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Savills shares jump after UK housing market improves post-election

Savills has seen shares jump after the estate agency said it saw the UK commercial and residential markets pick up after last month’s general election.

The real estate business said its full-year results for 2019 will be at the “upper end” of expectations, following an “excellent” performance in the UK.

It said Brexit uncertainty had restrained UK growth until mid-December, but saw “a strong close to the year as confidence to transact returned to the market”.

The London-listed firm also said it was particularly “resilient” as it faced challenging backdrops in both the UK and Hong Kong.

In Hong Kong, Savills said the political unrest had a severe impact on trading from the middle of 2019 and continues to press on performance in the region.

It said that, as a result of the political backdrop, its Asia Pacific region has performed “slightly below” expectations, while the company has also seen an increase in the time taken for its Australian business to bear fruit.

Elsewhere, the company delivered significant year-on-year growth in the US, as well a “strong performance” from its investment management arm.

In continental Europe, trading was broadly in line with expectations, despite declining markets in some countries.

In the trading update, Savills said: “Despite the backdrop of uncertainty, the UK performed well across all business lines, latterly benefiting from improved investor sentiment in both commercial and residential markets.

“Our residential business continued to outperform the overall market conditions, in particular taking share in the core London market.”

Savills said it believes increased political stability in the UK means it “should maintain improved sentiment”, but said it remains cautious until the full impact of Brexit is better understood.

Shares in the company increased by 7.1% to 1,231p in early trading on Monday.

By Henry Saker-Clark

Source: Yahoo Finance UK

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Number of British Second Homes Fell by 2% Over Last Decade

The number of second homes bought in the UK dropped by 2% between 2010 and 2018, according to new research.

Data compiled by Swinton Insurance revealed a slight drop in the number of second home purchases over the last ten years. However, these figures mask a different story – the huge variations between regions. Massive rises in the number of second homes in some areas were counterbalanced by huge drops in others.

Regionally, the biggest decline was seen in Scotland. There was a 34% drop in the number of second homes bought north of the border. West Dunbartonshire saw the biggest drop of 98%. In England, the region with the biggest fall was the West Midlands, which saw a 25% drop in the number of second homes being purchased.

Despite the overall drop in second home purchases, certain areas across the UK have seen massive increases over the last decade. For example, Croydon in South London has seen a huge 6,529% rise in the number of second homes purchased, from just 7 in 2010 to 464 in 2018.

Other regions with a positive trend include the North West, which has seen a 43% rise in second homes bought over the decade. The highest increases in this region were seen in Rochdale at 1,048%, Manchester at 917%, and Salford at 550%.

Sophie, a 30-year-old professional from London who has bought a second home in Manchester, told Swinton: “I was able to purchase my first home after a grandparent left me inheritance. For my second home I used my life savings and purchased a flat in a part of Manchester which is expected to increase in value over the years.

“I wanted to invest my money in a good place as I had worked hard for it, and after doing my research and being advised money is better invested in bricks and mortar than any other type of investment, I thought buying a second home would be a more tangible investment for me.

“The process was pretty smooth, I had a mortgage broker and had spoken to people who have more than one property who advised me and helped me when it came to stamp duty and moving my first mortgage to a buy to let.

“However, managing the properties is a lot harder than I anticipated. Any property isn’t cheap, if anything goes wrong I have to pay and fix it very quickly especially if I have tenants in.

“My advice to anyone looking to purchase a second property would be to make sure you have the support you need to have a plan in place for maintenance, managing tenants and contract issues with second properties. Make sure that you aren’t relying on the tenants rent as income and that the location is in a popular location so it’s a lot easier to find and replace new tenants.”

Looking ahead, Swinton has also predicted which areas will see the highest rates of growth in terms of second homes, by looking at which regions have had the fastest growth over the last two years. Both Basingstoke & Deane and Southampton have seen the most growth in the last two years at 37% each, followed by Brentwood at 35%.

Source: Money Expert

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Forecast Predicts House Prices in Wales will Grow by 18% in 5 Years

Global real estate firm, Savills has forecast strong house price growth of 18% in Wales over the next five years, which would make it one of the fastest-growing markets in the UK.

While housing supply is almost meeting need, there is still a shortfall in the provision of affordable homes in Wales. The predicted house price rises are expected to put further pressure on the sector.

Caroline Jones is an associate director in Savills development team in Cardiff, specialising in residential development.

She comments:

“The value of residential property in Wales is fast catching up with the rest of the UK. The removal of the Severn Bridge tolls this time last year has already had an impact on prices in the south east of the country and this is likely to ripple out further in coming years. While this is good news for home owners, it will push the limits of affordability for more households, making the requirement for affordable provision increasingly urgent.”

2,592 new affordable homes were delivered in 2018/19, up from 2,316 in 2017/18, while the Welsh Government expects to have completed 3,569 during 2019/20. Despite the improvement in delivery rates, it currently still falls 33% short of the requirement of 3,895 more affordable homes per year over the five years[1] to March 2024, as set out by the Government earlier this year.

The average annual requirement of 3,895 affordable homes over the next five years, set out by Government earlier this year, equates to 47% of new homes built between 2019 and 2024. However, Savills figures show that only 34% of new homes completed since 2010 were affordable.

Commenting on the research, Caroline said:

“Welsh Government is aiming to build 20,000 new affordable homes over the next five years, an ambitious target in the current climate. Not only does it mean upping annual delivery to 4,000, there is already an accrued shortfall to address.

“Whilst the target to develop is welcomed, as it should contribute to addressing the affordability issue, it undoubtedly puts pressure on providers to deliver. This new drive is also an opportunity for those in the sector to innovate and ultimately to provide the quality, as well as the volume of affordable stock we need.”

“We are seeing action within the public sector, with councils gearing up to develop stock and strategic initiatives by Housing Association involving private sale to cross-subsidise the affordable housing provision.

“The challenges are significant. Availability of land is an issue, which is resulting in private and public sector housebuilders competing for the same sites. A shortage of skills and labour is another key barrier to overcome in order to upscale to this level.”

Help to Buy has been a major factor in the new build market, accounting for 20% of all new home sales since 2015 and this reached 25% of housing supply in 2018. During 2019, the number of Help to Buy sales fell back slightly to 20% of all new homes to September 2019, however it remains a key contributor to new homes delivery.

Welsh Government has yet to make a decision on whether to follow England in extending Help to Buy beyond 2021. This creates uncertainty for housebuilders, who will currently be buying land to develop after this date. Focus will also turn to affordable housing providers, who will try and address this issue by creating alternative low cost home ownership style products.

By MARK POWNEY

Source: Business News Wales

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UK house prices end decade on a high with 1.4 per cent growth

House prices were 1.4 per cent higher year-on-year in December, the first rise of more than one per cent for 12 months.

According to research from Nationwide, after seasonal factors had been considered prices rose by 0.1 per cent in December.

Numbers of first time buyers have also continued to recover, reaching 354,400 in the twelve months to October.

The figure is more than double the 155,000 recorded in 2009 and 12 per cent below the 2006 peak.

Nationwide’s chief economist Robert Gardiner said that despite volatile economic indicators for much of 2019, the UK’s housing market had remained broadly stable.

He added: “Looking ahead, economic developments will remain the key driver of housing market trends and house prices.

“Much will continue to depend on how quickly uncertainty about the UK’s future trading relationships lifts as well as the outlook for global growth.

“Overall, we expect the economy to continue to expand at a modest pace in 2020, with house prices remaining broadly flat over the next twelve months.”

However, London prices fell for the tenth consecutive quarter, with an overall annual decline of 1.8 per cent.

Despite the continued decline, prices remain only five per cent below the all time highs of 2017.

David Westgate, chief executive at Andrews Property Group, welcomed the news:

“Christmas and the small matter of a General Election made December difficult to read but the fact that annual price growth was above one per cent for the first time in a year will be seen by many as a positive precursor to 2020.

“There is an exceptional amount of pent-up demand in the market that has the potential to drive prices higher. Add to that continued low borrowing costs and the strong jobs market and you have all the ingredients for growth.”

Jonathan Samuels, chief executive of housing lender Octane Capital, said he expected London’s performance to improve this year:

“London may have been the weakest performing region in 2019 but that may well change this year.

“The capital certainly won’t be returning to the obscene growth rates of yesteryear but it may drag itself off the bottom of the table.”

By Edward Thicknesse

Source: City AM

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What to expect from the 2020 mortgage and property market

As the new year and new decade roll in to play, we ask three mortgage and property experts about what homebuyers can expect to see in 2020.

Looking ahead to 2020 in the mortgage market, we’ve got to consider how Brexit will continue to impact interest rates and buyer‘s confidence. The UK is due to leave the European Union on 31 January 2020, after Boris Johnson’s Brexit deal was passed by MPs.

Following this, we may see some recovery in the economy and rates might start to rise steadily to maintain inflation. Political uncertainty has gripped the housing market for the past three years with many holding off buying and selling. As a result, there’s been a recent fall in mortgage lending.

However, the reassurance that comes with a five-year administration following the latest general election may encourage those prospective and current homeowners who had previously adopted a ‘wait and see’ approach to commence buying and selling. We’re hopeful we’ll see activity in the housing market increase.

With 35,010 new first-time buyer mortgages completed in the summer of 2019 we’re also hoping that the level of first-time buyers entering the market will continue to grow. It’s clear that despite Brexit, first-time buyers still aspire to get on the property ladder.

However, while the Help to Buy ISA has assisted more than 225,000 home buyers since 2013, this was withdrawn by the government in November. The government also plans to end the Help to Buy equity scheme by 2023.

For those who do want to protect themselves against Brexit-linked uncertainty, it’s worth considering a fixed-rate deal. Knowing how much repayments will cost each month will give some peace of mind. However, it’s always important to take any personal and future circumstances into account when securing a mortgage and seek advice from a broker to ensure you’re aware of the options.

‘Growing feeling that the London market has now bottomed out’

Andrew Montlake, managing director of UK mortgage broker Coreco:

With the General Election result finally delivering political clarity in relation to our exit from the EU, transaction levels look set to pick up in 2020.

Clearly a lot of the hard work around Brexit has yet to be done, but the political stability provided by a strong Conservative majority will give a lot of people the confidence to finally move home.

There’s a huge amount of pent-up demand for property and that will start to show through quite early in the New Year. In 2020, Spring for the property market is likely to start in mid-January.

With competition among lenders reaching feverish new heights, mortgage rates will remain highly attractive during 2020, giving people even more reason to buy and sell.

In recent years, the regions have outperformed the capital and while this trend may continue in 2020, there is a growing feeling that the London market has now bottomed out.

Affordability will remain a key issue for many borrowers, especially in London and the South East, and so the Bank of Mum and Dad, or Gran and Grandad, will play as critical a role as ever.

The first half of the year may see more activity than the second, as the feel-good factor caused by the General Election result slowly fades and the complexity of the trade negotiations ahead becomes clearer.

Overall, we expect average prices to rise by 2–3% during 2020, conservative growth in historical terms but significantly up on the sub-1% growth of recent years.

‘Degree of certainty may trigger flurry of activity’

More than a quarter (28%) of estate agents expect house prices to fall next year, down from 43% last year when agents were asked the same question. Over half (56%) of agents expect house prices to stay the same, according to NAEA Propertymark (National Association of Estate Agents).

A quarter think the number of sales made to first-time buyers will increase and over half (58%) expect it to stay the same. A third expect demand to decrease and a further quarter (28%) think supply will increase.

Mark Hayward, chief executive, NAEA Propertymark:

The changing political landscape throughout 2019 has undoubtedly caused uncertainty in the housing market, which in turn has affected sentiment and decision-making. Once the current political impasse is resolved and it’s clear how and when we’ll be leaving the EU, we hope there will be a degree of certainty which may trigger a flurry of activity.

Regardless of the colour of the new government, housing must be a priority. A clear strategy is needed to tackle key issues such as stamp duty costs.

Additionally, we’d like to see the government commit to bringing regulation into the sector as soon as they can in the New Year and to consider the introduction of digital logbooks to allow for a more interactive, streamlined and transparent process for home buyers and sellers.

The housing market needs reassurance from the government, which will in turn inject some confidence in the market for both buyers and sellers.

Despite the difficult year, the UK property market remains a strong sector overall, and has demonstrated a huge amount of resilience in the face of political turmoil. We hope for a more certain outlook and some stability in 2020, which is hopefully provided sooner rather than later.

Source: Your Money

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House prices treble over last 20 years

The price of a home in the UK has more than trebled since the turn of the century, new research has revealed.

The average UK price in 1999 was £91,199 and has now risen to £279,997, representing an increase of over 200 per cent. In Scotland, prices have risen by 173 per cent, from £68,959 in 1999 to £187,533.

London and East Anglia jointly saw the biggest increase, at 284 per cent. – while two local authorities within London have seen average house price increases of over 400 per cent since the end of 1999. Property prices in London are by far the highest in the UK now at £338,536. In 2000, the house price to earnings (PE) ratio – which is calculated by taking the average earnings in a region as a proportion of average house prices in that region, – sat at 5.4.

However, by the end of 2019 this has rocketed to 10.8. North of the Border, the PE ratio stands at 5.3.

Over the past 20 years, Scottish house prices for first time buyers have risen by 212 per cent – from £48,683 in 1999 to £151,847 today.

Russell Galley, managing director at Halifax, which carried out the research, said: “The rise in house prices in London since the turn of the century is well documented, and a sharp decrease in affordability just shows how quickly the market has moved.

“Conversely, there are bargains to be had elsewhere such as in the North, Scotland and Northern Ireland where prices have been slightly more subdued and properties compared to earnings are comparatively affordable. A renewed focus on housing policy and increased infrastructure investment aimed outside the South East, for example, may go some way to rebalance the differences.”

He added: “New buyers are hugely important to the overall health of the UK housing market. Despite a shortage of homes and the ongoing challenge of raising deposits, we know that the number of first-time buyers is moving in the right direction.

“Key to this is continued low mortgage rates and a wealth of options available to first-time buyers, helping to support even more step foot on the ladder.”

While every region saw houses, at the very least double, in value, residents in Northern Ireland experienced the least dramatic increase at 139 per cent, or £97,056. Richmond-upon-Thames in London has seen the smallest change in its first home house price to earnings ratio, increasing by just 0.4. However, in 2000, the area was already the most unaffordable according to this measure at 7.2.

By JANE BRADLEY

Source: Scotsman

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Agents anticipate rent increases in 2020

The majority (84%) of letting agents think rent prices will rise next year, up from two thirds (65%) last year, ARLA Propertymark has predicted.

More than three fifths (61%) think demand will continue to increase, but almost seven in 10 (68%) reckon the number of landlords operating in the private rented sector will decline next year, as they are driven out by rising costs.

Indeed, two thirds (68%) expect landlords’ taxes to rise again.

David Cox, chief executive, ARLA Propertymark, said: “For far too long, successive governments of all political persuasions have passed significant amounts of complex legislation for landlords.

“As a result, much of this year has dampened landlords’ appetites to invest and expand their portfolios, with many consolidating their assets, or choosing to step away from the sector altogether.

“This has impacted tenants most, who have restricted supply and have been faced with less choice and paying higher rents.

“Looking ahead to 2020, we hope the government recognises the importance of increasing supply for tenants and uses it as an opportunity to make the market more attractive for landlords.

“This will encourage more landlords back into the market as well as ensure that tenants, including those who are most vulnerable, are not at a disadvantage in being able to find a suitable and affordable home to rent.”

BY RYAN BEMBRIDGE

Source: Property Wire

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Boris Johnson’s Conservative election win poised to massively unlock UK property sales

The UK housing market can expect a surge in sales and rental activity across Britain after Boris Johnson’s Conservative party secured a resounding victory in the general election, property experts say.

By 5am local time on Friday, the Tories went over the threshold of 326 seats that are needed to form a government. By 730am local time, with just two constituencies to be declared, Conservatives secured 363 seats versus Labour’s 203.

While the pound hit the highest level against the US dollar (GBPUSD=X) since June 2018 and up by 1.7% against the euro to €1.2063 (GBPEUR=X), other sectors, such as property, have been heralding the Conservative victory as a massively positive.

“The property market will be one of the main beneficiaries of Friday’s decisive General Election result,” said David Westgate, Group Chief Executive at Andrews Property Group in a statement.

“Such a conclusive victory for Boris Johnson has the potential to turbocharge the property market and get it out of its current rut. The certainty that comes with a 5-year administration will create confidence and bring back the aspirational buyers and sellers that have been lacking since the EU referendum result.

“For three years the property market has been gripped by political uncertainty and deadlock but now it can finally move on. There’s every chance we are now at the beginning of a market cycle that may not peak until 2027 or beyond, with growth of around 4% a year.

Prior to the general election, Johnson as well as his predecessor Theresa May failed to get a Brexit deal through parliament due to the lack of seats to secure support.

But now, with a significant majority secured, Johnson can push through a Brexit deal or trade deals without worrying about gaining support from some politicians from other political parties.

That also means a move away from relentless uncertainty that has been stemming investment from businesses into the UK as well as freezing growth or movement across industries, like property.

Now, experts say that more clarification over the future of Britain will improve confidence and take the plunge in buying and selling property as well as allow companies to unlock investment.

“While the government’s track record of late has been fairly admirable with some 241,000 new homes delivered this year, there’s always room for improvement, and now the election dust has settled we should hopefully see an unhindered route to delivery and a positive impact on social housing given that it is linked via S106 agreements,” said Michael Stone, founder and CEO of Stone Real Estate.

“We’ve seen many big housebuilders operate on a more hands-off basis of late, largely due to a lower rate of house price growth and a fear of financial underperformance in tough market conditions. However, the new build sector has actually been the silver bullet against Brexit uncertainty with those opting to enter the fray rewarded with consistent levels of buyer demand and buoyant sold prices to match.

“With things only about to get better, the new build sector can expect a busy time over the coming year as pent up market apprehension surrounding our political landscape is relieved to a degree, and more homes are built, more homes are bought, and market sentiment receives a well-needed boost. ”

London ‘should lead the way’

Property experts, especially in the luxury housing market, say that the Tory win will stimulate the market.

“Forget political alignments for the minute, as we finally have a sense of certainty on which we can move forward as a nation, and while the curtain is far from falling on the rollercoaster that has been our European departure, we should see a fair degree of positive property market stimulation as we enter into next year,” said Marc von Grundherr, director of London-focused estate agent Benham and Reeves.

“The sluggish 1% annual rates of house price growth that have plagued the market for the last few years should now give way to a far healthier three to four percent.

“It may take time to reverse the more negative trends we’ve seen across London, however prime central London, in particular, should now lead the way with some very healthy levels of activity and price growth.”

Mark Pollack, director and co-founder of estate agent Aston Chase also emphasised the “enormous boost” on the London residential property market post-election.

“With Boris Johnson’s victory we now have a greater level of certainty surrounding the outcome of Brexit affording a great sense of relief and renewed confidence in the knowledge of a hopefully more stable political future.

“With the outcome of the election now determined and a working majority the government can now progress with the Brexit negotiations and we expect that this will be the catalyst for renewed confidence in the London property market from both UK end-users and from international investors from across the globe.”

By Lianna Brinded

Source: Yahoo Finance UK

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Number of luxury Edinburgh properties selling for £1 million on the rise

Edinburgh is behind a rise in luxury home sales in Scotland, with the number of properties selling for £1 million or more up 21 per cent year on year in the first half of 2019.

The rise in Scotland was much greater than that across the UK, which was up just five per cent in the same period, according to Bank of Scotland analysis.

Scotland’s capital city drove the increase, with sales of £1 million-plus homes up 41 per cent – 18 houses – in the first half of 2019.

Of the 94 such properties sold in Scotland between January and June 2019, only 32 were sold outside of Edinburgh, meaning the city accounts for two-thirds (66 per cent) of all these sales across the country.

Another area of growth in the high-end property market in Scotland was East Lothian, where five £1 million-plus homes were sold in the first half of 2019, up from one in the first six months of 2018.

Aberdeen sales also grew, with four luxury homes sold in the first six months of this year, up from two in the same period the previous year.

However, elsewhere in Scotland recorded falling sales in the high-end market, with two such homes in Glasgow being sold in the first half of 2019, down from five in the same period in 2018.

In Fife, eight luxury homes were sold in the first six months of this year, down from four between January and June 2018.

The number of properties that sold for more than £1 million in East Dunbartonshire also halved, dropping from six to three, while sales in East Renfrewshire fell from three to two.

Louise Santaana, head of private banking, Bank of Scotland, said: “Whilst the high-value property boom the UK experienced over the last decade has slowed over the past 12 months, sales of million-pound homes in Scotland have continued to increase, with the most transactions taking place in Edinburgh.

“The Scottish capital continues to be a sought-after destination for those looking to invest in million-pound houses.”

Last month, Sean MacMillan, Aberdein Considine Property Partner in Edinburgh said that despite fears over Brexit, sales prices were holding out across much of Scotland.

He said: “There is clearly homeowner anxiety around Brexit, but this has yet to be reflected in sales figures, perhaps due to the greater public having little idea what Brexit will actually look like.

“With another extension in place, we would expect to see these fears ease in Q4 as a new Parliament is elected. The make-up of that parliament will have a big say on what market sentiment will be going into Q1 of next year.”

Aberdein Considine’s analysis of the new build market showed that the current average new build price is now at its highest level since the financial crisis, £231,686, up 7.6 per cent on 2018. The cost of a new build home in Edinburgh is now £294,577, a 2.1 per cent rise, and both East and Midlothian stood out with respective increases of 12.2 per cent and 10.1 per cent.

Source: Edinburgh News

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Should you invest in a holiday let?

There is money to be made in the rapidly expanding holiday let market. But do your sums carefully before you buy.

Forget buy-to-let; try buy-to-holiday-let. More and more landlords are moving into buying property specifically for holiday lets, driven by the tax advantages and a less stringent regulatory environment compared with conventional buy-to-lets. Holiday lets are a small market, but they are expanding quickly. Leeds Building Society, for instance, registered a 19% increase in holiday-let mortgage applications in the first half of 2019 from the same period in 2017.

The tapering of mortgage interest relief, second-home stamp duty surcharge and more stringent affordability checks have all dented the profitability of buy-to-let investments. Regulatory changes regarding everything from letting fees and tenant deposits to licensing and minimum space requirements have had the same effect. Airbnb, meanwhile, used to offer lucrative short-term lets but users are facing stricter rules to do with tax, compliance with local laws and mortgage terms and conditions.

Tax relief for holiday lets

By comparison with buy-to-let, furnished holiday lets (FHL) offer many advantages for potential investors. HM Revenue & Customs views holiday homes as small businesses, making them liable to pay business rates instead of council tax. But a tax loophole enables many to avoid paying. This is because owners are entitled to relief on 100% of the business rates payable if their properties have a rateable value of less than £12,000.

Those whose properties have a rateable value between £12,000 and £15,000 are also entitled to relief on a sliding scale, in line with the government’s small businesses rates relief policy. (You can check the rateable value of your property at gov.uk/correct-your-business-rates.)

FHL are also exempt from the mortgage tax-relief changes that apply to the conventional buy-to-let sector. Furthermore, owners can claim capital allowances for items such as furniture, equipment and fixtures, as well as capital-gains tax relief.

Still, a property must meet certain criteria to qualify as an FHL. It must be furnished; located within the UK or the European Economic Area (the EU plus Iceland, Liechtenstein and Norway); commercially let with a view to making a profit; available for letting for at least 210 days a year; and let for at least 105 days a year. As long as you can meet these criteria, there is good money to be made. According to Sykes Holiday Cottages, which manages holiday-let properties for landlords, Cumbria and the Lake District takes the top spot as the highest-earning region for holiday lettings, with an average annual income of £13,000 for a two-bedroom cottage and £28,000 for a four-bedroom cottage. Cornwall ranks second with an average annual income of £13,000 for a two-bedroom cottage and £23,000 for a four-bedroom one.

Roll up your sleeves

The major downside to investing in a holiday let is that it’s a lot more hands-on than buy-to-let. The property will need to be maintained, cleaned and the linen changed for each let. If you don’t live nearby you’ll need local help.

The same goes for advertising the property, answering queries, checking in guests and handing over keys. Sykes Holiday Cottages, for instance, charges a chunky 20% commission for such services. Any void periods will reduce your income too. In some areas the letting periods are as short as 20 weeks a year.

Lining up the paperwork

You also won’t be able to finance this on a residential mortgage or a normal buy-to-let mortgage. Most lenders don’t support holiday lets: the wide seasonal variations in income are considered too risky. If you want to turn a property you already own into a holiday let, check if this breaches the terms and conditions of your mortgage. You may have to switch to a new one. Fortunately, a growing number of small banks or building societies offer specialised holiday-let mortgages. These include: Metro, Paragon, Leeds, Cumberland, Furness, Market Harborough, Principality, Tipton and Harpenden. You’ll need a deposit of at least 25% for a holiday-let mortgage, while a 40% deposit will give you access to more competitive rates. Your annual rental income will need to be worth 150% of the interest payments. In addition, a borrower will probably need to prove a minimum income of £25,000 a year.

Seek advice

The number of holiday-let properties allowed also varies from lender to lender. For example, Paragon has no limit, but Harpenden only allows a borrower to have a maximum of four holiday-let mortgages. Owners in Greater London are prohibited from renting out a residential property for more than 90 days in any one year, unless they have planning permission.

Given the variety of deals available, it’s crucial to do your sums before investing in a holiday let and, if you are going to take out a mortgage, seek independent advice from a reputable mortgage broker. Finally, keep in mind that you will need buildings and contents insurance; to obtain the best deal consult an independent insurance broker.

By: Chris Menon

Source: Money Week