Second homes ban led to rise in house prices

A BAN on second homes in St Ives has backfired as newhome builders abandon the town, causing house prices to rise for locals, a study by the London School of Economics has found.

Residents in the Cornish coastal town voted to ban the sale of new houses as second homes in 2016 following concerns they were being priced out of the market by wealthy summer dwellers from London and the South East. At the time property prices averaged £323,000, said estate agents Hamptons – about 14 times annual earnings in Cornwall.

The principal-residence policy was designed to allow locals to buy new properties without having to compete with second-home buyers.

However, it has inadvertently led to a reduction in available homes due to local building companies relocating to towns elsewhere, Prof Christian Hilber said. Competition between summer dwellers and locals intensified as demand switched from new-builds to existing homes after the new regulations were introduced.

The ban led to prices in the new-build market falling 13 per cent – but prices for existing homes rose 7.7 per cent, Land Registry figures revealed.

Prof Hilber said: “Tourist towns face a fundamental trade-off. They can restrict second-home investors, with possible positive effects on amenities and affordability. But this always comes at the cost of a significant adverse effect on the local economy. Any policy that succeeds in keeping second home investors away will hurt the local economy – mainly tourism and construction.”

He suggested an alternative local annual tax on the value of second homes, arguing this could discourage people buying a property as an investment and help with the affordability of existing homes.

Malcolm Bell, of Visit Cornwall, said the report should open a debate on “innovative solutions and smart measures, rather than wellintended but blunt tools”.