Is now the time for second home markets like Dubai to change the thrust of their marketing, and try to appeal to lifestyle buyers rather than pure investors? I ask the question because the largest research ever conducted into Britons who buy holiday homes overseas suggests that the halcyon days of the investor may be over.

The research, by estate agent Savills and lettings firm www.Holiday-Rentals.com, shows there are now 425,000 British-owned homes overseas.

Until recently, a typical British-owned holiday home was in Spain or France, belonging to an affluent, older family. They kept it primarily for themselves, their family and friends, had a small mortgage or had purchased the home outright, and were largely unworried about letting it out or selling for a profit in the short term.

But in recent years a far wider range of Britons have bought overseas for investment reasons. They have chosen locations like Dubai – hitherto largely ignored by British holiday home buyers. Many of these investors are not affluent and bought homes abroad to provide a future pension pot or short term windfall on the assumption it would appreciate. Most have buy-to-let mortgages – some over 90 per cent of a property's purchase price – and are heavily reliant on rental income to cover monthly costs.

But as these investment purchases have been fuelled by low cost flights and easy mortgages, will they survive? Are we now looking at yet another shift in the tectonic plates of the property industry as this new era of rising oil prices and severe restrictions on borrowing becomes a permanent way of life?

According to the survey's authors, we are. The market will change, they say.

"The investment market has already diminished rapidly, just in six months. But we will see a return to the traditional use of the holiday home as a lifestyle choice, and that demand will actually rise in the near future" says Jacqui Daly, a researcher at Savills.

"Our survey showed 18 per cent of people buying for their retirement. There are vast numbers of over-50s and over-60s wanting homes overseas. Demographics show there are many more of these to come. They've a lot of equity in UK homes so most won't need to borrow at all" she insists.

The survey also suggests few existing owners will sell up in the light of dearer fuel prices. Only one in 10 of those surveyed said they would sell their home or buy one closer to the UK if 'green taxes' made their holidays more expensive.

But what will change, according to Greg Grant, managing director of Holiday-Rentals, is the approach of existing lifestyle owners towards renting.

"Those who had previously kept their homes to themselves may begin renting out – almost as a last resort – to maximise income in these tighter times. They'll see that a month's rental can, if timed well, pay for much of a year's running costs on a home" says Grant. He insists that those investors with existing overseas city homes will not lose out. Despite soaring oil prices, air travel is predicted to grow according to almost all UK government and property industry experts; meanwhile airports in most emerging 'city break' locations are enlarging, he says.

"Renting does not suffer during a downturn. We expected to see falls in bookings but so far we've seen no reduction in website traffic from people wanting holidays. Families in particular may desert hotels and save money by renting a home" he says.

The survey, conducted in the first quarter of 2008, shows a typical 'lifestyle' holiday home used solely or largely by its owners valued at £220,000 (Dh1.61m). A typical investment home, which was more likely to be an apartment, is worth £135,000. Those who let out properties received a typical weekly rent of £549.

Despite a growing debate over flying's effects on the environment, over 30 per cent of investors had bought a property in a long-haul location such as Dubai.

But the survey, although only just released, already looks a little out of date, compiled as it was in the early part of 2008 before the UK housing market downturn began in earnest. "In the future" says Jacqui Daly, "the real focus for developers, agents and locations must be to promote their lifestyle qualities, not their investment potential."

So now might well be the time for Dubai to emphasise that it is a great place for holiday homes as well as an investment hot spot; to demonstrate that there are villas and houses to buy for families, as well as apartments for single professionals; and to show what good value the area can be. This is a market worth fighting for. Britons now own overseas homes worth £58 billion – this represents a rise of 35,000 homes and over £5bn in the past year alone, despite the credit crunch, according to the Savills survey.

That is an awful lot of lifestyle purchasing power to attract to Dubai.


-- Graham Norwood is a property correspondent for The Observer