The second home debate
(20/04/2016)Second homes – important community lifeline or just more fuel to the fire heating up UK property prices?
Property prices are always a sticky subject. If you’re a homeowner, you’re always going to have your fingers crossed for prices to skyrocket, while as a potential buyer, you’re desperately hoping for house prices to steady or even drop.
Then there are the geographical issues. Since the credit crunch, house prices in London and the south east have often accelerated even further away from those in the rest of the country. And it’s a similar story in popular holiday destinations, where second homes, or those bought as holiday let investments are pushing up
And second homes are very much in the spotlight at the moment, as residents of St Ives in Cornwall are set to go to the polls to decide whether or not to restrict second home ownership in the picturesque seaside town.
Second homes – good news or bad news?
The question centres around whether or not to prevent the sale of new homes to those who intend to use them as a holiday let or a second home.
The big issue is whether or not second homes are strangling rural holiday spots. There’s no doubt that the relentless rise in house prices in some tourist areas pushes homeownership out of the reach of an increasing number of locals. Yet the argument that second homes bring in much needed investment and spending into the local economy is also a strong one.
Chris Balch, a professor of planning at Plymouth University, told The Guardian: “The real problem is speculation and the delivery of housing as assets. It’s the equivalent of the tower cranes in London. Is planning going to provide an answer? If the government has taken the stopper out of the bottle and let the genie out to allow local people to have a say, then we may see a slight correction.”
Plymouth University, however, also revealed a study at the end of last year that suggested second home-owners thought they made a positive contribution to local economies AND managed to stay sensitive to the potential negative social effects of second-home ownership.
Justifying this is the argument that second home-owners bring physical improvements to towns by doing-up properties, and money by spending locally. This is especially true to those who let their property out to holidaymakers, who are almost certain to inject quite a bit of money into the local economy during their stay.
Whatever the result of the referendum in St Ives, the issue of second homes is not going to go away, especially with an estimated 1.6 million properties in the UK counting as second homes…
Will stamp duty on buy-to-let mortgages and second homes help cool things off?
Since the beginning of April, people taking out mortgages for buy-to-let properties or second homes have faced a surcharge of 3% in stamp duty (the one-off tax you have to pay when purchasing a home).
This is almost certain to have the short-term effect of cooling off property prices in holiday hotspots where second homes are rife and holiday lets common. However, as long as property is seen as an asset to invest in rather than a home, the demand for second properties is likely to remain.
And with the housing market in central London currently cooling off, investors are inevitably going to be looking at areas where there is still a strong demand for properties.
First-time buyers – how to get onto that slippery first rung of the property ladder
On the face of it, the sort of inflationary pressure on the housing market caused by second-home buyers and buy-to-let landlords is bad news for first-time buyers. And the fact that the average house price for first-timers is more than £175k is even more frustrating.
However, help is at hand, in the form of the new help-to-buy ISA, which can give your savings a jump of up to £3,000 to boost your deposit. There are also shared ownership schemes and even the option of getting a guarantor mortgage. This is where a close relative, such as a parent or guardian, is legally bound to pay your mortgage if you are unable to meet repayments.