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Valued for its hundreds of sandy beaches, fishing coves and glorious countryside, Cornwall has long been the undisputed champion of the holiday break and holiday rental market.
Last year, official data revealed that the county had the highest number of holiday homes (6,080), which attracted 14,230 guests. However, despite these figures, Cornwall is not the most lucrative hotspot for short-term (less than 28 days) buy-to-let property owners. We reveal where vacation rentals make the most money for owners.
The Cotswolds are an area stretching from Stratford-upon-Avon in the north to Swindon in the south, Gloucester in the west and Oxford in the east.
How the Cotswolds became a hotspot
Many will be surprised to learn that a lodge in Cornwall generates less income than Cumbria, the Lake District and also Dorset.
The highest earning region in 2023 was the Cotswolds, an area stretching from Stratford-upon-Avon in the north to Swindon in the south, Gloucester in the west and Oxford in the east.
Here, the average holiday home owner earns £28,500 a year (all figures before tax), according to Sykes Holiday Cottages.
A four-bedroom cottage in a chocolate town like Broadway or a house in a small market town like Chipping Campden would generate a holiday rental of £46,300 a year.
Its popularity as a quintessentially English destination has been boosted by familiar faces moving there, from David Cameron, Kate Moss and Elizabeth Hurley to Jilly Cooper and Stella McCartney.
Where people shop and stay in the Cotswolds
Maria Stengard-Green, who has run Luxury Cotswold Rentals with her husband Nigel since 2010, says the area has always been a favorite retreat for high-net-worth Londoners, but has recently gained popularity with international tourists.
‘Americans love the Cotswolds, where they can see all the beautiful, picturesque villages. We are also getting more Europeans, including Scandinavian and Dutch tourists. We didn’t used to get many from the mainland.
The couple now manages a portfolio of dozens of homes, including those of other owners, and say tourists are willing to pay a premium to stay in a beautiful home.
“It is expensive to stay here, but people are willing to pay the price, many of whom will stay for a whole month to explore the area,” he adds.
The property on its books can cost £55,000 a week in the case of North Lodge Blenheim, a seven-bedroom country house in the private, gated Blenheim Palace Park, near Woodstock. The rate includes daily housekeeping and a private chef for two meals a day.
Paul Houghton-Brown, of estate agency Hamptons, agrees and says there has been a change in the last two years, with buyers now more likely to come from further afield.
‘The international market (mainly Americans and Australians) buy property in the Cotswolds and use the house when visiting the UK with friends and family, then rent it out as a holiday let when they are not here, to generate cash and cover running costs.
“We are dealing with properties generating £75,000 a year, but some of these houses can be quite expensive to maintain,” he says.
“British buyers are increasingly concerned about high taxes on holiday lettings and increased government restrictions,” he adds.
The towns of Stow-on-the-Wold and Bourton-on-the-Water, popular for their romantic honey-coloured Cotswold stone cottages and pretty gardens, are among the most sought after by tourists. Median earnings reached £42,500 and £36,000 respectively last year, the report said.
The region’s year-round appeal also helps improve income, says Graham Donoghue, chief executive of Sykes Holiday Cottages. However, buying property in the Cotswolds cost almost double the national average – £500,311 in February 2024, according to the Land Registry.
Where else do vacations lead to greater profits?
Cumbria and the Lake District are Britain’s second most lucrative region for holiday let owners. Demand for holiday homes in Cumbria has “never been higher”, according to The Holiday Letting Outlook Report 2024.
Houses in the national park generate an average of £28,200 a year, this rises to £44,200 for four-bedroom properties. However, the average property is much more affordable than in the Cotswolds. Houses in Westmorland and Furness, the local authority that comprises many of the Lake District’s most popular towns including Windermere, Penrith and Kendal, cost an average of £220,045 in February. This means that homeowners who rent out their second homes to sightseeing tourists can expect to generate a 12.8 percent annual return on the average property.
Take the picturesque village of Grasmere, located at the foot of spectacular moors and home to William Wordsworth. It is one of the regions in Great Britain with the highest growth in vacation rental income. Homeowners with homes in the village earned 12 per cent more in 2023 than the previous year, equivalent to an extra £4,700, bringing their total annual income to an average of £43,100.
Ambleside, which has become a popular base for exploring the Lake District, has also seen one of the biggest increases in income, with holiday lettings grossing 12 per cent more to £32,900 in 2023, up from £ 29,300 the previous year.
The third most profitable holiday rental location is Dorset, famous for the spectacular cliffs that line the Jurassic Coast. Holiday lets here earn an average of £27,000 a year, while four-bedroom homes attract £38,300 a year.
That means that with the average property price of £354,268, prospective buy-to-let owners who want to get in on the action can still generate a healthy rental yield. However, they may end up shelling out more council tax, as Dorset councilors approved plans in February to charge double council tax on second homes. The bonus will take effect on April 1, 2025.
Trailing the Cotswolds by around £10,000 a year in pre-tax profits, in fourth place is Cornwall and the Peak District, where landlords generate an average income of £26,500 each year.
But a surprising outsider is Northumberland, which dominates the list of top regions experiencing the fastest growth in income, with five of the top ten locations. Landlords in the seaside town of Seahouses saw their income soar 36 per cent in a year, earning an extra £7,800, to a total of £29,700.
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