Second thoughts on second homes?

Second homeownership is coming under greater scrutiny and is subject to increasing regulation, especially in popular holiday spots. And our research reveals that purchases may indeed be peaking.

Published under Research — Sep 2023
Second thoughts on second homes?

Second homeownership is coming under greater scrutiny and is subject to increasing regulation, especially in popular holiday spots. And our research reveals that purchases may indeed be peaking.

Of all the properties sold in Great Britain back in 2019, 2.2% of them were bought as second homes, intended to be kept for the owners’ use or perhaps to be rented out as holiday lets. Since then, the proportion of second home sales has decreased steadily, to 1.8% last year and to 1.6% so far in 2022.

 

As you would expect, many second homes are located near the coast. In 2020, as the Covid-19 pandemic gripped the world and foreign travel was severely curtailed, the share of British coastal properties bought by second home buyers hit a high of 5.4%. This year, the proportion stands at 4.0%.

In both 2020 and 2021, the resort town of Scarborough, in North Yorkshire, saw the greatest share of sales to second homeowners. In 2020, 41% of all properties sold in the local authority were bought as second homes, to buyers who paid an average of £280,000. In 2021, 30% of all Scarborough sales were to second homers.

Nowhere in London made it into the top 15 locations for second home buyers in 2020, which is unsurprising as lockdowns made buyers rush for space, while the boroughs of Westminster and Hammersmith & Fulham made the cut in 2021.

However, there has been a dramatic reversal this year, with Islington, in north London, seeing the highest share of properties bought by second home buyers, a move seemingly driven by the post-pandemic return to the office and the desire to have a pied-à-terre in the capital. Some 16% of sales in Islington in 2022 have gone to second homeowners, who paid an average of £713,300.

 

The second highest share of second home purchases this year is in South Oxfordshire, while sales to second homeowners in Scarborough have fallen dramatically, accounting for only 10% of transactions in the local authority so far in 2022.

Nevertheless, second home purchases are tailing off. In part, this is due to affordability because house prices have risen so much and is also likely driven by a shift overseas as people are able to go abroad once again as pandemic restrictions have eased, both here and across much of the globe.

While second homeowners tend to come from the wealthier corners of the country, they’re not immune from the cost of living squeeze. And as interest rates rise and second homes become a more costly discretionary expensive, we think fewer people will purchase them. Also, with energy bills spiralling, also it’s likely that some second homeowners will sell up in the years ahead. All this means that we’re likely to have passed peak second home ownership.

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Isaac Odegbami

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