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27 June 2017

Second homes: The Moral Maze

One could be forgiven for feeling something of a pariah as a result of owning a second property in the Southern Counties of England.

Successive governments have seemingly sought, through their respective taxation policies, to make owning a second home as expensive and thus unattractive as possible.

Additional stamp duty land tax is payable on second homes when purchased, changes to income tax in relation to rental income and mortgage interest payments bite during ownership, and there is no availability of relief from capital gains tax on sale. If that little lot doesn’t put you off, the prospective new neighbours, the locals, have also had a go. 

In the Courts

In November 2016, the High Court heard a case brought by property developers to overturn a neighbourhood plan introduced in St Ives, proposing that newly built homes could only be occupied as principal residences (i.e. by locals or others as their main residence) rendering them unavailable to those looking to buy a second home. The High Court ruled in agreement with the locals, who were complaining that 25% of the town’s residential property were second homes (a 70% increase in a decade up to 2011). In Rock and Polzeath the figure is said to be over 50%.

Other parishes, such as Cawsand, have since followed suit and joined forces with their own similar neighbourhood plans. Even Verbier in Swizerland has introduced a rule requiring the purchasers of chalets to use them as their primary residences. The ever-increasing house prices that result from the huge demand for second homes in certain areas, can render them unaffordable to locals and can have a huge impact on the local community. 

A reluctance from mortgage lenders

The mortgage lenders have also had their say. Whilst most mortgage companies will happily lend against a principal residence they are generally more reticent about lending against a second home. If you plan to occupy the second home from time to time you will almost certainly be in breach of the conditions of a buy-to-let mortgage. Those mortgage companies that will lend, are unlikely to do so on particularly favourable terms, making the acquisition/investment even more difficult, expensive and risky, as your choice of lender is significantly reduced.

A right to buy a second home

As we live in a capitalist society, should we not allow the market to dictate an organic balance of supply versus demand? Is it not the case that the communities most affected by second home syndrome actually benefit greatly from the money generated by the tourist industry and second home owners providing jobs for locals, and trade for the bars, cafés, restaurants and tourist attractions?

The irony is that these geographical areas are so popular because of their raw beauty, and the warm and welcoming communities created by the locals. Unfortunately however, the effect of the volume of second homes or investment property in some areas has sometimes been to gut them of their charm and in the worst cases also their doctors and schools and people as it becomes unaffordable and impractical for locals to live there.

Preserving local communities

We all have a responsibility, as with an endangered species, to have regard for our beautiful rural communities, and seek to buy property sustainably - in a way which allows these communities to thrive for us all to enjoy.

Certain districts and developers have come together to construct purpose-built sites for second home owners to avoid depriving locals of housing stock. Whilst these developments have various limitations on when they can be occupied and by whom, which might affect their attractiveness as an investment proposition or flexible second home, they do at least strive to put a stop to the decline of these communities into seasonal playgrounds.

We can also help you to discharge your responsibility with these three top tips:

  • Carefully consider which towns and villages are able to accommodate second home owners whilst retaining a good percentage of local homes and a wide range of amenities.
  • Do your upmost to engage with your chosen community as often as possible, bringing your range of skills and time to local projects and events.
  • Support local goods and services as much as possible and encourage others (such as your guests or visitors for holiday lets) to buy local supplies and support the community during their stay.

This article originally appeared in Surrey Life.