Many second home owners have ‘panicked’ and offloaded their properties and “this means that there will be fewer holiday lets available to rent for those without huge budgets”
Second home sales have fallen off a cliff, according to new analysis of property transactions, and owners are said to be selling up to avoid hefty tax increases. According to one Welsh property expert, many owners have “panicked” and sold up after the Welsh Government announced council tax increases and new measures to require properties to be let for a minimum of 182 days to qualify for business rates.
A record 26,290 second properties were purchased (in the UK) in 2021 as homeowners spent their lockdown savings and investors rushed to take advantage of enormous demand for domestic holidays, according to Hamptons analysis of data from Countrywide, one of Britain’s largest property groups. However, by 2022 the tide had turned. The number of second homes purchases dropped to 20,340 last year – a fifth lower than the 25,600 sales in 2019, the last normal year for the property market before the pandemic.
Carol Peett, who runs home buying service West Wales Property Finders from Pembrokeshire, said that while changes mean that councils have the power to charge 300% council tax for second home owners, many authorities would be reticent to do so as they “do not want to kill the goose that lays the golden egg of tourism”.
Currently, premiums are set at a maximum level of 100% and were paid on more than 23,000 properties in Wales in 2022. Local authorities opting to apply premiums have access to additional funding, and the Welsh Government has encouraged councils to use these resources to improve the supply of affordable housing.
From April 1, the criteria for holiday lets to qualify as a business changed. Under the new criteria the current ‘availability threshold’ for properties to qualify as holiday lets will rise from 140 to 252 and the current occupancy threshold will go from 70 to 182 days.
Mrs Peett said: “However, this panicked a lot of owners with holiday lets which would not meet the huge increase in days needed to be let to qualify for business rates into selling up. Those affected were mostly local people who owned one holiday let to supplement their farm income or who had invested in a small holiday let to supplement their pensions etc. rather than those with expensive second homes to whom a few more thousand in council tax is fairly irrelevant or top notch holiday lets which would let enough to qualify for business rates.
“This means that there will be fewer holiday lets available to rent for those without huge budgets.” She believes that these higher rents could put people off from holidaying in places like Pembrokeshire. She said the new 182-day threshold was “totally unreasonable” and together with the proposed tourism tax, the measures would “cripple the tourist industry as rents will have to rise”.
She added: “Why pay to come here when you can go abroad for less or stay over the border in England without paying tourist tax?”
Mrs Peett said that there had been a small bounce back as people realise councils are unlikely to increase tax up to the maximum. But she cautioned: “It is mainly second homers who wish to let their places a little to offset the costs, or purely as second homes, rather than locals buying a holiday let to supplement their income.”
Furthermore, in Mrs Peett’s experience, the properties being sold off are in those priced between £450,000 and £700,000 which are of “no benefit” to young locals wanting to buy as they are too expensive for them. She said many of them are also “unsuitable” for permanent living: “Chocolate box cottages which look lovely to stay in for a couple of weeks in summer but in reality are dark and damp in the winter,” she said. “Or in places away from any local amenities so not suitable for full time living if you have children who need to get to school, or parents to work.”