The collective wisdom is that the UK housing market has seen better days. Buyer demand in previously popular areas has evaporated, and asking prices have been slashed repeatedly. The Financial Times reported at the beginning of the year on the fact that 75 per cent of second-home sellers in Devon have had to cut their asking prices by, on average, 15 per cent. Similar trends have been observed in Cornwall and more recently in the Cotswolds and Suffolk too – all traditionally popular with second home buyers.
If it’s a bad time to be selling, it’s usually a good time to be buying, and if you have the money to spare in these leaner economic times, there are bargains to be had. However, at odds with the potential for great savings in the short-term is the fact that under no circumstances should you ever purchase a second home on a whim or without significant prior research and preparation. If you’re unsure about whether to buy a second home, this guide is for you.
Why are you buying?
Perhaps the most obvious reason for buying a second home is to have a place away from home that you can visit to escape your first home. The typical second home buyer is the rat-race running worker in the capital who escapes at the weekends to a quiet, picturesque village.
Of course, there are plenty of other decent reasons for buying more property. Among them is the investment opportunity of the property: buying a home and renovating it in an area with great growth potential. Alternatively, you could buy and property and rent it out to either a long-term tenant or to people who want to have a vacation in the area. And of course, mixing and matching these approaches can mean that you get the most money and enjoyment out of your investment.
Where are you buying?
In depth research of the housing market will be essential if you want to get the most out of a property investment. The task of purchasing a holiday home is somewhat less complex, but no less important. As previously mentioned, there are definite trends in where people in the UK (and abroad) buy their second homes. But under no circumstances should you follow the herd if you haven’t actually been to the place.
You’ll want to get the most out of a second home property if you’re using it for holidaying. If you manage to buy in a place you just plainly don’t enjoy, you’ve wasted significant time and money. Holiday in the area, preferably in the same village. Obtain pictures of the property you are interested in during different seasons, so you can get a good idea how nice the area is when there isn’t plenty of sun.
You’ll also want to have travelled between your home and your potential new property: nothing kills your enthusiasm for a lovely little cottage quite like a five hour drive through hills and unlit country roads. The bottom line is that you have a the time and a roof over your head to consider getting a property. Think about it for a good three months, and if you’re still enthusiastic about the investment, and you’ve calculated the financial implications, it’s time to buy.
What Do I Have To Do To Buy?
As a first home owner, you won’t need telling that buying property isn’t simply a case of paying the asking price. But the complexities of owning a second home won’t necessarily be familiar to you. You’ll almost certainly need to take out a mortgage on this home, and in doing so, you will have to declare any loans or borrowings you are already committed to paying off: clearly, if you don’t have a large income and you’re under the cloud of a large mortgage on your first home, your second home dream is simply never going to happen. However, second home mortgages and their associated repayment plans are specifically targeted towards people who’re tackling multiple investments, so it’s always worth investigation.
Securing, maintaining and insuring your home also comes with its own unique challenges. Even if you’re diligently visiting your second property to get the most out of it, you’ll probably still find paintwork peeling, gutters and plumbing blocking, the roof coming loose and plants overgrowing as time wears on. Security and insurance come up against your absence too – it’s essential to have comprehensive second home house insurance that protects you fully when you’re not resident in the property, and without requiring constant visits from a neighbour or other strict security requirements.
Remember, that you will have to account for earnings on the property if you’re renting. If you’re selling, it’s also important to note that Capital gains tax is 40 percent on second homes. Allowances can reduce the impact of this somewhat, but it’s a hurdle to leap over if you’re buying to renovate and sell.
Steph Wood dreams of owning a second home and writes for Schofields Ltd, a UK based second home specialist.
Image source, MorgueFile.com