is registered in England with number 01923571, registered office at Senator House, 85 Queen Victoria Street, London, EC4V 4AB. Quilter Cheviot Limited is a member of the London Stock Exchange and authorised and regulated by the UK Financial Conduct Authority. Quilter Cheviot Limited has established a branch in the Dubai International Financial Centre with number 2084 which is regulated by the Dubai Financial Services Authority. Quilter Cheviot Limited is regulated by the Jersey Financial Services Commission for the conduct of investment business and funds services business in Jersey and by the Guernsey Financial Services Commission to carry on investment business in the Bailiwick of Guernsey. Accordingly, in some respects, the regulatory system that applies will be different from that of the United Kingdom.<\/span>\u201d<\/span><\/p>” content_phone=”

Further to our market update webinar on the 7th February 2022, please find below some further commentary from one of our discretionary portfolio managers Quilter Cheviot on the Russian & Ukraine conflict published on the 24th February.<\/strong><\/strong><\/h4>\n

<\/strong><\/p>\n

Published on 24th February 2022<\/em><\/p>\n

<\/strong><\/p>\n

Investors have had a lot thrown at them in recent months, with the emergence of the Omicron variant, rising inflation worries, and the prospect of higher interest rates. To these concerns, we can now add the Russian invasion of Ukraine which, aside from the likelihood of human suffering, poses geopolitical dangers for the West and threatens to make our inflation problems worse. Clearly, it is a fast-moving situation which could change very quickly but, at the time of writing, Russia\u2019s military has launched air and missile attacks across Ukraine as well as land incursions in some areas. This followed Vladimir Putin\u2019s formal recognition of the independence of the breakaway republics in Eastern Ukraine and their request for military support.<\/strong><\/p>\n

<\/strong><\/p>\n

Markets have been volatile in the build-up to the crisis with geopolitical tensions exacerbating investor concern about the prospect of higher interest rates. Central banks look set to end years of quantitative easing and ultra-low rates as they attempt to get a grip on rising inflation, taking away what has been an important support for markets. There had been some light at the end of the tunnel, with economists forecasting that the peak in inflation was around the corner as the impact of the pandemic wanes. However, this peak could get pushed back if oil, gas and other commodity prices continue to rise on the back of the Ukraine crisis. Clearly, one of the big risks would be an interruption in the Russian gas supply to Europe.<\/p>\n

Volatility is likely to continue in the coming days, though history does give us some comfort that markets should eventually shrug off these geopolitical concerns and recover. During the Crimean annexation of 2014, investors experienced some volatility, but global equities soon resumed their upward trend as the crisis subsided. Going<\/p>\n

back further, global markets had a difficult time in the run-up to the US-led invasion of Iraq but bottomed about a week before the troops went in and spent the rest of the year going up steadily. And even further back, there was a big drop in bourses during the Iraqi invasion of Kuwait in August 1990 when the oil price doubled but markets soon stabilised afterwards. Clearly, all geopolitical events are different and this one is particularly serious, but we are confident that markets will bounce back once tensions subside.<\/p>\n

In terms of what we are doing in client portfolios, we continue to take a long-term approach and favour a broad mix of internationally diversified equities alongside lower risk alternatives and fixed income. We have been gradually rotating into sectors that should benefit from higher interest rates such as banks as well as energy companies. However, we continue to favour longer-term growth companies with strong franchises and will look to take advantage of any prolonged volatility. While we are still cautious on bonds our fixed income holdings remain focused on liquidity, security and providing diversification from equities. Rest assured that we are monitoring developments closely.<\/p>\n

<\/p>\n

Disclaimer:<\/span>
\u201cInvestors should remember that the value of investments, and the income from them, can go down as well as up and that past performance is no guarantee of future returns. You may not recover what you invest.<\/span><\/p>\n


Quilter Cheviot and Quilter Cheviot Investment Management are trading names of Quilter Cheviot Limited. Quilter Cheviot Limited is registered in England with number 01923571, registered office at Senator House, 85 Queen Victoria Street, London, EC4V 4AB. Quilter Cheviot Limited is a member of the London Stock Exchange and authorised and regulated by the UK Financial Conduct Authority. Quilter Cheviot Limited has established a branch in the Dubai International Financial Centre with number 2084 which is regulated by the Dubai Financial Services Authority. Quilter Cheviot Limited is regulated by the Jersey Financial Services Commission for the conduct of investment business and funds services business in Jersey and by the Guernsey Financial Services Commission to carry on investment business in the Bailiwick of Guernsey. Accordingly, in some respects, the regulatory system that applies will be different from that of the United Kingdom.<\/span>\u201d<\/span><\/p>” content_last_edited=”off|desktop” _builder_version=”4.14.8″ _module_preset=”default” header_4_line_height=”1.5em” global_colors_info=”{}”]

We\u2019ve all done it, right? Spent time in a picturesque location in a lovely holiday home and began to ponder what it would be like to own a holiday house there. Many may have even gone a few steps further; contacted local real estate agents and looked on portals to assess what the costs of owning a holiday home would be. Really debating if we could afford it before committing to the daydream of what future summer vacations, not to mention Christmas, spring break, and those long weekends could look like.\u00a0<\/span><\/b><\/p>\n

Owning a holiday home, is it <\/span>really<\/span><\/i> the right investment?\u00a0<\/span><\/b><\/p>\n

The answer to this complex depends on a number of different factors. It is important for you to consider your unique situation; what is your motivation for buying a holiday home and what are your long-term goals to determine whether this is the right option for you. For example, are you buying somewhere you will eventually retire to but rent out in the meantime? Is this a lifestyle investment? How often will you use the home? Is it easily accessible, and the list goes on\u2026\u00a0<\/span><\/b><\/p>\n

It can be very easy to romanticise the idea of spending every school summer holiday in your very own chateaux in the French countryside surrounded by vineyards creating childhood memories for your children; warm days by the pool, beautiful scenery, and cycling to the local boulangerie for fresh bread in the morning. Can your finances meet the dream?<\/span><\/b><\/p>\n

Would you be \u201cbetter off\u201d spending a few evenings looking through Airbnb and renting someone else’s holiday home for the week where all you have to do is show up? You don\u2019t have to worry about the cleaning, maintenance, running costs, occupancy during the offseason, and keeping up the 5-star reviews. This also begs the question, as a guest where could you go next? What do you do in the offseason? If you don\u2019t own your own holiday home this would allow you to look at renting another holiday home in the Alps during half term to take the children skiing or a cabin in the snow in Poland for a white Christmas.<\/span><\/b><\/p>\n

If you would like to investigate your options a little further, here are some things to consider.\u00a0<\/span><\/p>\n

Consult your <\/span>financial adviser<\/span><\/a><\/span>, accountant and local real estate agents to get some insights.<\/span><\/b><\/p>\n

<\/span><\/b><\/p>\n

Best location to buy a holiday home<\/strong><\/h2>\n

<\/strong><\/p>\n

\"Best

<\/strong><\/p>\n

Whether you are buying a holiday home, long-term investment property, or even a new family home; finding the right location based on your budget and considering the potential return is essential. For many, the area for a holiday home will be somewhere that they themselves would like to holiday (or have previously holidayed).<\/span><\/strong><\/p>\n

The first rule of property investment is location, location, location. For holiday rentals, start by looking at desirable locations where people want to holiday. Is the area located by the beach, water, or a lake? Does it offer unique views of the mountains and countryside? What is the climate like? What types of activities and experiences are nearby? Is it accessible by car, plane or public transport? How far away is the closest international airport? Who is your target market? Is it family-friendly? Are there specific festivals or events throughout the year? If tourism is not your primary market, then what other industries are available within that location and what is the demand like for that type of property. These are just some of the questions to ask yourself and consider.<\/span><\/strong><\/p>\n

Another consideration when looking at locations for holiday homes is development potential. Is the property you are considering able to be subdivided or developed further in the future if you choose to do so? This can significantly affect future plans and your potential returns.<\/span><\/p>\n

Many local councils and building management companies around the world have introduced rules which prohibit short-term rentals as part of the council or building by-laws where short-term rentals are either not allowed or are restricted to a certain amount of time per year eg 90 days.\u00a0 This can significantly affect your rental return. Make sure you research this properly before making any decisions and confirm whether this applies to your property.<\/span><\/strong><\/span><\/b><\/p>\n

<\/span><\/strong><\/p>\n

What (and where!) are guests looking for in a holiday home?<\/b><\/h2>\n

<\/b><\/p>\n

\"What

<\/b><\/p>\n

Your target clientele and demographic for holiday homes within your target area will help you ascertain what people are looking for in a home that they will rent for a week or two. Who is searching the area for holiday rentals? Is it groups of friends, singles, couples, or large families? Are people looking for centrally located small apartments or spacious villas with enough room to host large extended families, groups of friends, or corporate weekends away?\u00a0<\/span><\/b><\/p>\n

What amenities are people searching for when looking for a short-term or longer-term stay? Is it worthwhile adding a pool or a hot tub? Will air conditioning\/heating or a heated pool help with occupancy levels and does the cost of installation and maintenance of these items work out financially?<\/span><\/b><\/p>\n

Demand. What is the current demand, and future demand, for holiday rentals within your chosen area? Is the rental market currently saturated? What are the occupancy rates and what is the nightly rate in both peak and off-season? It may be easier to rent a huge 7-bedroom villa in the Greek Islands in summer, but what is the demand like in the quiet winter months when ferry and airline schedules are reduced.\u00a0<\/span><\/b><\/p>\n

If you are buying a holiday home primarily as a lifestyle investment, then consider your own current needs as well as future needs. Is it located close to your current home? If it involves flights, are there regular low-cost flights available from your hometown to the local airport? Realistically does it make sense (including travel time) to go for a long weekend or what would be the minimum amount of time that you could go for? If you wish to combine using the home yourself and renting it out, is there somewhere private where you can keep your personal belongings (including a car)? If you plan on using it for holidays with family and friends; will you get the use out of this investment?<\/span><\/p>\n

<\/span><\/p>\n

Costs to consider when buying a holiday home<\/b><\/h2>\n

<\/b><\/p>\n

\"Costs

<\/b><\/p>\n

A holiday home undoubtedly comes with more costs than a regular investment property; could the lifestyle of this investment and potential returns offset these initial and ongoing costs?<\/span><\/p>\n

Generally speaking, to ensure higher capital growth, it is important to try and keep your holiday rental for the longer term; giving you the opportunity to increase the potential value but you must ensure you have the cash flow to finance this.\u00a0<\/span><\/b><\/p>\n

Some of the costs to be aware of include:\u00a0<\/span><\/p>\n