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A holiday let is for life not just for the pandemic, warns lender

Research by Suffolk Building Society has revealed nearly one in five UK adults contemplated buying a holiday let property during the pandemic, when overseas travel become restricted.

The mortgage lender said it had seen the number of completions on holiday-let purchase double between 2020 and 2021.

It appears to be the younger generations driving this trend, with those aged 18 to 34 being the most likely to have considered a holiday let property in the last 24 months.

But whilst it may seem a tempting market to enter, the building society is concerned many budding investors are jumping in without any previous experience or knowledge and this could pose a risk.

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Charlotte Grimshaw of Suffolk Building Society said new investors to this market should be aware of certain rules lender put in place on holiday lets which may restrict their ability to take out a mortgage.

She said: “It will be important to check they have realistic expectations, with many lenders’ criteria including minimum ages and a requirement to already be a homeowner. Brokers can play an important role here in helping prospective short-term landlords assess their options.”

She said those interested in holiday lets should first try their hand at buy-to-let as a way of gaining additional income and experience with longer-term tenants before branching out into the holiday market.

Restrictions

Charlotte also warned not all lenders would allow the buyer to market their property on short-term lettings sites such as Airbnb and Vrbo. And she said properties in holiday parks, caravans or lodges, and those of unusual construction method may not always be accepted by lenders.

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“It’s easy to understand why the idea of owning a holiday let home is so attractive,” she added. “As people were limited to holidaying in the UK, often within an area they know and love, their eyes were opened to the opportunity of increasing their income, as well as enjoying a property for personal use too.

“However, intermediaries should also advise their clients to take the time to understand the market and check out the competition before falling in love with a property that isn’t viable in terms of lettings.”

The survey revealed, of those who expressed their interest in becoming a holiday let landlord, almost a third, (32%) said Covid-related restrictions inspired them to look into holiday lets, however, half (50%) claimed it was always part of their plan.

Devon and Cornwall were the locations that most wannabee holiday let landlords were considering, followed by the Lake District, Peak District and Yorkshire Dales.

By Kate Saines

Source: What Mortgage

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Dorset is top-earning county for holiday homes

DORSET was the top-earning region for holiday homes in 2021, a holiday lets company has said.

Based on the average income figures for a four-bedroom holiday let, holiday home owners in Dorset earned £36,000 last year – up 50 per cent from 2019, according to new figures published by Sykes Holiday Cottages.

It follows an uplift in demand for UK holiday ‘staycation’ accommodation throughout the pandemic.

Meanwhile the nationwide average income for holiday let owners in 2021 was £28,000 – up 33 per cent from 2019.

Last year, bookings to Sykes’ holiday accommodation throughout Dorset increased, with many Brits shunning foreign holidays due to travel restrictions and ongoing uncertainty.

The Cotswolds and Peak District took second and third place, with holiday home owners earning on average £35,000 and £34,000 in 2021, respectively. Devon and Somerset rounded out the top five.

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Bev Dumbleton, chief operating officer at Sykes Holiday Cottages, said: “2021 was certainly the year of the staycation and we saw the strong demand for accommodation across Dorset culminate in record bookings and a significant boost in average yearly income for our owners.

“With the interest in holidays closer to home likely to remain a fixture for years to come, those considering investing in a holiday home in 2022 could see great success – particularly if they choose a location like Dorset which has proven fruitful for those already in the market.

Top-earning regions for holiday homes in 2021 – based on the average annual income of a four-bedroom property, as the median property size.

  1. Dorset – £35,864
  2. The Cotswolds – £35,027
  3. Peak District – £33,833
  4. Devon – £33,071
  5. Somerset – £32,708

Regions with the highest occupancy rates in 2021:

  1. Cumbria & the Lake District – 80.2%
  2. Northumberland – 80.1%
  3. Peak District – 78.6%
  4. Southern Scotland – 78.6%
  5. North York Moors – 78.4%

BY ELLIE MASLIN

Source: Dorset Echo

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New rules for second homes introduced by UK Government

Changes, announced 14 January 2022, are set to target homeowners who leave properties empty rather than letting out to holidaymakers.

Currently, owners of second homes in England are able to avoid paying council tax and can access small business rates relief by simply declaring an intention to let the property out to holidaymakers.

This has led to concerns being raised that some homeowners may be unfairly benefiting from the tax break through their empty properties.

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From 1 April 2023, holiday let owners will be required to provide evidence such as websites or brochures used to advertise the property, letting details and receipts. Currently, there is no requirement for evidence to be produced that a property has actually been let out commercially.

Second homeowners will have to prove holiday lets are being rented out between 70 and 140 days a year to access Small Business Rates Relief, where the criteria are met.

In coastal and rural areas, a short-term rental market is an attractive option for landlords due to the comparative lack of regulation that is expected for landlords within the private rented sector which often leads to problems with affordability and availability.

By Timothy Douglas

Source: propertymark

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Buy-to-let mortgage guide for rentals and holiday homes

This buy-to-let mortgage guide will help you if you’re thinking about buying a second home or holiday property. If you’re lucky enough to be in the position to do so, you can rent it out to paying guests to boost your income.

More than 770,000 families in England own a second home according to the English Housing Survey 2018-19, the most recent year for which official statistics are available. Of these, almost 40% use their second pad as a holiday home for themselves, friends or to let out to holiday makers.

It’s not hard to see why. You can earn thousands of pounds each year depending on the charm and location of your holiday home. It could be an investment that generates regular income and long-term gains, if house prices increase. Or the income could help you cover the cost of a mortgage on the property, while leaving you free to enjoy it at other times.

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Buy-to-let mortgage guide for rentals and holiday homes

If you fancy making money from your countryside bolthole or city pied- à-terre, here are some helpful buy-to-let mortgage tips to get you started.

Choosing your property and location

Picturesque destinations with year-round appeal that are accessible to large populations such as the Peak and Lake Districts and the Cotswolds are a win with holiday makers. North Wales and the Welsh Borders are also sought-after locations, according Luxurycottages.com.

Think about how easy it is to get to your property using different transport links and your home’s proximity to attractions or the coast. If your home is near a beach or in easy walking distance to tourist hotspots you can charge more.

City lovers might want to invest in an urban pad. Last year, analysis by Vanquis found the top three most profitable cities to be an Airbnb landlord were Cardiff, Belfast and Manchester.

Personal touches and premium customers

You’ll need to go the extra mile to attract quality guests and charge a premium. Holiday homes positioned as premium getaways can generate up to 2.5 times the income of a standard property.

Chief executive of Luxurycottages.com Alistair Malins says: ‘Every guest wants to feel special when they’re away and thoughtful little touches like a hamper of local produce, or a bottle of wine on arrival really help set the tone for their stay.

‘Being able to enjoy some of the luxuries that you don’t have at home, such as a hot tub, sauna or warming up by a log burner all add to the authentic experience of staying in a luxury home.’

Setting your rates

Speak to local letting agents to find out the going rate for properties like yours. Ask how long the booking season lasts and what rates you can charge in high and low seasons. How much you can charge, however, will partly depend on the quality of your online reviews.

During your first year before you have any reviews you may want to offer your property at a discount so you can attract holiday makers and build up positive feedback.

Your property may not always be let, especially outside the holiday season. So if you have a mortgage on the home that you’re expecting to repay from lettings income, factor some empty periods into your calculations.

Advertising your holiday home

Airbnb is one of the most popular platforms used by holiday homeowners. You pay around 3% per booking to use the website. You have to manage your own bookings and respond to guest queries. Similar websites include Booking.com, Cottages.com and VRBO.com, formerly known as HomeAway.

An alternative is to pay a property agent to market your property, manage guest admin and maximise lettings for you. Agents tend to charge between 15% and 20% of every booking.

Tax treatment

Income you earn from letting out your holiday home is taxable. You will need to declare it on your annual tax return. You’ll then pay income tax at 20%, 40% or 45%, depending on whether you’re a basic-, higher- or additional-rate taxpayer.

More happily, you can qualify for a host of tax perks on your holiday home if it meets the Furnished Holiday Let rules. The main rules to remember are that it must be available to let for at least 210 days a year and let to paying guests for 105 days a year.

If you meet the requirements, you can deduct expenses from your earnings before tax such as:

  • Mortgage interest costs
  • Advertising or property management fees
  • Cleaning and maintenance
  • Utility bills
  • Welcome pack items
  • Insurance premiums

You’re also entitled to tax relief on items such as furniture, fittings and equipment bought to enhance the value of your holiday home.

Setting up your holiday home in the first year can be expensive. Don’t worry though, you can carry any losses forward into the next tax year for tax purposes.

Here’s some more tax advantages:

  1. Small business rates relief – holiday let owners must register for business rates rather than council tax. However, you may be entitled to small business rates relief which means you pay nothing at all. Call your local council to find out if you’re exempt.
  2. Wear & Tear Allowance – you can claim tax relief on domestic items you’ve replaced because they’re no longer usable.
  3. Pension contributions – profits you earn from your holiday home are eligible for a tax top up from the government when paid into your pension pot.
  4. Capital Gains Tax – when you sell your property you may be eligible for entrepreneur’s relief, rollover relief or hold-over relief.

It’s advisable to speak to an accountant for tax advice.

Specialist mortgage and insurance

You’ll need a specialist holiday buy-to-let mortgage which typically requires a 25% deposit. It’s best to speak to a mortgage broker who can find you the best mortgage rates for your circumstances. Specialist insurance is a must too. Everyday home insurance won’t cover your needs because there is an increased risk of damage and theft.

You may want public liability cover too, which insures you if a guest is injured in your property. Price comparison websites will allow you to search for specialist cover.

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By Samantha Partington

Source: Ideal Home

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Britain’s holiday home hotspots revealed: Salcombe tops the list for city dwellers’ most sought-after second home town followed by Falmouth and North Berwick

Salcombe has topped the list for British city dwellers’ most sought-after second home town followed by Falmouth in Cornwall and North Berwick in East Lothian.

Second homes and holiday lets in the South West are the most popular, with Salcombe, Falmouth, St Ives, Brixham and Newquay all within the top six in demand, according to a study by Lakeshore Leisure Group.

Meanwhile, separate data from the Department for Levelling Up, Housing and Communities also names the South West as the region with the most second homes, making up 27 per cent of the UK’s total.

The Government figures, which are the most recently available for second homes per area in the UK, place the South East second at 14 per cent, followed by London at 12 per cent and Yorkshire and Humber at 10 per cent.

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It comes as house prices of £2million properties in rural areas rise by the fastest rate in a decade, with wealthy people in cities hunting for countryside retreats across the UK amid a staycation boom during the pandemic.

In Scotland, North Berwick and Ullapool are the most popular locations for a rural dwelling, while Tenby is the only Welsh town in the top twenty second home towns.

Lakeshore Leisure Group said: ‘Whilst many of these towns thrive on a tourist economy, there are downsides to these increases in second home ownership – particularly for the locals.

‘As these areas become more desirable for second home purchases, property prices rise and often locals are priced out of buying a permanent residence in their local area.

‘Not only does this result in a property that is occupied often less than half the year, the towns become increasingly seasonal; overcrowded in the summer and holiday months, but quiet and lifeless during the off-season.’

The company compiled the data, released earlier this year, by looking at the combined Google search history of 101 urban cities for ‘second homes in [town name] and ‘holiday homes in [town name]’.

A total of 19,990 Google searches were made by city dwellers for Salcombe between April 2020 and August this year, while 12,370 were made for Falmouth and 12,140 for North Berwick.

In 2018-19, three per cent of households in the UK reported having a second home, with the proportion remaining unchanged from 2008-09, according to the Department for Levelling Up.

The most common reason for having a second home is for use as a holiday home or weekend cottage, while 35 per cent say they view it as a long-term investment or income and 16 per cent once used it as their previous home.

Overall, 57 per cent of second homes are located in the UK while 34 per cent are in Europe and nine per cent are in non-European countries, according to the latest figures.

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In the government department’s English Housing Survey 2018-19, it said: ‘Since 2008-09 there has been an increase in the proportion of second homes in the UK and a corresponding decrease in European and non-European second homes.’

Meanwhile, it was revealed in September that ministers were preparing a triple clampdown on second homes amid warnings that they are squeezing the life out of holiday hotspots.

Communities Secretary Robert Jenrick planned a range of reforms that give councils powers to ban the creation of new second homes if they are deemed to be damaging to the local community.

They would be able to impose such bans without having to first hold and win a local referendum on the issue.

Councils will also get new rights to insist developers build more starter homes, instead of focusing on properties likely to be attractive to ‘incomers’ seeking a holiday home.

The moves, which were included in planning legislation over the autumn, are designed to provide respite to communities in areas such as Cornwall, the Lake District and the Cotswolds which have high concentrations of second homes.

By KATIE WESTON

Source: Daily Mail

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Second home owners cash in on Devon staycation boom by flipping to holiday lets

The number of second homes in Devon has dipped in the last year as owners flip their properties to holiday lets as they take advantage of the Covid pandemic staycation boom.

As well as income from holiday letting, there are other financial benefits to second homeowners flipping their properties – the small business rates regime, which covers 96 per cent of holiday homes in England, means that they pay little to no property taxes.

A holiday letting rental price “boom” in Devon’s tourist hotspots has led to the shift, with restrictions on foreign travel to other countries resulting in a rise in demand for domestic holidays.

Official government figures reveal there are 13,593 houses and flats in the county classed as second homes for council tax purposes – down from 14,086 in October 2020.

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These homes are unlived in, but fully furnished – and can include “buy-to-leave” properties, which are purchased as investments that are left unoccupied in the expectation that their value will rise.

Despite the drop, Devon still has one of the highest rates of second homes in England, at one in every 42 homes – more than double the national average.

Separate analysis of government figures from the Atlas Group shows that more than 11,000 second homeowners nationally have converted their properties since the start of the pandemic.

In Devon, the number of holiday homes trading as businesses has jumped by 16 per cent – as of August, there were 7,522 classified as holiday homes in the area, compared to 6,474 properties in March last year.

The government announced in March that it would legislate to tighten tax rules for second property owners in England, meaning they will only be able register for business rates if their properties are genuine holiday lets.

Holiday homes were also entitled to grants last Spring worth £552.2 million to support non-essential retail, hospitality, leisure, personal care and accommodation sectors at the start of the pandemic, while top up grants worth a further £256.8 million were made available in January during the third national lockdown.

“Restart grants” announced at this year’s Budget provided further grant funding of £522.3 million, taking total grant support to £1.3 billion, according to Altus Group’s annual business rates review.

However, while these owners have been cashing in, campaigners say both second homes and holiday lets can lead to problems in housing access for local residents.

Will McMahon, director of Action on Empty Homes, said: “In the last five years we have seen an escalating housing crisis while the number of long-term empty homes and second homes keeps rising.

“This year’s figures seemed to show second homes numbers dropping at a time when communities around the country were reporting the opposite – now we know why.

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“It turns out this isn’t happening at all, they are just switching to business rates in huge numbers to dodge council tax and avoid penalties for being kept empty.

“Today there are nearly 100,000 families and over 120,000 children stuck in overcrowded and insecure temporary accommodation because of a shortage of social housing.

“Yet over half a million homes have no one living in them because they are either long-term empty or are used as holiday lets.

“It is time that we looked at meeting housing need in this country before delivering developers’ and landlords profits.

“That means getting unused homes back into use and improving the powers we offer councils to limit homes being turned into holiday homes or Airbnb-type short lets.”

Action on Empty Homes don’t think that holiday homes shouldn’t be allowed, but say that if local planning is to mean anything then councils should be able to exercise control and make the right choices to meet local community needs.

That might mean saying ‘yes’ to planned holiday parks but ‘no’ to residential homes being bought up and turned into Airbnbs.

They argue that councils need better powers to get empty homes into use, along with meaningful planning powers that offer local residents the chance to put meeting housing need first and ensure that new developments build homes that are lived in; and that homes classed as residential don’t turn into businesses that house no one and push up local rents and house prices.

By Colleen Smith

Source: Devon Live

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Half of adults losing out on tax breaks from holiday lets

An estimated 52% of adults said they were not willing to invest in a holiday let property due to the perceived ‘hassle’ of taking one on, according to research from Hodge.

Only a third of those questioned by Hodge said they would consider investing in a holiday let property, with the vast majority admitting to not even knowing there were tax breaks involved.

Eight out of 10 people (84%) said they were not aware of the financial benefits, and a further 8% said they were not sure.

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The top five reasons listed by those not willing to consider a holiday let, apart from the hassle, were that they did not think their finances would allow it (48%), they did not want to go to the same place every time (41%), they felt too old to do it (35%), they would worry about visitors breaking things (24%), and they would worry about their finances if empty for too long (21.53%).

Emma Graham, business development director of Hodge, said: “These figures are quite concerning in many ways, at a time when people are seeking alternative ways to make the most of any capital they have.

“To think so many people in the UK are missing out on tax breaks because they don’t know about them means thousands could be missing out on financial gains at a time when many have arguably never needed them more.

“This just shows the benefits of people using expert mortgage brokers or financial advisers, as they will be able to explain the tax benefits of owning a holiday let, as well as helping customers navigate the different products on the market.”

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“Most people might also be surprised to find that a lot of Holiday Let and 50+ mortgage products are available to them well into later life.

“And what’s really frustrating about these findings is that such an overwhelming majority of those we asked weren’t even aware that there are tax breaks involved which could, in effect, create gains difficult to achieve elsewhere in the market.

“If they look at the kind of mortgage products which are actually on offer, I think most people would be interested to find many of the perceived fears they have in owning a holiday let are often capable of being met before the property search even begins.

“It’s hard to think thousands could be missing out on making the most of their dream holiday home simply because they think they’re not eligible for, or aware of, the many rewards involved.”

By Jake Carter

Source: Mortgage Introducer

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Second homes boom continues as pandemic reshapes residential market

While the end of the stamp duty holiday will cause seasonal patterns will re-establish themselves, “demand remains high and supply stubbornly tight” suggesting a gradual process of normalisation, according to new research from Knight Frank.

However, its data shows that the second homes boom that began after the first lockdown in 2020 isn’t over and more buyers than ever have opted for the attractions of a second home, motivated by a series of lockdowns.

Consistent with reports of a booming second homes market in South West England during the year of the staycation, the number of transactions liable for the second home 3% stamp duty surcharge hit a new high of 84,700 in the second quarter of this year.

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The number will also include buy to let investors taking advantage of the stamp duty holiday but it is nevertheless the single largest quarterly figure since the Higher Rates for Additional Dwellings (HRAD) surcharge was introduced in 2016.

The second homes surcharge contributed £485m of the £2.06bn of residential stamp duty collected in Q2 2021, which was the largest slice (24%) on record. It was also the largest contribution by value since Q4 2017.

Second home purchases outside of London increased by 83% in the first eight months of 2021 compared to the five-year average, according to Knight Frank data. The rise was in the Central region was 58% over the same period, bolstered by a recent focus on the Chipping Norton region of the Cotswolds in the TV show Clarkson’s Farm.

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Meanwhile, second home purchases in the South West, which is more of a traditional target, doubled in the same period.

It is not just a UK phenomenon. According to Knight Frank’s Global Buyers Survey 2021, 33% or international buyers are more likely to buy a second home as a result of Covid-19. However, consistent across borders is the current challenge of matching supply with demand – something that will support pricing but could limit volume.

Mark Proctor, head of the South West region at Knight Frank, said: “I’m not surprised people have been much more driven to purchase. They were unable to travel overseas last year, and the lack of freedom of movement left many wanting somewhere to retreat to outside of cities.

“Being told to work from home has enabled people to realise their lifestyle ambitions via a second home, and with the equity that’s built up in the London and the South East property markets over the longer term, that five-year plan to buy a second home has come forward considerably for many buyers.”

By ROZI JONES

Source: Financial Reporter

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How to Maximise Holiday Home Income 2022

Recent figures have shown that more than 11,000 second-home owners in England have opened their properties to become holiday lets.

Second-home owners have utilised their properties to take advantage of the staycation demand and to secure additional income during the pandemic.

Emily Turner, Sales and Marketing Director and Property Expert of Perfect Stays helpfully offers her four top tips on how you can maximise your investment going into the off-season.

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1. Intelligent pricing strategy

Having a detailed understanding of your customers’ booking habits is vital if you want to maximise rental rates. Your pricing needs to be tailored for each week throughout the year to suit visitor demand in your local area. Prices also need to remain competitive to your local market while adjusting to suit seasonal trends.

To start, look at visitor data for your region and when numbers peak. Depending on your location, this may correlate with national bank holidays, school holidays or popular local events. Once you’ve built up a picture of visitor behaviour and the local market, you’ll be in a position to create a pricing structure that maximises rental rates.

2. Unique features

Investing in unique features that will make your property stand out will help to maximise revenue. Features such as a hot tubs, wood burners and games rooms help your property book well in the colder off-season months and can help raise rental rates.

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Winter can traditionally be a quieter time for holiday homes but by creating a cosy feel you can increase the appeal of your property during this period, attract more visitors and boost your annual revenue.

The key is making your home a comfy and enticing retreat for the whole family to spend time together so offering guests activities or key features that keep them occupied indoors if the weather takes the turn for the worse, will entice potential holiday-goers to book with you.

Although items like hot tubs are not an insignificant initial investment, the increased number of bookings and associated rental rates you’ll achieve will have a significant benefit in the longer term, offering you a good return on investment and ensuring your property stands out to visitors all year round.

3. Location

Location is an important factor for guests when considering which holiday home to book and what they want to get out of their stay. Accommodation is only one part of the experience so share details on what guests can enjoy doing in the local area and highlight unique amenities like sea views, beaches, great restaurant and historical sights etc. Offering guests more than just the accommodation will entice them to pay more and stay longer.

4. Pet friendly

Making your holiday home dog friendly is a sure way to boost bookings from the pandemic puppy boom. According to the latest Google data, searches for ‘dog friendly holidays’ have seen a 179 per cent percent increase in the UK since the start of the pandemic.

Cater to the demand by ensuring your property is pet safe. If possible, make sure your garden is fully enclosed and designate a suitable place the dog can sleep unsupervised overnight, such as a utility room.

With a very high percentage of UK holiday makers wanting to get away with their dog, accepting pets will expand your property’s appeal to a wider market and enable you to increase booking levels all year round. Although many owners worry about the potential damage dogs may cause to a property, issues are extremely rare and charging a small fee for each dog will cover any additional cleaning required.

Source: Property Wire

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England sees ‘boom’ in second homes flipped to holiday lets

More than 11,000 second homeowners in England have flipped their properties to become holiday lets since the start of the Covid pandemic, research shows.

Analysis of government figures by real estate advisers the Altus Group shows the number of holiday homes trading as businesses has jumped by more than 20%.

The group said a rental price “boom” in holiday hotspots had led to the shift.

Restrictions on foreign travel to other countries resulted in a surge in demand for domestic holidays, it added.

The data shows 67,578 homes classified as holiday homes have been flipped to become commercial premises, compared to 56,102 properties in March last year.

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Almost 4,000 homes have been flipped in South West England alone since the start of the pandemic, amid record visitor numbers in Cornwall and Devon.

Meanwhile, the South East also has also seen a significant rise in the number of new lets, with a 27% rise – or 1,458 properties.

‘Far more lucrative’

Transforming second properties into holiday lets has helped secure additional income for owners during the pandemic, but could also be beneficial for tax reasons.

Holiday homes were entitled to grants last spring worth £552m to support non-essential retail, hospitality, leisure, personal care and accommodation sectors.

Meanwhile, top-up grants worth a further £257m were made available in January, given the third national lockdown.

This year’s Budget also saw further grant funding announced to take total grant support to £1.33bn since Covid first hit, according to Altus.

Robert Hayton, UK president of Altus Group, said: “The grants for second homeowners will have been far more lucrative than ‘business as usual’ for many, especially in the off-seasons, whilst there is a pivot towards holiday lets as rental prices boom in hotspots.”

About 96% of holiday homes in England are also covered by the small business rate regime, so pay little to no property taxes.

However, the government announced in the March Budget that it planned to legislate to tighten tax rules for second property owners in England, meaning they would only be able register for business rates relief if their properties were genuine holiday lets.

Source: BBC

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