THE number of second homes in Britain could hit 700,000 by 2016 if current trends continue, meaning a growing number of people will be looking for ways to finance their dual-centre lifestyles.
An estimated 350,000 people now have a second home in England, according to a study by Savills, an estate agent — 14.6% more than only two years ago. And the Royal Institution of Chartered Surveyors said that a further 200,000 own at least one property abroad.
Yolande Barnes at Savills said: “Second homes fall neatly into three main categories — the weekend retreat, the holiday home and the city pad — and all are becoming more popular.”
Demand for bricks and mortar has been fuelled by the rapid house-price inflation of the past decade. Prices have nearly trebled, taking the value of the average house from £62,453 to £172,979, according to Halifax. As interest rates have fallen from 6% to 4.5% in this period, it is not surprising so many people have increased their exposure to property in a way they can personally enjoy.
Savills found that Cornwall and London were the most sought-after areas.
Demand for second homes in north Norfolk is on the up as buyers snap up properties that look good value compared with many other areas of the country. Halifax’s latest regional house-price index revealed that properties in East Anglia rose by 3.4% in the first three months of this year, beaten only by Wales, where the value of the average home has gone up by 4.5%.
And after a slowdown last year, many estate agents and industry analysts have been reporting a resurgent market in recent months. There are, however, signs that the mini-boom could already be over. Prices have risen by just 0.1% this month according to Nationwide, down from 1.1% in March, and the annual rate of growth has fallen from 5.3% to 4.8%.
Fionnuala Earley at Nationwide said: “Average petrol prices look set to breach £1 a litre and this will clearly hit consumers’ pockets. Utility bills are also rising and the latest increases in unemployment are likely to soften consumer confidence. We think this adds up to a mildly weakening, rather than accelerating, profile for house price growth this year.”
Looking to the longer term, many analysts are predicting low levels of single-digit growth — a far cry from the 22.4% of 2002. Barnes said: “We think growth will average about 4.5% a year over the next five years, but this will vary hugely across the country.”
Some in the industry are more bullish. Christopher Hall at the National Association of Estate Agents (NAEA) said: “I am confident the average house price will increase by up to 100% over the next 10 to 15 years.”
The reason Hall thinks prices are set to double is that there simply aren’t enough houses to meet demand. The shortage has been fuelled by historically low levels of new houses being built, and an increase in the number of people looking to buy. The increased demand stems from the fact that more people want a second home, high levels of buy-to-let investment, immigration and more single-person households.
Capital Economics, a consultancy, is not convinced by this argument. It thinks the level of growth predicted by the NAEA is unlikely because affordability is stretched and property is overvalued in many areas.
Ed Stansfield at the consultancy said: “A doubling of house prices by 2016 would require that prices rise by an average of just under 7.2% a year. Compared with average rates of house price inflation of 9.7% a year over the past 30 years, that figure does not seem remarkable. But since inflation is set to be much lower than in the past, comparing nominal rates of house price inflation tells us little.
“Also, if we assume that inflation moves in line with the Bank of England’s 2% target, the NAEA predictions imply that prices will rise by 5.2% a year in real terms, more than double the 2.3% annual average rate seen over the past 30 years.”
However, thousands of people who have recently been investing in second homes clearly believe that property is still a sound investment. Among them is Charles Phillpot, 51, pictured with his wife Claire and children Emma and James.
Phillpot, managing director of Adventis, a marketing agency, bought a four-bedroom house for £700,000 in Polzeath, Cornwall, last year. He rents it out as a holiday home during the summer and for the rest of the year the family use it as their second home.
Phillpot said: “I keep in touch with local agents and am confident that the property has already risen in value. In the summer we get £2,000 a week for letting it and we only need to let it for 12 weeks to cover the costs. The rest of the year we use it ourselves. We love the house. We use it as a home, a business and a store of wealth.”
However, Barnes said that anyone thinking of investing in property needs to buy carefully. He said: “Selection will be crucial, as some areas will underperform the national average, while other areas will outperform.”
She thinks the biggest increases in second-home ownership over the next few years will be in relatively undervalued areas such as Kent and Dorset coasts, parts of Suffolk and Norfolk, and rural areas near big cities such as Leeds, Manchester and Newcastle.
However, the government has second-home buyers in its sights. Multiple-home owners used to get a 50% reduction in council tax on their second property, but this was slashed to just 10% in 2004.
The government is believed to be looking at further clampdowns. These include an absenteeism tax that would be directed at homes left empty for six to eight months a year; doubling or trebling council tax for second homes; and the introduction of a business-rate tax on such properties.
