The international market for second homes has changed significantly over the past 10 years. Our recent survey, carried out in conjunction with holiday rental experts HomeAway, shows that buyers now prioritise rental income over the luxury of buying exclusively for their own use, but this has not always been the case.

Back in the 1970s, nine out of 10 owners kept their second homes to themselves. Even as recently as 2000, eight out of 10 owners never rented out their properties commercially. However, after a period of rapid change, more than two-thirds of owners now rent out their second homes for at least part of the year to cover some, or all, of their costs. 

Many buyers are motivated by the potential for profit and the number of owners holding properties purely as rental assets has risen sharply over recent years. In the early 2000s, only 14 per cent of additional homes were bought purely for renting out. By the time of the credit crunch in 2008, this figure had risen to 19 per cent; in 2018 more than a third of all additional homes are bought as solely rental properties. 

Not only are buyers of second homes more aware of the potential for income, the profile of rental demand has changed too. Online marketplaces for short-term rental accommodation have made it much easier for owners to rent out their properties and opened up the market beyond the traditional holiday demand.

'Over the past 10 years, the online travel industry has changed significantly. Staying in a holiday home has been transformed, moving from an alternative way to travel to a preferred way to stay,' says Christophe Pingard, Vice President EMEA of HomeAway.

'With the rise in the popularity of the category, holiday rentals are not only attracting more, but, most significantly, a new group of younger travellers. They are willing to invest in their trips, although price is still an important factor when choosing accommodation, particularly as they are travelling more often. That’s one of the factors that make staying in a holiday home so attractive.'

Post-credit crunch, the holiday rental market retreated to prime, established locations, led by wealthy, capital-rich individuals with little or no reliance on borrowing. The easing of credit conditions and low interest rate environment has opened the market up again and demand for smaller, cheaper properties has grown since 2013. 

Based on the survey sample, the average price of a property purchased last year stood at £215,000, 37 per cent down on a decade ago. Just over a third (34 per cent) of properties bought were flats, up from a quarter, reflecting the changing nature of the second homes lettings market.

A third of all owners cover costs with rental income, and another third make a profit. The average gross yield across the sample stands at 6.4 per cent, or 3.9 per cent after costs, but excludes taxes. 

British second home buyers shop more widely than all other nationalities represented in our survey, with only 24 per cent of second homes located in the UK. France accounts for 19 per cent of properties owned and Spain 16 per cent, while the top three location choices among international owners are Algarve (5 per cent), Costa del Sol (4 per cent) and Costa Blanca (4 per cent). 

Similarly, only a quarter of Dutch-owned second homes are located in The Netherlands. Across all other nationalities represented in the survey the majority owns second homes in their own country. A very clear majority of French (86 per cent) and American (85 per cent) owners favour their home turf. 

Florida is top of the list for American owners, accounting for 14 per cent of second homes, followed by California (6 per cent) and North Carolina (4 per cent). The Spanish, Italian and Portuguese – all countries favoured by holidaymakers – strongly favour their own countries, with less than 5 per cent of their additional homes bought overseas.  

Further information

Read more: Spotlight: Second Homes – Global trends in ownership and renting

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