Real Estate –
Re-locate or buy a second property?
The property market has been a fairly resilient during the pandemic. Whether simply re-locating or buying a second property, there are some important considerations for investors.
At a time when so many asset classes are hit by volatility, the property market in the UK remains buoyant. Trends were starting to emerge pre-pandemic; for example, HMOs were becoming more more popular with portfolio landlords, while buy-to-let properties were gaining popularity as an attractive investment by high net worth individuals looking to diversify.
The coronavirus pandemic is responsible for some of the shifting behaviours that continue to contribute to a more resilient housing market. These trends are stoking demand and increasing prices in popular areas.
For example, with more people holidaying in the UK, investors are increasingly turning their attention to holiday lets. Other factors that contribute to the stronger demand are linked to people who invest in a second property or even re-locate. Starting with a second home can be a good option for those who are interested in getting to know a new area but are not quite ready to take the plunge and completely re-locate. Another advantage for the owner is the option to rent or let the property for parts of the year.
There are, of course, pitfalls when buying a second home or re-locating, especially at a time when prices are rising. We’ve teamed up with Nigel Bishop from Recoco Property Search, to offer an eight-point guide.
1. Holiday home or relocation?
You need to decide how you’re going to use the property. If you intend to let the property out when you are not using it then you should ensure that your mortgage agreement allows you to do this; for existing mortgages, you might need to apply for consent from your lender. In addition, make sure that your buildings and contents insurance provides suitable cover for holiday letting.
While you might be keen to escape the city, the convenience of being able to walk to the shops at any time of day is not something that can necessarily easily be done in more rural areas! How do you feel about not having all the amenities you are used to on your doorstep and the fact that a “quick shop” may well entail an hour round trip in the car?
For some, the idea of a secluded cob barn in a National Park can be very appealing. But have you considered the reality of living there during the winter months? Is the area heavily reliant on tourism and if so, do the local amenities close during the low season or is there a sizeable community that ensures the area remains vibrant when the holidaymakers return home?
If you purchase an additional property you may incur a Stamp Duty Land Tax (SDLT) surcharge of 3%. In addition, should you ever wish to sell your second home, then Capital Gains Tax (CGT) may be payable on any increase in value. If you decide to let the property out, then income tax will be due. Do you plan to purchase the property in your personal name or as a company? Speak to your accountant at the earliest opportunity to ensure the transaction is structured in the most suitable way for your circumstances.
Consider whether the second home will limit your ability to holiday in other places, either in the UK or abroad. If you enjoy visiting the same location each year, then purchasing a home there may make sense, but will the acquisition and running costs mean you must compromise on the opportunity of visiting other locations due to the expense?
Consider the distance for family and friends to visit. If it’s a permanent home, consider daily routine – it’s very different from a holiday on the beach. What is essential to you – schooling, business, shopping etc. and can you get there easily?
In today’s world, the internet is essential both in our private and business lives. However, not all rural areas have good internet or mobile signals. There are many tools available to check both broadband speeds and mobile signal.
Whether you are purchasing a permanent or second home, the local community is an important element to most people’s lifestyle. Will you meet likeminded people to create a social life? The pace of life is dictated by the individual, not the area, but most rural areas involve more travelling to find entertainment. Also remember, just because you might not have visited a city before doesn’t mean it isn’t a bustling metropolis that might have everything you need.
Whether re-locating or buying a second home, your long-term success depends on your research, understanding what’s important to you and what your ultimate goals are. Speak to a member of our team.
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