Investors told to buy short-term lettings accommodation

Investors told to buy short-term lettings accommodation

Given that yields are much higher, there is huge potential for investment in short-term accommodation as market demand for the product increases over the next three years.

Summary:

  • Demand for short-term accommodation is expected to rise significantly over the next three years
  • Supply of accommodation remains limited in most regions, with over 60% of the world’s serviced apartments in the US
  • There is huge potential for serviced apartment investment in major UK cities

Short-term lettings are expected to be a major new growth area of property investment.

More and more employers are relying on short-term contracts and a new report from Knight Frank has confirmed that the supply of suitably flexible accommodation is not meeting the demand, especially in large cities with national and international links.

The independent property consultancy’s Global Cities 2016 report explains that by 2017, short-term assignments will account for 20% of all international relocations, while long-term assignments are expected to fall from 52% to 45% during the next three years.

Despite the growth in demand, the supply is not expected to increase, especially as short-term lets can fall into a legal grey area that many people are unfamiliar with.

The report states: “Against this background, those cities that embrace the short-term rental model stand to benefit in the future.

“For investors and landlords, there are clear long-term rewards in the world of short-term rental accommodation. Cities that embrace the flexibility of models like serviced apartments will reap the economic rewards.”

Flexible accommodation models that can cope with the shift in demographic behaviour include serviced apartments and even though the number of serviced apartments has increased by 80% in the past seven years, almost two-thirds of these units are in the US.

Investment in high-quality serviced apartments is described as very lucrative by the report as rental values can be double those that are available in the long-term market.

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