How do you choose where to invest? What is the driver behind your decision-making process? Are you simply following the crowd, is there something you have missed, some untapped location, some upcoming property hotspot that will be the exciting new opportunity that will make you the toast of your friends? At Flambard Williams, we believe we have found an area that is both prosperous and flourishing, one that will not be familiar to many of you as investors, but one that is rather synonymous when thinking of summer holidays, beautiful sweeping beaches along world-famous coastlines, Cornwall. Yes, Cornwall!
Up until now, this part of the world has had many little property hotspots dotted along its coastline, but there are still a few untapped locations that have gone under the radar. In this article, the ones that we have targeted are expected to be the place to buy, especially given our inside scoop on some exciting new developments that have recently been brought to our attention. Let’s take a look at the beautiful coastline of North Cornwall, in particular, the coastline next to St Ives. For a few years now there has been a ban on second home ownership for new builds in these beautiful Cornish towns, meaning prices of existing property continues to drive even higher in these areas. So how does this help with what I have referred to in this article so far? Well, we have knowledge of a new development of 175 oceanfront apartments and townhouses on a private site with its own beach next door to St Ives. In this particular location, there is no ban on second home ownership, providing an opportunity to buy in this beautiful part of the country with no restrictions. At this point, you may now be wondering how this will benefit you as an investor. Well read on and all will become clear.
In the last few years, we all know that the buy to let investor has been squeezed, with various punitive taxes, and losses of relief. With this in mind, there is beginning to be a shift from conventional buy to let towards holiday letting, in pursuit of better returns. The ONS shows that the total number of holiday lets in 2016-17 rose by 5.5%. It is no coincidence that this increase has come at a time when these new tax changes have started to take effect.
So what is the reason for this increased interest in Holiday lets? Statistics show that a good holiday let will earn more in 6-8 weeks than the same home being rented out on a long-term rental period would achieve in a year. To an investor this is now beginning to look very attractive, and although a holiday let will not be fully occupied all year round it doesn’t take much to better the returns achieved through conventional models, plus you have the added advantage that wears and tears will be at a minimum with the property occupied for less time. Also as an owner, you can use the property yourself as a holiday home, wherein a normal let you could not do this. Also remember Cornwall is now a year-round destination, hence lifting occupancy rates above the norm.
A major reason for investing in holiday lets is the tax advantages. Stamp duty is not bypassed here, as this will no doubt be a second home for many, but this is not the biggest threat to landlords profits at present, the phased removal of mortgage interest relief is. Holiday lets that are fully furnished are liable to mortgage interest relief, plus there are some added advantages in that there are capital allowances for furniture and fixtures to further lowering your costs. Add to this the fact that profits from a holiday let can count as earnings for pension purposes, and the additional CGT reliefs for traders, holiday lets begin to make a lot of financial sense.
There are obviously a few rules, and some possible obstacles to highlight, but these are easily negated. To qualify as a holiday let a property must be suitably furnished, commercially let for at least 105 days and available for let for at least 210 days in the tax year. As aforementioned, this isn’t too onerous, especially as places like Cornwall are year-round destinations. The other issue which we have touched on is occupancy rates and the fact that these do not match the long-term market. This obviously would be a problem if this led to lower revenues, but given the returns that can be made from even the shortest rentals, the returns far outweigh a traditional buy to let. So in conclusion, and in light of the above, Holiday lets are looking very attractive, and the locations that standout are those where traditionally it has been difficult to get a foothold in the market what with the banning of new second homes being sold to outsiders in key destinations in Cornwall and Devon. So what should the smart investor be looking for? New and exciting developments springing up next door to these hotspots! Snap up one of these below value properties overlooking the same beaches as their far more expensive neighbours and you could be onto a winner, in more ways than one.
So in conclusion, and in light of the above, Holiday lets are looking very attractive, and the locations that standout are those where traditionally it has been difficult to get a foothold in the market what with the banning of new second homes being sold to outsiders in key destinations in Cornwall and Devon.