While enjoying holidays, I don’t doubt that many of us have wondered if it is possible to own a holiday home and as the summer comes to a close many of these ideas are put on hold for another year, well there is another opportunity. In the past holiday homes have been seen as a luxury rather than as an investment. However, new data is showing that investing in holiday homes can be especially good with certain tax benefits in the UK. Currently, for one in ten people in the UK a second home ownership is a reality – what is more surprising is that evidence suggests that just 3.4 per cent of adults let the property out. This would mean that 6.6 per cent of adults, or 3.4m people, have extra properties that they leave empty as an investment or use as holiday homes.
So, let’s look at some of the matters to consider for holiday homes, investing in the UK, and how investing in holiday homes could work for you.
Increasing staycations and UK based tourism
As a result of Brexit, the weak pound has increased both foreign and domestic tourist numbers in the UK. In 2017 39.2 million overseas visitors came to the UK, up 4% from 2016 adding £24.5 billion to the UK economy. Additionally, staycations are also increasing causing holiday rental prices, which have soared by 17.5 per cent in the South of England. With the prospect of Brexit in whatever form now a certainty, causes for this increased demand look unlikely to wane over the coming years.
Could a holiday let beat buy to let?
A recent report shows that whilst the national average yield on a holiday let is a little over 10% and that higher yields of 14% could be achieved between 2018 and 2022 this compares favourably when compared to Buy to Let investments where the average gross rental yield was 5.2 per cent in the second half of 2017, one can see that holiday lets are currently returning higher yields within the UK.
The UK vs Overseas
It is still not entirely clear how property ownership within the EU for British nationals will be affected by Brexit, some of the legislation that could change ranges from tax (non EU citizens currently have to pay 49% capital gains in France) visas, health care and securing a mortgage. One can avoid all these potential pitfalls by buying in the UK and benefiting from furnished holiday lets tax incentives. Some of the benefits include claiming Capital Gains Tax relief for traders, entitlement to capital allowances for items such as furniture, equipment and fixtures and most attractive is that the profits count as earnings for pension purposes.
Whether it’s a hut by the sea, a quaint country cottage, or chic town flat, holiday homes provide a sense of fulfilment that your main home can’t. Many of us long for a bolt hole. With mortgage rates at record lows and more holidaymakers choosing private self-catering homes as their travel accommodation choice, a holiday home investment can be both a shrewd financial and lifestyle investment.