Top UK locations to invest in vacation rentals in 2025

The UK hotspots where purchasing a vacation rental could generate alluring returns for property owners are revealed as staycations gain popularity among British citizens

In recent years, vacation rentals have become a costly investment. The termination of the furnished holiday lettings tax scheme, along with an increase in stamp duty and council tax premiums, have been driving up expenses for second homeowners and reducing profits.

However, many British are choosing to take their vacations closer to home this year due to the seemingly unending sunshine and the decrease in rainy days in the UK.

According to a study by Sykes Holiday Cottages, staycations are becoming more and more popular. Approximately two-thirds (63 percent) of British citizens will take a vacation in the UK this year, and roughly a third (34 percent) intend to make it their primary vacation destination in 2025.

Additionally, families are expected to spend 1,292 on holidays this year, up from 1,070 last year, or a 17 percent increase from the previous year.

This is fantastic news for UK vacation rental owners, particularly those who own homes in well-liked coastal or rural locations.

In addition to being popular destinations for British vacationers, these areas also offer lucrative real estate for buy-to-let investors.

Which UK vacation rental locations yield the highest profits?

According to new research, Brixham in Devon is the best place to invest in vacation rentals in the UK, with bookings in the harbour town increasing by 62% annually.

This is based on the most recent Staycation Index report from Sykes Holiday Cottages, which was put together using booking information from 22,500 UK properties.

Teignmouth in Devon and Saundersfoot in Pembrokeshire are not far behind, with booking growth of slightly more than 30%, indicating that vacationers love coastal getaways.

The following table shows the top destinations with the highest demand.

Source: Sykes Vacation Cottages' Staycation Index report.

Whitby, Keswick, and Ambleside were the most popular destinations for solo staycations, which increased by 28% in 2024.

Is it still wise to invest in vacation rentals?

"While we acknowledge that recent tax changes are putting increasing pressure on some owners, the ongoing growth in domestic bookings, especially in popular locations, presents a valuable opportunity to offset those challenges with strong demand and healthy returns," says James Shaw, managing director of Sykes Holiday Cottages.

"UK staycations' enduring appeal is not only supporting local economies but also helping many owners navigate this shifting landscape," Shaw continues. Landlords have the chance to benefit from the summer boost as domestic tourism is expected to increase the UK economy by 24 billion this summer, according to Sykes data.

Whether it is the removal of the business asset disposal relief, which previously lowered capital gains tax to 10 percent, or the expiration of the furnished holiday letting tax, the buy-to-let market has had a difficult few years.

Is that still the case, even though vacation rentals are well-liked for their high returns?

According to Property Investments UK founder Robert Jones, vacation rental investments "generally earn much higher rents and yields than long-term buy-to-lets."

He provides the following example.

Long-term lease: If the property was purchased for £200,000 and rented out for £1,000 a month, it would generate £12,000 in revenue annually, or a 6% rental yield. Holiday let: With an average nightly rate of 107, the same property could conceivably bring in 2,250 per month at 70% occupancy. In other words, the landlord would receive £27,000 a year from it, or a 13 percent rental yield. Jones claims that when you compare the net rental yield and income for both strategies, it is "not unrealistic to double your return compared to a traditional buy-to-let strategy," even though the operating costs for a vacation rental would be higher.