The UK’s Second Home Crackdown – Will It Really Improve the Property Market?
The UK’s property market has been a subject of concern for years, with the dream of homeownership seeming out of reach for many first-time buyers. In an attempt to address this issue and make housing more accessible to locals, the government launched a crackdown on second homes. However, as we delve into the data, it becomes apparent that this move may not be the silver bullet the property market needs. In this blog post, we will explore the impact of the second home crackdown and why it might not be the solution to the UK’s housing challenges.
The Current State of the Property Market
Properties in popular holiday destinations have seen a significant surge in prices, making them increasingly unaffordable for first-time buyers. According to analysis from Hamptons Estate agents, the average purchase price of a second home in 15 locations, ranging from Pembrokeshire to Cornwall, is £343,253. This amount is a staggering £99,482 more than what first-time buyers in those areas can afford.
The Hope for Affordable Homes
Councils and the government have argued that by freeing up second homes, more affordable housing options will become available for the local population. To achieve this goal, one in four English councils are planning to utilize new powers to increase the amount of council tax paid by second homeowners. This measure is intended to encourage the turnover of second homes and make them available for local residents.
The Government’s Efforts to Address the Issue
In April, Michael Gove, the levelling up secretary, announced several changes aimed at making it more challenging for second homeowners and holiday let owners to retain their properties. Gove expressed concern that short-term lets were pushing local people out of their cherished towns, cities, and villages. The measures were designed to prioritize families in need of affordable housing close to their workplaces.
Unintended Consequences of the Crackdown
Despite these efforts, David Fell, a senior analyst at Hamptons, argues that most second homes are not within the reach of first-time buyers. These properties tend to be sold to upsizing families from outside the local area, and they often have strong family connections to both the property and the region. As a result, second homes change hands infrequently and are typically inherited or gifted rather than purchased.
Impact on Second Home Sales
The property market witnessed a boom during the pandemic, with double-digit house price growth. However, sales of second homes have recently declined, and they now make up only 1.5% of UK house sales, down from 2.2% in 2009. The increased cost of borrowing, higher mortgage rates, and the 3% stamp duty surcharge have contributed to making second home purchases unviable for many.
Is the Second Home Crackdown the Solution?
While the second home crackdown was introduced with good intentions, it may not yield the desired results. Mark Proctor, a regional partner for the south west at Knight Frank, suggests that the increased cost of borrowing has a more significant impact on second home sales than government policies or council tax rates. Second homes are often considered a luxury rather than a necessity, and they are the first to feel the pinch during tougher economic times.
The Voices of Second Home Hotspot MPs
Even MPs from second home hotspots have voiced their concerns. Selaine Saxby, MP for North Devon, raised the issue in Parliament, stating that her constituency lacks the number of affordable homes needed, and coastal communities should not become ghost towns during much of the year.
While the second home crackdown may have been initiated to address the UK’s property market challenges, the evidence suggests it may not be the solution we were hoping for. The rising cost of borrowing, higher mortgage rates, and other economic factors have impacted the sales of second homes more significantly than government policies. To truly improve the property market and provide affordable homes to locals, a more comprehensive and balanced approach may be needed, focusing on both supply and demand factors in the housing market. Only then can we hope to achieve the goal of making homeownership a reality for more first-time buyers in the UK.