By Graham Norwood
The perfect holiday home should offer more than guaranteed sunshine, splendid isolation and pristine beaches – it also needs to pay for itself
W Retreat Villa in Thailand
Sun, sea and sand have always made for a perfect holiday home. In these straitened times, if the property and the location also offer an income, all the better. Increasingly, prospective buyers of even the finest villas and waterside apartments consider the potential rent to be as important as the size of the pool or the quality of the tiling.“Five years ago 90 per cent or more of those buying top-end holiday homes would neither need nor want to let out their homes. They had three, four or five properties around the world and these were lifestyle purchases only. They didn’t like the thought of other people using them,” explains Robert Green, the director of London-based Cluttons Resorts, which sells homes in the Caribbean, Asia and Europe.
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“Many of these buyers from before 2007 have changed their minds. They realise they may need to let out their homes if they don’t use them personally. They don’t require a serious profit, but want enough income to pay for the running of the villa or apartment,” he says.
In response, developers behind new holiday home schemes are offering products that meet the changing demands. “For example, a villa may be configured so some of it can be let out and the rest locked away,” suggests Green.
There has also been a change in where buyers should look for the highest returns. In 2006, Spain and Florida were among the places providing the best yields; now there are so many owners in these former hotspots seeking to make up for their diminished capital by renting out that the local lettings markets are nearing saturation.
Today’s buyers have to look at different destinations if they wish to combine personal relaxation in their own holiday property with the prospect of additional income to pay for it. We look at five of the best.
Thailand
“Thailand has suffered from coups and high-profile political rallies but these have never been directed at tourists,” says Green. He advises investors to choose well-managed resorts with proven track records.
“The hotel-branded vacation home has become a trend over the past five years,” says Phanom Kanjanatheimthao of Knight Frank in Thailand, citing resorts by Sheraton, Allamanda, Banyan Tree, Dusit and Outrigger as examples. New schemes of that kind include the Mövenpick White Sand beach resort at Pattaya and the W Retreat on the island of Koh Samui.
Golf and beach front-line apartments and villas sell for 20 to 40 per cent more than second-line, but the rental season for all properties is limited – November to March.
Likely cost of Koh Samui front-line two-bedroom villa: £1.33m.
Peak weekly rental: £7,150
Best annual rental yield: 5.4 per cent
Morocco
This location ticks a lot of boxes. The government is promising investment under a decade-long “plan Azur”, while new flights from Germany and Britain are boosting an already-burgeoning tourist trade. The country is popular for short breaks from Europe and its tourist season runs almost year-round. Website www.homeaway.co.uk saw a 55 per cent rise in Morocco bookings in 2010.
“I’d buy in or around Marrakech. There’s golf, fine restaurants, walking in the Atlas mountains, horse riding and even quad biking in the desert,” says Alex Peto of estate agency Aylesford International.
Marrakech has a range of holiday homes from refurbished riads in the historic Medina, which can fetch £4m, to new-build villas on the city limits. The Baglioni Marrakech opens next year and will allow buyers five weeks’ use of a five-bedroom property for £305,000, or £2m to buy outright.
Likely cost of Marrakech villa: £750,000
Peak weekly rental: £7,500
Best annual rental yield: 8 per cent
South of France
You are spoilt for choice on France’s Mediterranean coast and almost every option is likely to guarantee sunny holidays – if you can afford the price tag.
The glamour of St Tropez is well known and buyers from the Middle East and central Europe are joining those from Britain, the US and Germany. But its tourist season is relatively short, from June to September.
Saint-Jean-Cap-Ferrat has similar prices and tourist patterns to St Tropez but is closer to Monaco and has recently become popular with Russians.
As well as its high-summer tourist season, Cannes hosts conventions that require good quality accommodation, not least the annual film festival in May.
Likely cost of St Tropez villa: £7m
Peak weekly rental: £30,000
Best annual rental yield: 4 per cent
South Africa
The World Cup brought a global audience but no significant economic upturn; even so, the country is popular with Europeans thanks to a minor time difference and having summer during Europe’s cold months.
Purchasers seeking an apartment in Cape Town head for Clifton and the Victoria and Alfred Waterfront, where prices range from £450,000 to £1.3m. In nearby Camps Bay, prices start at £1m for a three-bedroom detached villa with security. Budget-conscious but more adventurous buyers may look to the Cape winelands – an hour or more from the city – where small two-bedroom properties are under £250,000.
Letting is popular but owners of smaller homes “must be careful with pricing as one- and two-bed apartments compete with hotels and their various special offers,” says Joanna Leverett of Savills. The season runs from October to April.
Likely cost of Cape Town apartment: £1.2m
Peak weekly rental: £2,700
Best annual rental yield: 5 per cent
Caribbean
Different islands offer different temptations, such as air access, marinas, beaches, polo, golf, restaurants and of course sunshine. But only one island combines them all: Barbados. It remains the most popular Caribbean tourist destination, not to mention the densest and most gridlocked. Property prices range from £125,000 to £18.5m.
The tourist season is almost year-round, although the peak is December to May; the calmer waters of the west coast make it far more popular than the east. Three-bedroom apartments inland rent for £1,500 to £3,500 per week; the same size home on a west-coast beach will fetch £2,600 to £4,300 per week in the February peak.
But there are signs of a glut of lower-priced homes on the island, both to buy and rent; Realtors Limited are advertising two- and three-bedroom flats with up to 25 per cent reductions.
Like cost of beach apartment: £1.25m
Peak weekly rent: £4,000
Best annual rental yield: 7 per cent
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Capital growth away from the city
Holiday home rental returns can sometimes fund owners’ holidays. Second homes, on the other hand, get such high use by owners that they rarely provide rental income – but some provide long-term investments. This exclusive data from Savills shows the short- and long-term valuations of key weekend escape areas around the world favoured by the seriously rich.
“The tradition of spending the weekend in the countryside is well-established in many ‘old world’ cities like New York, Paris, London and Moscow,” says Yolande Barnes, head of Savills research. “It is likely that the CEO who occupies a small apartment in Paris or Moscow during the week would have a second home in the country. Those in Asian city states such as Hong Kong and Singapore are more likely to travel to neighbouring countries such as Thailand, Malaysia and Indonesia to enjoy their second homes.
“For the global billionaire, meanwhile, a leisure home forms an integral part of overall accommodation needs. We have measured the leisure accommodation of both the CEO and global billionaire households in our World Class leisure properties index,” says Barnes.
St Tropez, Oxford and Long Island all showed a modest increase in value over five years. Moscow boomed between 2005 and 2010, reflecting rising global commodity prices tied directly to the performance of the city’s property market. Short-term valuations for ‘old cities’ are weaker, with only the French Riviera maintaining growth, largely due to the highly competitive and limited supply of properties.
Alibag in India attributes its 138 per cent growth over five years to the general increase of wealth in Mumbai.
Tokyo and Sydney serve as a reminder that property prices can plummet as well as rise. Japan’s decade-long slump in the housing market faces renewed difficulties following this spring’searthquake and the resulting nuclear worries at Fukushima.
Second home yields Region Billionaire CEO Dec 2005 to Dec 2010 (%)* Dec 2010 to Jun 2011 (%)* London Country Estate, Oxfordshire Manor, West Country 9 0 New York Estate, Southampton, Long Island Estate, Westhampton, Long Island 14 -5 Moscow Dacha, Outer Moscow suburbs Dacha, Outer Moscow suburbs 65 1 Hong Kong Resort Villa, Phuket, Thailand Villa, Krabi, Thailand 6 5 Paris Estate, Cap Ferrat, French Riviera Estate, St Tropez 22 4 Mumbai Estate, Alibag, India Estate, Alibag, India 138 7 Shanghai Country Estate, Phuket, Thailand Estate, Phnom Penh, Cambodia 10 1 Singapore Extensive Villa, Bukit, Bali Villa, Penang, Malaysia 12 0 Sydney Beach Villa, Palm Beach, NSW Country Villa, NSW Highlands 52 -11 Tokyo Country Estate, Hakone, Kanagawa Mountain Estate, Niseko, Hokkaido -10 -3 Source: Savills Research * The figures are the average across the two categories of second home Copyright The Financial Times Limited 2011. You may share using our article tools.
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