Why holiday lets are suddenly. . . HOT PROPERTY
With staycations booming and tax breaks on offer, a place in the country could be within your grasp
HoLIDAY homes are now hot property as Britons rush to cash in on the staycation boom and tax breaks.
Estate agents in rural hotspots are reporting a trebling in enquiries as properties are snapped up in minutes.
The revival of the Great British Holiday following curbs on foreign travel means returns on holiday rentals could surge. Top properties on cottages.com already rake in up to £73,000 per year.
A stamp duty holiday means buyers in England could save up to £15,000 if they complete their deals by March 31, 2021.
And a Land and Buildings Transaction Tax (LBTT) tax holiday in Scotland, affecting homes costing up to £250,000, could save Scots thousands if they complete their purchase before the same date. So, should you join the rush?
OFFERS OVER THE ASKING PRICE
EXCLUSIVE data for Money Mail from
cottages.com shows queries from investors wanting to buy holiday lets are already up 25pc since the Chancellor announced the stamp duty holiday last week. Visits to its Let Your Property pages have increased by 180 pc.
St Ives in Cornwall is one of the most popular spots for holiday lets in the UK. So much so that locals voted to ban the sale of new houses as non-primary residences in 2016.But Paul Le Bas, regional director of Millerson estate agents, which operates across West Cornwall, says 80 pc of his business is in holiday and second homes.
He says in the six weeks since the market reopened, the firm has done as many deals as it would usually do in three months.
‘I’ve never known a market like it in 20 years,’ he adds. ‘We’re putting homes on the market that are selling 20 minutes later.
‘We had one property that came to market for £330,000 late on Friday afternoon. By Monday, we had 17 viewing requests, and letters through the door from people making offers before they’d viewed it. It sold for 7pc above the asking price.’
Forecasts from the Centre for Economics and Business Research (CEBR) predict house prices will fall by 5pc this year and a further 10.6pc in 2021. But Le Bas believes holiday lets and second homes are outperforming the rest of the market and prices could even increase judging by current demand.
Prices in St Ives have increased by 29 pc in the past five years, to £396,619. Le Bas adds: ‘I can see buyers getting into the market now prior to prices increasing any further.’
HELP FROM THE CHANCELLOR
THE stamp duty holiday announced by Chancellor Rishi Sunak means anyone buying a holiday let or second home in St Ives will save £9,831, based on average prices. That’s compared to the average saving of £4,500 for buyers across the rest of England. Buyers of additional properties still have to pay the 3 pc additional home surcharge, but that is now a flat rate for properties up to £500,000. It was previously 3 pc up to £125,000, 5pc on the value between £125,001 and £250,000, and 8 pc between £250,001 and £500,000. Those buying a second property worth £500,000 will save £15,000, the same as those buying a primary residence for the same price.
In Scotland, the LBTT will apply for purchases of more than £250,000 rather than £145,000 as before. Someone buying a £250,000 property in Scotland will save £2,100 in LBTT. It is estimated that 80 per cent of properties north of the Border will be completely exempt from LBTT.
Those purchasing buy-to-let properties in Scotland can also benefit from the changes, but will need to pay the Additional Dwelling Supplement of 4 per cent.
Miles Kevin, director at Chartsedge estate agents, which specialises in second homes in
Devon and Cornwall, says he has already had buyers and sellers get in touch following the cut. ‘Plenty of my clients have got a lot more interest in buying a house now,’ he adds. He says coastal properties are the most sought after, with demand greatest up to £300,000.
Phil Jones, of Ashdown Jones in the Lake District, says the stamp duty holiday could push prices up if sellers decide to cash in as well.
He has seen two deals in which the seller upped their asking price by £5,000 following the announcement, which saved both second home buyers £15,000, even though an offer had already been agreed.
‘I don’t think it’s necessarily the right thing to do morally, and it’s not what it was brought in for,’ he adds. ‘Prices will rise if that happens across the board.’
HUGE SURGE IN BRITISH BREAKS
RISHI SUnAK faced warnings that a failure to bring in a stamp duty holiday immediately could kill the housing market.
But agents in holiday home hotspots say their market was already buoyant due to a surge in demand for staycations.
With the future of international travel still uncertain, Britons are looking closer to home for their summer breaks.
Bookings for holiday homes between July 1 and August 31 are already up 156 pc on last year, according to Holidu, a holiday let search engine.
In east Devon and St Ives, bookings are up by 263 pc and 262 pc respectively.
Holiday home owners are hoping travellers stick with staycations for the forseeable future.
Cottages.com says bookings for 2021 are already up 62pc over the past four weeks compared with 2019, with Cumbria and Devon up 98 pc and 89 pc respectively.
Many owners expect the season
will extend into October this year, compensating for losses during lockdown. Mike Graham, of Hackney & Leigh estate agents in the Lake District, says the area ‘didn’t really need the incentive of a stamp duty cut’.
He says activity has been ‘brilliant’ since lockdown was lifted.
‘People are worried about getting on an aeroplane,’ he adds. ‘There is a potential uplift in holiday lettings and there is no point in keeping money in the bank at the moment if you’re lucky enough to have that.’
TAX BREAKS AND MORTGAGES
HOLIDAY let owners can also take advantage of tax breaks no longer available to buy-tolet landlords.
As of 2020/2021, buy-to-let investors will no longer be able to deduct all the interest they pay on their mortgage from the rental income they declare to the taxman. But because holiday lets are classed as a business rather than investment, those owners can continue to do so.
Other perks include subtracting expenses and taking into account some, or all, of the value of furniture and essential fixtures and fittings.
To qualify for the tax relief, the property must be classified by HM Revenue & Customs as a Furnished Holiday Let.
This means it must be available to let by paying holidaymakers for at least 210 days a year, and lettings must have been agreed for at least 105 of those.
Leeds Building Society has responded to the predicted rise in staycations by reintroducing its holiday let mortgages.
It is offering two-year fixed rates until September 2022 at 2.84 pc for borrowers with a 40 pc deposit and 3.34 pc for those with a 30 pc deposit.
Dominik Lipnicki, of Your Mortgage Decisions, says affordability is normally calculated based on takings for 24 to 30 weeks’ occupancy, even if the client is booked up for 52 weeks.
But the number of holiday let mortgage products available is down from 162 to 60 and the number of providers is down from 20 to nine since March 5, according to data firm Moneyfacts. The average rate is 3.48 pc; borrowers will normally require a deposit of at least 25 pc and a maximum term of 40 years is available from seven providers.
. . . BUT NO HELP FOR NEEDIEST
CRITICS say the stamp duty cut is not helping those who need it most. While those buying a main residence worth £500,000 will save £15,000, it will save buyers in North-East England £38 based on average prices in the region.
Meanwhile, it does nothing to improve the paucity of loans available to first-time buyers.
Until March, young people could buy a house with as little as 5 pc deposit, but fears of a price crash have seen these deals withdrawn. Most banks now expect buyers to have at least a 15 pc deposit.
Self-employed workers are also facing stricter checks and may be asked if they have claimed a grant using the Government’s Self-Employment Income Support Scheme.
Property expert Henry Pryor says the Government should have helped younger people ‘who have been royally stuffed’.
He also casts doubt on whether holiday home prices will rise as predicted and believes that if they follow the overall forecast set out by the CEBR, a £500,000 home will lose £50,000 in value over the course of next year, wiping out stamp duty savings. However, Emma and Greg Newton are buying their second holiday let in Norfolk as they look to capitalise on a surge in staycations and stamp duty savings.
The couple, from Kettering, Northamptonshire, bought their first holiday let in Burnham Market, North Norfolk, in 2016 for £325,000.
They spent around £60,000 renovating the three-bedroom period cottage and it is now worth £525,000.
During peak season it is rented at £1,900 per week and makes £40,000 per year, a profit of £24,000 once mortgage payments and letting fees are paid.
Emma, 48, a silversmith, says it is already booked until the end of September. She believes the rise of staycations will mean holiday lets will only become more profitable over the next few years.
She adds: ‘Knowing how well the holiday let had gone in Burnham Market and understanding that the pandemic is going to cause people to holiday in the UK more, we thought we’d go for it and get another one.’
Their new property is a smaller cottage in Sedgeford, three miles from Burnham Market, which they bought for £310,000.
It, too, is booked until the end of September. Emma says she and Greg, 46, who works in IT, started looking for the property during lockdown and the reduction in their stamp duty bill by £5,500 was ‘another little bonus’.
The mother-of-two adds that they hope the extended season will mean their income will recover to its normal levels despite lockdown.
The booming holiday let market seems a far cry from the experience of second-home owner Tony Willis, who was the victim of a vigilante attack by locals in Bigbury-on-Sea, Devon, in March.
‘Go Home’ was daubed in the dirt on his family car, while leaflets telling him to do the same were posted through his letterbox. It was one of numerous hostile acts directed at second-home owners after locals became enraged with affluent families fleeing the cities for their country boltholes.
A symptom tracker developed at King’s College London showing second-home hotspots had higher incidences of the virus than surrounding areas fanned the flames.
It prompted commentators to ask if the pandemic had made second-home ownership socially unacceptable. Not yet, it seems.