Where it really pays to own a buy-to-let holiday – and why the Cotswolds beats Cornwall

Prized for its hundreds of sandy beaches, fishing coves and glorious countryside, Cornwall has long been the undisputed champion of holidays and the holiday 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 profitable hotspot for short-term (less than 28 days) landlords. We reveal where the holiday allows owners to make the most money.

The Cotswolds is an area that stretches 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 Cornish hole generates less income than Cumbria, the Lake District and 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-box village such as Broadway or a house in a small market town such as Chipping Campden would fetch an annual rent of £46,300.

Its popularity as a quintessentially English destination has been fueled by well-known 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 wonderful picturesque villages. We also get more Europeans, including Scandinavians and Dutch tourists. We didn’t used to take many from the mainland.

The couple now manage 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’s expensive to stay here, but people are willing to pay the rates – many of them will stay for a whole month to explore the area,” she adds.

Property on their books can cost £55,000 a week for North Lodge Blenheim, a seven-bedroom country house set in the gated and private Blenheim Palace Park near Woodstock. The rate includes daily housekeeping and a private chef for two meals a day.

Paul Houghton-Brown, of Hamptons Estate Agents, agrees and says there has been a shift in the past two years, with buyers now typically from further afield.

“The international market – mainly Americans and Australians – are buying property in the Cotswolds and using the house when visiting the UK with friends and family, then renting it out as a holiday let when they’re not here to generate cash and cover running costs.

“We’re dealing with properties that generate £75,000 a year, but some of these houses can be quite expensive to run,” he says.

“UK buyers have become more concerned about the high taxation of holiday homes and greater 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 beautiful gardens, are among the most sought after by tourists. Average earnings last year reached £42,500 and £36,000 respectively, according to the report.

The region’s year-round appeal also helps improve incomes, says Sykes Holiday Cottages chief executive Graham Donoghue. However, properties in the Cotswolds cost almost twice the national average to buy at £500,311 in February 2024, according to the Land Registry.

Where else does the vacation make the most profit

Cumbria and the Lake District is the second most profitable region in the UK for holiday home owners. Demand for holiday homes in Cumbria has “never been higher”, according to the Holiday Letting Report 2024.

Homes in the national park fetch an average of £28,200 a year, rising 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 encompasses 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 owners who have rented out their second home to backpackers can expect to generate a return of 12.8% per annum on the average property.

Take the picturesque village of Grasmere, nestled at the foot of spectacular corners and home to William Wordsworth. It is one of the fastest growing regions in the UK for holiday rental income. Homeowners in the village earned 12% more in 2023 than the previous year – the equivalent of £4,700 more – taking their total annual income to an average of £43,100.

Ambleside, which has become a popular base for exploring the Lake District, also saw one of the biggest rises in incomes, up 12% to £32,900 in 2023 from £29,300 in previous.

The third most profitable holiday rental location is Dorset, famous for the dramatic cliffs that line the Jurassic Coast. Here, holidaymakers can earn an average of £27,000 a year, while four-bedroom houses attract £38,300 a year.

This means that with the average property priced at £354,268, potential landlords looking to get in on the action can still generate a healthy rental yield. However, they could end up paying extra council tax as Dorset councilors approved plans to charge double council tax for second homes in February. The premium will enter into force on April 1, 2025.

Around £10,000 a year behind the Cotswolds 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 with the fastest growing incomes, with five of the top ten locations. Landlords in the coastal town of Seahouses saw their income rise by 36% in a year, earning an extra £7,800 to £29,700.