On 8 July, Chancellor Rishi Sunak announced a cut to stamp duty that could save holiday home buyers up to £15,000 if they complete the purchase before 31 March 2021. The government raised the threshold on stamp duty to £500,000, in a move to restart the stagnant housing market.
Second home buyers will still have to pay the additional stamp duty surcharge at a rate of 3% for properties up to £500,000. For properties over £500,000, you would have to pay 8% rate of stamp duty up to £925,000. This figure includes the second home surcharge.
With a ‘staycation’ likely to be as much as most holidaymakers feel comfortable taking this year, it’s not surprising that demand for holiday lets has surged, meaning buyers could profit from letting out their property when they’re not there.
All this seems to make the prospect of buying a holiday property rather tempting. But is now the best time to buy?
Data from cottages.com shows that queries from investors wanting to buy holiday lets are already up 25% since Sunak’s statement.
What’s more, demand for such properties was already surging because of the fact that most Brits will holiday at home this year. Unsurprisingly, coastal areas like Cornwall have seen the highest rise in interest.
Paul Le Blas, Regional Director of Millerson estate agents across West Cornwall, says his firm has done as many deals in the six weeks since markets reopened as it usually would in three months.
In holiday hotspots, it’s very much a seller’s market. There are reports of people making offers even before viewing properties and houses selling for as much as 7% above asking price.
Despite forecasts that house prices could fall by as much as 5% this year, experts believe that holiday lets and second homes are outperforming the rest of the market and prices could even increase because of the extra demand.
Now could be a good time for buyers to get in the market before prices increase any further.
At the moment, holiday let owners can take advantage of tax breaks no longer available to buy-to-let landlords.
As of this financial year, buy-to-let investors will no longer be able to deduct the interest they pay on their mortgage from the rental income they declare to HMRC.
However, holiday lets are still classed as a business rather than an investment, so holiday-let owners can continue to deduct their mortgage interest from their rental income.
Please get in touch if you’d like to discuss your options with regard to buying a holiday home. We would love to help.