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2024 is about to come to a close and property owners should start reassessing their letting strategies to maximise their portfolio’s earning potential. One of the options that property owners consider is short-term letting.
According to the London Council, there are at least 43,000 short-term rentals in the city. The Office for National Statistics also reveal that private rents in London increased 7% in 2024.
This shows a continuously growing market. Although regulations are limiting the use of shortlets (e.g. planning permissions, 90-day limit, etc), it remains a lucrative market for property owners.
In this article, you’ll learn about 5 reasons why short-term letting is a smart choice for property owners. You’ll also discover the factors affecting the high demand for shortlets in London.
5 Reasons to Opt for Short-Term Letting In London
Property owners in London have several options to capitalise on their rental properties. Before making a choice, identify the goals you want to reach and the portfolio growth you want to achieve. Different letting strategies offer specific benefits. Long-term letting, for instance, offers security and a stable source of rental income.
Short-term letting follows a different strategy so it brings another set of benefits. Here are 5 reasons why you should use it as your letting strategy in London.
Fill Voids While Waiting for a Sale
Reports reveal that in 2023, there were 87,763 empty houses across London. This is aggravating the housing crisis as it blocks people from the much-needed supply. The local government encourages the owners to either rent or sell the property.
In case you decide to sell it, you can use it as a short-term rental while waiting for the right offer. This will force you to fix the property to attract short-term rental guests. When you invest in furnishing, it won’t just appeal to potential guests. It will also elevate the property’s value and give you a higher chance of getting a good offer.
High Nightly Rates
Short-term rentals are often priced with a higher nightly rate compared to other letting strategies like longlets and midlets. According to the data provided by the Westminster City Council, a 1-bedroom flat has an average rental income of £495 per week for assured shorthold tenancy. As a short-term rental, you can earn up to £1,561 per week (£223 per night).
Of course, there are peak and off-peak seasons but you can imagine the difference in the rental income you can get from shortlets.
Availability for Personal Use
Another reason why short-term letting is a smart choice is because it’s flexible enough to allow the owner to use the property. For instance, you have to move overseas but intend to visit London now and then. Using short-term letting will give you the flexibility to use the property while earning from it while you’re away. You can block off dates and rent out the rest. This gives you the best of both worlds: income and personal access to your property.
Lower Risk of Property Damage
There’s a valid concern about wear and tear in shortlets. After all, you’ll rent it on a short-term basis several times to different people. But despite the frequent turnovers, there’s a lower risk of damage compared to long-term leases.
There’s not enough time for guests to leave significant damage to the property because of the shorter stay. Not only that, the cleaning and maintenance checks between bookings will allow you to act on damages or minor issues before they turn into major problems. This will help you stay proactive in the property’s upkeep.
Wider Market Demand
Short-term letting caters to a wider market. You can attract business travellers, digital nomads, students and vacationing families, couples and friends. This gives you security because you don’t have to rely on a single demographic to occupy the property. You won’t be affected by the off-peak seasons of the tourism industry because you still have students and business travellers to cater to. The same is true during term breaks. Even if students are on break, other guests can book a stay on your property.
Why Short-Term Rentals Are In Demand in London
Choosing short-term letting as your strategy is perfect for London properties simply because it’s one of the most well-visited cities in the world. It’s a popular destination for couples, families and vacationers. As a major financial district, it attracts business travellers and digital nomads from around the world. The same is true for students who want to take advantage of the higher education offered by London’s prestigious universities.
These are only a few of the reasons why the short-term letting market will always thrive in London. For this year and the next, you can expect the demand to continue because of 3 reasons.
Multiple Events and Festivals
London is a popular spot for events, festivals and cultural experiences. You have sporting events like the Wimbledon games, the London Marathon, football leagues, ePrix and many more. The London Fashion Week is also a major event that people from around the world look forward to.
There’s also the Notting Hill Carnival, St. Partick’s Day Festival, Thames Festival and various events happening at multiple parks around London.
This city is also a common stop for world tours like those of Taylor Swift, Ed Sheeran, Coldplay, etc. These music events attract fans from all parts of the world and they need temporary accommodations for that.
All these, and more, make short-term rentals in demand in London.
Business Travellers Prefer Shortlets
Another market that fuels the short-term letting market in London is business travellers and digital nomads. London is a major business hub and this means international companies operate in the city. Although business travellers used to stay in hotels, they now prefer short-term rentals because it feels like a home to them. Some bleisure travellers also bring their loved ones to extend business trips into personal holidays. Staying in shortlets offers business travellers a more economical option because they can choose to cook their meals instead of dining out.
Increasing Student Population
The prestigious universities and educational institutions in London attract international students. This is another market looking for short-term rentals in the city. These students aren’t looking for long-term rentals because they usually go home during term breaks. Or their courses are only a couple of months long. They don’t want to be tied to long-term lease agreements.
If your shortlet is located near a university, make it appeal to the student population. Provide amenities and furniture they can use to study and be comfortable while they complete their education.
Grow Your Property Portfolio Through Short-Term Letting
Compared to long-term and mid-term letting, short-term letting offers higher nightly rates and the flexibility to let you use it when necessary. You can also use this strategy while you wait for a property sale.
Short-term letting is incredibly rewarding in London because the demand will always be high. The multiple events and festivals attract people from all over the world. Not only that, business travellers and international students prefer staying in shortlets instead of hotels. This means switching to short-term letting will allow you to seek higher rental yields and better occupancy rates.
Would you like to know more about short-term rentals? City Relay offers expert short-term rental management services. Contact us to find out how we can help maximise the earning potential of your properties.
