Second home developments have been one of the brightest spots in the UK new-build market through the recession and now into the recovery, according to Knight Frank’s new-build second homes report 2010.

After a slight decline of 0.4% in 2008 the number of second homes in Britain rose by 2.6% in 2009, to reach record levels of 245,384 and Knight Frank expects to see a further 2% rise in the total to more than 250,000 in 2010. Forecasts by Deloitte and Oxford Economics suggest that b etween now and 2020 the amount of money spent by Britons holidaying in the UK could grow by 2.6% a year in real terms

The amount of money spent by foreigners holidaying in the UK is also predicted to grow by 4.4% a year and growth in UK tourism over the past three years has expanded beyond the usual popular months with the highest growth in bookings being seen in September and October, as well as at Christmas and New Year.

The growing demand is boosting investment yields. Good q uality holiday lets typically offer between 5% and 7% gross rental yields, often achieving higher yields than properties which are let on standard AST’s.

Liam Bailey, head of residential research, Knight Frank, said: “There are several reasons for the faster rebound in demand for second homes following the recent recession. Interest rates are much lower than they were in the early 1990s, which has reduced both the cost of acquiring property and the attraction of keeping money in cash. While credit has been severely constrained for homebuyers requiring high loan-to-value ratios, wealthy investors with large amounts of equity have been able to take advantage of low financing costs.

“The recovery from the recession has coincided with a trend for taking holidays in the UK despite a succession of three damp summers between 2007 and 2009. The fashion for ‘staycations’, as holidaying in the UK has been dubbed, has been inspired partly by a weak pound and partly out of environmental concerns. Holidaying in the UK is now widely considered a ‘green’ option, especially when compared with long-haul destinations.

“The potential investment returns from holiday lets is also a huge draw. Increased demand for self-catering accommodation throughout the year has enabled buyers to look upon a second home as an investment rather than a luxury. Investing in second homes has been made easier and more attractive by the emergence of managed holiday home developments. Owners do not have to manage lettings themselves: this can be organised for them along with cleaning and maintenance. And buyers can still use the property for their own use for several weeks of the year so get the best of both worlds.