The Daily Telegraph - Saturday - Money
330 £1M
Move over, Cornwall. Wales has taken the top spot, thanks to its rugged scenery and more affordable property, writes Ruth Bloomfield
Alastair Kerr started with one studio flat and now owns 330 properties across west London
Mr Kerr will save about £1m by switching his properties to cheap fixed-rate mortgage deals
For years, Cornwall has been Britain’s holiday home hotspot – so much so that some towns in the county cracked down on the sale of second properties to outsiders.
But recently its crown has slipped. Wales, with its glorious countryside, beautiful coastline and, crucially, affordable property, has been propelled into the top spot for the most popular second home locations.
Research by estate agency Savills found that in Gwynedd, in the northwest of the country, the proportion of second homes is 8.6pc, followed by Pembrokeshire and the Isle of Anglesey (at 6.8pc and 6.2pc respectively). This is now significantly higher than the proportion in Cornwall at 5pc.
As a result, the Welsh government is attempting to stem the flood of second home buyers, amid concerns that many locals are being priced out of the market.
From April, second home buyers will pay a 4pc surcharge, up from 3pc, on the land transaction tax, the equivalent of stamp duty. The government is also considering a statutory registration scheme for holiday accommodation.
But increased costs and red tape will do little to deter most buyers. Because, compared with other second home options, Welsh property prices are enticingly low.
In Gwynedd the average house price is £186,128, according to Savills, up 10pc in the past two years. This is almost £100,000 less than the average price of a Cornwall property, at £281,427.
Not only does this cut entry costs, but it also means rental yields are potentially very appealing, on top of the savings that you can make renting a holiday home rather than a buyto-let. Calculating the yield of such a property is notoriously difficult: demand is seasonal, and it depends on how much its owner wants to use it themselves.
The average price of a home in Pembrokeshire, according to Savills, stands at £205,818, up 5.9pc in the past two years. This sort of budget would buy a two-bedroom house or flat in Tenby. If it was rented out for 33 weeks, the median occupancy rate, at £ 632pw, the average according to holiday rental website Cottages.com, that would create an annual yield of 10pc. Even if it was rented out for 15 weeks per year the yield would still be 4.6pc.
The most popular locations for holiday lets on the website are coastal; top of this list is Tenby and neighbouring Saundersfoot, in Pembrokeshire. Also highly popular is Barmouth, in Cardigan Bay, and Llandeilo, west of the Brecon Beacons.
For Luke Hansford, of Awaze, the parent company of Cottages.com, the appeal of Wales to staycationers is that it is less crowded and developed than much of the West Country. They can enjoy the local landscape in relative peace, which makes it a more social distancing- friendly option than, say, Newquay.
The stamp duty holiday, as well as the boom in staycations and travel restrictions, has put the property markets in many of these places into overdrive. Carol Peett, of buying agent West Wales
Wales is less crowded than the West Country, making it a better option for social distancing
Property Finders, said: “There is very little on the market, the minute anything goes up for sale it gets snapped up – often for well over the asking price. We have never seen things so busy and the lack of properties on the market is a big problem.”
On the Anglesey coast, Dafydd Rowlands, of Joan Hopkin estate agents, estimated that about half his clients were second home owners. “We are in an area where there is a high holiday home presence,” he said. “Inland is more of a local market.”
What second home buyers want most is a sea view, and many are prepared to pay a hefty premium for the privilege. A two- bedroom flat with a sea view in Beaumaris would cost, he estimated, around £300,000; a similarsized property in the town, but lacking
a view, would cost about half that. Buyers are generally from the North West and the north Midlands, said Mr Rowlands; trains from Chester to Bangor, the gateway to Anglesey, take just over an hour. “Often they will look at buyto-let options so that it pays its way,” he added.
The scenic university town of Aberystwyth is another firm second home favourite due to its location in Cardigan Bay. There is also – in normal circumstances – plenty to do, with an arts centre, a couple of cinemas, a golf course, and lots of bars and restaurants.
Ben McNally, of John Francis estate agents, found that second home buyers were after either a seafront home or something rural and secluded. A threebedroom country cottage would cost around £250,000, while you could pick up a one-bedroom flat on the seafront for £100,000. For anyone considering buying a Welsh bolthole, Mr Hansford recommended looking for a three-bedroom property – large enough to rent to families, but also small enough for couples to consider.
While a pretty property with kerb appeal will rent well, Mr Hansford said that upgrading the property to appeal to those after a little luxury was also worthwhile. Hot tubs, voice- enabled technology, integrated speakers and electric car charging points are all popular, as is a stylish but neutral decor.
Managing a holiday rental from afar isn’t for the faint-hearted, however. “People are spending £1,400 for a week, and so they expect everything to be perfect,” said Mr McNally.
Lynwen Green, who runs a holiday let in Llandovery, at the foot of the Brecon Beacons, agreed. “It is a lot more labour intensive than a buy-to-let.”
Ms Green and her brother converted a barn at their parents’ sheep farm into a three-bedroom holiday home. “It has been absolutely crazy,” she said.
“Before the pandemic we were booked for more than 40 weeks per year, and we were surprised by how busy we were.” Maes Merlin barn is fully booked for most of this year and well into next, through Cottages.com, at £1,200pw in high season.
Either she or her brother are at the barn almost daily. “You have got to maintain standards,” she said. “It is hard work, and you have to pay for a lot of maintenance and to replenish stock, but, on the other hand, the returns are a little bit better than buy-to-let.”
Investing in a holiday let also presents a moral conundrum. In many parts of Wales there is huge upset at wealthy incomers hiking prices beyond the reach of locals and anger at the way that some have blithely breached lockdown rules.
“What has happened since the first lockdown is that it is becoming much more political,” said Mr Rowlands. “People want to see property prices rise, but they want a balance, too.”
Asteady income in retirement is the holy grail for most investors. Richard Gaunt, 74, from Somerset, is no different. The semi- retired public relations professional has several moving parts to his savings plan. First, there is his £ 300,000 Isa used to supplement pension income. However, he wants more and needs to boost the yield from 3pc to 6pc, while making sure it doesn’t dwindle in size.
“My aim is to improve my income and ensure my wife has enough to live on when I am gone. I want to keep my total funds above a safety net of £400,000,” he said.
The Isa is made up of 16 funds, including popular picks such as Fundsmith Equity and City of London investment trust. There are also riskier options such as Jupiter India and unlisted companies via investment trusts Caledonia Investments and Schroder UK Public Private Trust. Altogether, it kicks out around £7,500 a year in income.
Then there is a £270,000 personal pension pot, already being drawn down, which provides £16,700 6,700 a year. Combined with his state pension of £8,800 a year, he and his wife enjoy an annual income of £33,000. 0.
A £100,000 investment nt pot is also being raided for £20,000 each year to add to his Isa.
Mr Gaunt has no mortgage gage on his house, worth around £500,000, 0,000, two cars on credit, and a third, hird, a sports car, debt free.
He has never fully y retired and is active in the community.
“I have been supplementing my income by doing various freelance jobs. I run an annual charity golf tournament, I’m a beater on shoots, sommelier of the wine club, pub quizzer and beer drinker,” he said.
Like millions of aspiring investors, Mr Gaunt had invested in all three of Neil Woodford’s funds s after he followed positive e reviews by his fund shop op Hargreaves Lansdown.
“I think I have lost around und £45,000 and I am contemplatmplating joining a class action to sue
Hargreaves Lansdown and would also like advice on how I can get some money back,” he said.
Claire Walsh
Independent chartered financial planner Mr Gaunt could achieve better returns if he diversified his portfolio. Instead of targeting an income in his Isa, he should focus on growth and sell down whatever he needs each year to fund his lifestyle.
There is a hotch-potch of different funds but the portfolio still lacks asset class or geographic diversification. He is taking a lot of risk. More than 90pc is invested in stocks, with the majority in British companies. Then there are the high-risk, niche funds.
British stocks have lagged other developed countries, returning 70 percentage points less than global shares over five years. He could benefit from a more international approach.
Rather than focusing on increasing the yield, which would mean taking on more risk and damaging his pot size in a market crash, he should invest the Isa into a low-cost low-cost, multi-asset fund, which owns stocks an and bonds from around the world via track tracker funds. He should then take out the am amount he needs each year and review per performance of the portfolio regularly regularly. He already owns Vanguard’s Li LifeStrategy 80pc Equity fund. This could be an excellent choice to move the rest of his Isa into. I It has not been very volatile and a returned an average of 9pc per year over the pa past three years.
Another option, if he wants to take less risk by owning more bonds, is the Vanguard LifeStrategy 60pc Equity fund, which has returned around 8pc a year.
Either would give Mr Gaunt the growth he needs to maintain his withdrawals, all at a low cost of 0.22pc before Hargreaves Lansdown’s 0.45pc fee is taken into account. G Given that Mr Gaunt is 74 an and semi-retired, picking aV a Vanguard fund reduces the r risk that his portfolio is hit w with a sudden drop from a dud fund, as he has suffered in the past. He has £50,000 in Fundsmith Equity, which has performed very well, but this does not mean that it always will. Just look at Neil Woodford. He had a great track record and was also a “star manager” but it all collapsed.
Given that one of his goals is to make sure that his wife can live off the Isa if he dies first, then simplicity is best. A single Vanguard fund makes more sense than 16 different funds all with different strategies. His wife may not want to manage such a complex portfolio if he is not around.
Gill Cardy Financial adviser, Red Kite Wealth Management
Before joining one of the class action lawsuits, Mr Gaunt should take his case to the Financial Ombudsman Service, as his stake is within the £350,000 limit that it can recover, as well as the Financial Services Compensation Scheme, which has a £85,000 threshold.
The only cases when class action lawsuits are worthwhile is when the sums lost are greater than the Fos or FSCS thresholds and thus a full legal case review is the only way of recovering any money. The Fos is generally a great route as it is very supportive of private investors, especially in cases like the Neil Woodford one. If the Fos says nothing is wrong, only then should he turn to lawyers as he has no other options.
If he opts to join a class-action suit then he would have to pay a large share of any winnings to the law firm.
Leigh Day is in the process of launching a claim against Link Asset Services, which administered the Woodford Equity Income funds that Mr Gaunt invested in, and is the most developed cause. However, it could take as much as 30pc of the money recovered.
Felix Milton
Financial adviser, Philip J Milton & Co Mr Gaunt should write a formal complaint letter to Hargreaves Lansdown, which includes evidence that it encouraged him to invest in Mr Woodford’s funds. Only after this is rejected should he go to the Fos or FSCS.