In the property game, one man’s misfortune is another’s gain. While for many, in these leaner times, a holiday home has become a liability to be offloaded as rapidly as possible, for others now is a good time to buy.

Prices are down — often by more than the average — and a combination of the credit crunch and the weak pound is encouraging more of us to holiday at home rather than abroad. A place by the sea or in the country here in Britain is looking like a good place to park money that is struggling to earn anything more than 0.0005% in the bank. Not just to lounge around in yourself, of course, but to let out for part of the year, so it pays its way — and maybe even makes a profit.

The cloud in an otherwise clear sky was provided by the budget last month (see panel), when the chancellor, Alastair Darling, announced that he was removing some of the special tax treatment hitherto enjoyed by holiday lets (and not by conventional buy to lets).

It can still make sense to buy, however, provided you choose carefully — and get the right price. The market has dropped substantially in some of the second-home areas that had the biggest bubbles. Prices in Devon are down by 24% from the 2007 peak and those in Cornwall by 21%, according to research by Savills estate agency, based on its own sales figures. Although the prime coastal spots will have held up better, almost nowhere is immune. The Cotswolds, for example, recorded an 18.6% fall; in Suffolk, Norfolk and Dorset, prices were down by 15%.

The key to making a success of your property is letting out the greatest number of weeks each year at the highest rent. So, what type of property should you buy, and where? Is the coast always a safer bet than idyllic countryside or a tourist city?

“People will always want sea and beaches — if you’re looking for the highest yield, aim for tried and tested coastal spots where demand is consistently high,” says Ross Elder, managing director of Holiday Lettings, a property- rental website. Although he reports an increase in bookings for both country cottages and city flats, he says that both are trumped by the seaside, because people tend to stay longer and return the following year if they like it.

This is borne out by a study of the market in a series of popular holiday-home destinations carried out by the property website Rightmove, in conjunction with Holiday Lettings, which shows that the Cornish resort of Newquay offers the best potential returns (see below). A typical two-bedroom flat, sleeping up to six guests and selling for an average £173,938, could be let for anything between £300 and £1,300, depending on season. If it were rented for a modest 22 weeks a year, it would give a 10% annual return on the purchase price — rising to 15.6% for a more ambitious 34 weeks. Yields are also good on the Pembrokeshire coast, at an estimated 9%-12%, and in Brighton (6%-10%).

“Newquay has appeal across all age groups: the great beaches and reliable surf are two big attractions,” Elder says. “Larger resorts like this, with more facilities, also have more year-round bookings and don’t shut down, like some smaller places. Newquay accounts for one sixth of our Cornish inventory.”

Is it better to spend your money on a tiny place with a great sea view — maybe a substitute for a hotel room — or a larger property that more that one family could share? Elder says that smaller homes are easier to attract bookings for — especially in these credit-crunched times. “A one- or two-bedroom cottage with a double sofa bed downstairs works wonders for those trying to get as much value as possible out of their holiday,” he says. “Families staying together and big parties are a limited market, though it helps if you’re willing to adjust prices for smaller groups.”

Wherever you choose, do as much research as you can before buying, ideally contacting the local tourist board to find out what type of accommodation is in short supply — and what kind is suffering from a glut.

Peter Hellyer, 49, a self-employed engineer, and his wife, Sharon, 46, plumped for a small property with a sea view. The couple, from Melksham, Wiltshire, bought a one-bedroom 1980s house 100yd from the water’s edge in Poole, in neighbouring Dorset, last October. They paid £192,000, taking advantage of the falling market to knock £18,000 off the asking price. “We researched the market thoroughly,” says Sharon, an education consultant. “We wanted the view above all, for ourselves as well as for the rental prospects. We could have bought a two-bedroom place without the harbour view, but we stuck to our plan and have aimed at single people and couples.”

So far, the plan seems to be working. “We’re over the moon with the bookings, one of which is a corporate let for 26 days,” says Sharon, “although we still have spaces left this summer. We’re torn between wanting to go there ourselves and needing the income, but because interest rates have fallen, we can cover the mortgage for the year with the 70% occupancy we’re aiming for. We don’t expect a profit in the first year because we spent money doing the house up and furnishing it.” Rental prices for their property, on Labrador Drive, start at £185 for two nights in low season, rising to £575 a week in high season (quayholidays.co.uk).

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