Luxury homes and short-term rentals have been a big topic for 2021. One of the great things about Hilton Head Island is the availability of each of those property types. For this update, I will discuss what is happening here in real-time, and hopefully, give some perspective on what the future may hold.
Short-term rentals have again had a banner season here on Hilton Head. Most owners have seen rental increases of at least 20% over last year's numbers continuing on a similar year-over-year trend from 2019. Overall, the demand for STR's has remained high. I see two main reasons for this:
- 1. The pandemic has spurred folks to travel local in lieu of international travel not yet reopened.
- 2. Many relocations to the area are tightening the already limited market for short-term rentals because they stay long-term.
The key to a solid return on STR's here is finding the renters that come to the Island off-season. September, October, April, and May are the money-making months. And although home prices remain high, the opportunity to own property within walking distance to the beach that will pay for itself can still be achieved.
Long-term rentals have seen a vast increase as well. Since 2019 long-term rentals on the Island have increased almost 60%. This increase creates an opportunity to take advantage of low-interest rates and has properties cash-flowing for you while you wait to come and enjoy it during retirement. High-end LTR’s are generating at least 10% return if not better due to the high demand. There is very little inventory at any price point, but all the attention is being put on affordable housing while the high-end properties are in short supply. Our luxury market is another fun one to watch. The key to this market is owning properties that are 100% updated and turn key. If a luxury home has the correct updates with current colors and surfaces etc., the seller can name their price. If corners were cut during renovation or the property is dated a buyer will not pay the price. Hilton Head’s luxury market has seen the highest increase in price ever. However, if a property has not been completely renovated the sales do not follow. If you are a flipper, this is the market to be in. The word of caution is to make sure you can afford to be in it. The luxury market is certainly a fickle one and can change very quickly.
My short observation of the future of the market here is simple. Supply and demand are driving it. It is difficult to predict out very far in today’s marketplace. I always get nervous when all the experts say there is no sign of the market slowing down. I am cautiously optimistic about what the future holds for Hilton Head Island. There should be plenty of opportunity for those who want to take advantage of it.
