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Second homes a market report

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					The Second Homes Market
John Gilbert, JG Associates

The second home market represents a very small proportion of the overall housing market. In 2000
an estimated 2% of households in the UK (some 500,000 households) have second homes.

The most comprehensive data available is for households in England produced by the DETR. In
1998/9 395,000 households in England had second homes, up in the past five years.

Second home-ownership is strongly correlated with income and rising house prices. The latter
increases equity in the main residence against which to re-mortgage or take out a further advance.
Few second home buyers take out a mortgage on the second home.

Abroad, the majority of second home buyers tend to be cash buyers.

Second home ownership is likely to continue to grow as a result of lifestyle and work pattern
changes together with favorable demographic trends among the key 45-64 year old age group.


Background                                                second properties. Of the 1.1 million households in
                                                          England that have more than one property, those who
There is little information on the market for second      own second homes, as defined above, total 395,000
homes in the UK. This article attempts to bring the       and account for 1.9% of households in England and
available information together for the first time in      35% of all second property households.
order to give a current overview of the market, the
prospects for the future and the opportunities it         Almost two-thirds of second homes are located in
provides for UK lenders.                                  England with the most popular locations in the South
                                                          West (19%) and South East (16%). The majority of
The definition of second homes used here excludes         the remainder are outside Great Britain. Relatively
the buy-to-let market and also properties in the          few households in England have second homes in
process of being sold as a result of inheritance or the   Scotland and Wales.
owners moving. The types of property considered are
solely houses, cottages and flats and do not include
caravans, mobile homes and park homes. Abroad,
                                                          TABLE 1: NUMBER OF HOUSEHOLDS IN ENGLAND WITH A SECOND
timeshare is a method of second home-ownership, but       PROPERTY, 1998/9
it is not covered in any detail in this article.                                                                             Location of second property
                                                                                    England     Wales Scotland Outside Unknown        Total         All
                                                                                                                   GB                        Households
Second home market size                                                                                                                      in England
                                                                                        000s     000s    000s    000s      000s        000s           %
No overall data is available on second home-              All with second       899               28        23      186            1     1,139           5.6
                                                          property (A)
ownership across the UK as a whole. The most              Main residence        565               12        10        67           -        654          3.2
comprehensive information covers the second homes         of someone else (B)
                                                          Intending to sell (C) 86                  1          -        2          -          89         0.4
market in England. This has been collected by the
                                                          ‘Genuine’ second   248                  15        13      117            1        395          1.9
Survey of English Housing (SEH) since 1994/5,             home (A)-(B)-(C)
published by the Department of Environment,               No second property   -                     -         -        -          - 19,280            94.4
Transport and the Regions (DETR). The latest period       Total known*         -                     -         -        -          - 20,419            100*
for which data is available is 1998/9. Table 1 shows      Source:   DETR Survey of English Housing
                                                                    *There are an estimated 4,000 households where it is unknown whether they have a second
the numbers of households in England who own                        property




HOUSING FINANCE NO 48    NOVEMBER 2000                                                                                                                    45
Table 2 shows estimates of the total number of                                                also experiencing buyer interest. The SEH suggest
second home households in the UK in 2000. As can                                              estimates that 117,000 households in England had
be seen, the vast majority of second home-owners are                                          second homes outside Great Britain in 1998/9. This is
English households accounting for 86% of all UK                                               27% higher than 1994/5, but below the 1997/8 high
second home-owners. However, this breakdown                                                   of 138,000. JG Associates estimate that there was a
reflects the geographic distribution of households in                                         10% increase in second home households in England
the UK rather than suggesting that there is                                                   between 1999 and 2000. (See Appendix 1)
necessarily a greater propensity among English
households to have a second home.                                                             Value of second home market
                                                                                              Overall the value of the second homes market in
TABLE 2: ESTIMATED NUMBERS OF SECOND HOME HOUSEHOLDS UK, 2000
                                                                                              England is estimated to have grown 31% between the
                                                       000                                %   first quarter of 1999 and the first quarter of 2000,
England                                               433                              86     from £19.4 billion to £25.4 billion (see Appendix 1).
Scotland/Wales                                         58                              11
N. Ireland                                             12                               3     The highest year-on-year growth is found in London
Total                                                 503                             100     (up 42%) and the South West (up 37%).
Source:   JG Associates
Note:     Assuming a 10% increase in second home households from 1999 to 2000                 The estimated 31% rise in the value of second homes
                                                                                              between those quarters will be mirrored in the value
                                                                                              of main residences and provide additional equity
Recent growth in second-home
                                                                                              which can be borrowed against. This will be
households in England
                                                                                              especially the case in London and the South East
Second home-ownership in England represents a very                                            where prices according to the Halifax rose by 30%
small market niche. In spite of the market having                                             and 20% respectively in this period.
experienced annual growth of 11% in the last two
years, to reach 248,000 second homes in England, the                                          TABLE 3: ESTIMATED VALUE OF SECOND HOME BY REGION Q1 1999-Q1
number of households with second homes in England                                             2000
has changed little in the last two decades. As a                                                                                         Q1 1999      Q1 2000      Percentage point difference
                                                                                                                                         £ billion    £ billion            Q1 1999–Q1 2000
proportion of all households in England, 1.2% had
                                                                                              North/North West                        1,904           2,190                            15.0
second homes in England in 1998/9 but this is little                                          Yorks & Humberside                      1,121           1,318                            17.6
changed from 1.1% in 1994/5.                                                                  East/West Midlands                      2,210           2,708                            22.5
                                                                                              East Anglia                             2,549           3,333                            30.8
                                                                                              South West                              3,810           5,225                            37.1
                                                                                              South East                              4,108           5,443                            32.5
CHART 1: NUMBER OF HOUSEHOLDS IN ENGLAND WITH                                                 Greater London                          3,670           5,205                            41.8
SECOND HOMES IN ENGLAND AND OUTSIDE GREAT BRITAIN                                             England                                19,373          25,422                            31.2
1994/5-1998/9 (000s)                                                                          Source:   DETR/Halifax/JGAssociates
                                                                                              Note:     See Appendix 1 for assumptions
000s
300                        In England
                           Outside GB

250                                                                                           Characteristics of second home-owners

200                                                                                           Higher income
                                                                                              Unsurprisingly, second home owners tend to have
150
                                                                                              higher than average income levels. Affluent
100
                                                                                              households are five times more likely than low
                                                                                              income households to have a second home. Research
 50                                                                                           undertaken by Eurostat in 1994 showed that 36% of
                                                                                              European households could not afford a second home
   0
          1994-95          1995-96           1996-97           1997-98          1998-99
                                                                                              while the remaining 55% do not want one or do not
Source:   DETR Survey of English Housing
                                                                                              have one for other reasons.
                                                                                              In England the link with income is also strong.
There is also evidence that an increasing number of                                           Among households with a second home in England
Britons are buying property abroad. Warmer weather                                            special analysis by the DETR of the SEH found that
and better transport has boosted this, along with the                                         the mean gross annual income of second home-
strength of sterling against the euro. France, Spain,                                         owners in England is around £45,000 while over 40%
Italy and Portugal are the most popular countries,                                            had gross annual income over £36,400 (the equivalent
although further afield, Florida and the Caribbean are                                        of £700 a week).




46                                                                                                                    HOUSING FINANCE NO 48                       NOVEMBER 2000
Age of household                                                                                  category. A significant number of second home
                                                                                                  buyers buy properties for investment purposes. These
Second home owners tend to be over 45 years of age.                                               are often non-city dwellers buying a pied-à-terre in
Around two-thirds of the heads of households in                                                   town or buying a flat for their student son or
England with second homes are in this age range and                                               daughter.
they remain the key second home owning age group.
This profile is unlikely to change in the next 20 years
                                                                                                  TABLE 4: SECOND HOMES BY REASONS FOR SECOND HOME-OWNERSHIP :
given that there will be many more households aged                                                1994/5, 1996/9
over 45 (King, 2000) - 46.2% of households in 2021                                                Base : all households based in England with second home in England
compared with 37.7% in 1998.                                                                                                                                                          1996/9
                                                                                                                                                                                          %

Type of household                                                                                 Holiday/weekend/retirement                                                           39
                                                                                                  Working/living away from home                                                        20
                                                                                                  Marital rift                                                                          5
The type of household owning a second home will                                                   Investment                                                                           26
                                                                                                  Other                                                                                22
also change, also reflecting changing demographic
                                                                                                  Total*                                                                              100
patterns. In particular there are expected to be fewer
                                                                                                  *         Percentages do not add up to 100 as more than one reason could be given
married couples and more cohabiting and single                                                    Source:   DETR Survey of English Housing 3 year average 1996/7 – 1998/9
person households.
                                                                                                  The reasons for having a second home have changed
CHART 2: SECOND HOMES: PROFILE BY HOUSEHOLD TYPE (%)                                              little over the last five years. The most stated reason
%                                                                                                 was as a holiday home/weekend cottage or retirement
60
                                                                                                  home, but over a quarter of second home households
                                                                                                  cite ‘It is an investment’ suggesting that for a
50
                                                                                                  significant minority a second home has to earn a
                                                             1994/5
40                                                           1996/9                               return. Locking up and leaving a holiday home for
                                                                                                  months, for example, may no longer be sufficient.
30
                                                                                                  Current trends in the second homes
20                                                                                                market

10                                                                                                Key factors affecting purchase decisions
                                                                                                  Factors affecting the mainstream housing market in
 0
          Couple, no
          depdendent
                        Couple, with
                        depdendent
                                        Large adult
                                        household
                                                       One female     One male    Lone parent
                                                                                 with dependent
                                                                                                  general also impact on the market for second homes,
           children       children                                                    child
                                                                                                  but more abstract individual and emotional factors
Source:      DETR Survey of English Housing 1994/5, 1996/9
Base:        All households with second borne in England
                                                                                                  also play a part in decision making.
                                                                                                  Rising house prices have allowed many to release
Together, married and cohabiting couples comprise                                                 equity from their main residence to purchase second
around 80% of those with second homes in England, up                                              homes, either buying outright or using the proceeds
from around three-quarters in 1994/5. Couples with no                                             as a deposit.
dependent children show the most increase, up nine                                                However, not all buyers need to borrow to finance a
percentage points on 1994/5 (sampling error may                                                   second home. For them the decision will revolve
account for some of this change). However, this is likely                                         around their own perception of, and attitudes towards,
to reflect younger cohabiting couples with two homes.                                             investing in property assets compared to equities or
The fact that over a half of second homes, apart from                                             bonds. Indeed expectations of rising prices may
London, are in the same region as the main residence                                              impact on this decision. However, for the vast
would seem to support this. There are however certain                                             majority in work it will revolve around their income
tax advantages for cohabitating couples regarding                                                 prospects, and the potential for lump sum windfalls in
second homes. Unmarried couples can split their two                                               the form of bonuses or the cashing in of share options.
homes between them for tax purposes, making a second
home a capital gains tax- free investment.                                                        Given that expectations of finances over the next 12
                                                                                                  months among the highest income band (£25,000+
Reasons for owning a second home                                                                  measured by GfK) has deteriorated, the likelihood is
                                                                                                  that there will be greater reluctance to take on major
Acquiring a second home is generally a luxury. But                                                commitments such as the purchase of a second home
not all second homes fall into the holiday home                                                   among this group in the near future.




HOUSING FINANCE NO 48                        NOVEMBER 2000                                                                                                                              47
CHART 3: FUTURE PERSONAL FINANCIAL CIRCUMSTANCES                                                                                                                                     the distinction as to what is the main home and what
IN THE COMING 12 MONTHS, OVER £25,000 INCOME BAND,
SEPTEMBER 1995-SEPTEMBER 2000
                                                                                                                                                                                     is a second home is eroding.
Mean getting better >0                                                                                                                                                               Compared with the 1980s there is now apparently
0.25
                                                                                                                                                                                     less of a desire to renovate poor quality
                                                                                                                                                                                     accommodation and a greater preference for
0.20                                                                                                                                                                                 properties that rival or even surpass that of the main
                                                                                                                                                                                     residence. Anecdotal evidence suggests that the
0.15                                                                                                                                                                                 average price of a second home is around £100,000
                                                                                                                                                                                     and values will have shown considerable increase this
0.10                                                                                                                                                                                 past year on the back of rising property prices. The
                                                                                                                                                                                     competition for second homes in attractive locations
                                                                                                                                                                                     further fuels price rises in those areas. Some hotspots
0.05
                                                                                                                                                                                     are desirable locations with second home-owners
                                                                                                                                                                                     now significant minorities and this can lead to
0.00
                                                                                                                                                                                     affordability problems for the local population and
          Sep-95
                   Dec-95
                            May-96
                                     Jun-96
                                              Sep-96
                                                       Dec-96
                                                       May-97
                                                                Jun-97
                                                                         Sep-97
                                                                                  Dec-97
                                                                                           May-98
                                                                                                    Jun-98
                                                                                                             Sep-98
                                                                                                                      Dec-98
                                                                                                                      May-99
                                                                                                                               Jun-99
                                                                                                                                        Sep-99
                                                                                                                                                 Dec-99
                                                                                                                                                          May-00
                                                                                                                                                                   Jun-00
                                                                                                                                                                            Sep-00
                                                                                                                                                                                     some frictions. This will be discussed in more detail
                                                                                                                                                                                     below.
Source:              GfK Great Britain Ltd on behalf of the European Commission
                                                                                                                                                                                     Overseas property purchases have reportedly become
                                                                                                                                                                                     more popular in the last year. Abbey National, active
House prices                                                                                                                                                                         in mortgage lending in France, Spain, Portugal and
During the past year house prices have been rising at                                                                                                                                Italy, reported in March that homes bought by Britons
their fastest rate for a decade with London and the                                                                                                                                  in France and Italy had risen by 75% in the year and
South showing the highest rises. House price                                                                                                                                         in Spain and Portugal by 25%.
movements in London and the South are very                                                                                                                                           The major reasons for the increase were the strongest
important in relation to the second homes market.                                                                                                                                    pound for a decade and low interest rates in Europe.
The SEH indicates 63% of second home-owners with                                                                                                                                     In addition the favourable performance of the UK
a second home in England, have their main residence                                                                                                                                  economy and rising house prices, particularly in
in London or the South East, with 21% in London                                                                                                                                      London and the south has enabled larger number of
alone. Indeed, estate agents state that the first signs of                                                                                                                           purchases. Arguably poor summer weather in the UK
recovery in the second homes market was when the                                                                                                                                     is resulting in more customers looking for guaranteed
London market picked up in the mid-90s and the                                                                                                                                       sun in southern France, Spain and Italy.
market has been very steady ever since. Given the
                                                                                                                                                                                     However, while property may appear cheaper in
rapid increase in available equity in this region this is
                                                                                                                                                                                     France, Spain, some parts of Italy and Portugal than
not totally unsurprising.
                                                                                                                                                                                     in the UK, the cost of buying can be higher.
Recent trends in second home purchases                                                                                                                                               Purchasing abroad can lead to difficulties for buyers
                                                                                                                                                                                     because of unfamiliar legal and tax regulations. This
Several trends have emerged in the past two years in                                                                                                                                 can add significantly to the cost of buying a second
the second home market in England. People seem                                                                                                                                       home abroad. Mortgage registration taxes, VAT and
willing to travel further in their desire to seek a better                                                                                                                           legal fees vary enormously in Europe and in some
quality of life away from a major city, or conversely                                                                                                                                countries the buyer has to pay part of the estate
to buy a base in a city and return to a main family                                                                                                                                  agents fees.
residence at weekends. Being within a two-hour
commute to London is still a defining radius for                                                                                                                                     Funding a second home
many London second homebuyers, preferably with
easy access to a good road/motorway or rail link.                                                                                                                                    Tenure of second homes
This is particularly true for people with weekend
                                                                                                                                                                                     Data from the SEH averaged over 1996/9 shows that
cottages.
                                                                                                                                                                                     the great majority of people (87%) own their second
Country cottages, often thatched but not too isolated,                                                                                                                               home in England. Of these, 44% had a mortgage on
and kept for exclusive use, together with flats close to                                                                                                                             their main residence, 39% owned outright and 16%
a marine/water view that are low maintenance and                                                                                                                                     rented. For households that had a second home
can be let as a holiday home are two of the main                                                                                                                                     abroad, the survey showed slightly fewer households
types of second home. Larger detached properties are                                                                                                                                 owned their second home (78%) with 15% owning a
also now being bought as a second home, although                                                                                                                                     timeshare.




48                                                                                                                                                                                                 HOUSING FINANCE NO 48     NOVEMBER 2000
There is no up to date information on how second           predominate with one leading mortgage broker
homes are funded but some data from the Harris             suggesting that around two-thirds are cash
Residential Property Index (now ceased) shed some          purchasers. This is higher still in France where only
light on the financing of second property transactions.    around 10-20% seek mortgage finance. The vast
In the period between April 1995 and March 1996,           majority are cash buyers using savings, equity in
57% were cash buyers compared with 43% requiring           property or inherited wealth.
a mortgage.
                                                           Second homes and local communities
In the period since 1996, competition in the mortgage
market has seen much product innovation. The               Growing second home-ownership and its impact on
number of lenders who offer loans on second                local communities is a major issue in many rural
properties has increased substantially with little         parts of the country. Purchases of second homes by
difference charged by many lenders for first and           people living outside of the community add to
second home mortgages. In addition greater                 pressures on local housing and alter the services
opportunities to remortgage in the past three years        required to support local communities. The pressure
has created alternative ways of funding second             on rural housing is fuelling demands for tough
homes.                                                     measures to curb ownership of second homes in
                                                           Britain. Among the measures proposed are a
Little data is available in relation to mortgage lending   scrapping of the 50% council tax discount for second
for second homes but there is some anecdotal               home-owners and having to get special permission to
evidence that the market may be bigger than                buy into an area as a second home-owner.
commonly realised. The position of second homes
owned overseas further complicates the difficulties in     In some areas the effect of second home purchase has
sizing the lending market, as using equity in the main     been to raise local house prices so that the local
UK residence to fund overseas property is again a          community find it difficult to afford houses in their
suggested method by mortgage intermediaries.               locality. One scheme to enable locals to have the pick
                                                           of properties coming on to the market is used in
One lender involved in this market reported that the       Shropshire. All homes are made available only to
average loan to equity on holiday homes is around          local people for the first three months on the market.
50-60% with the average holiday home valued at
some £100-120,000.                                         Recent research (Tewdwr-Jones and Gallent)
                                                           examined the growth of second home-ownership in
Lending on second homes                                    several rural areas in Europe including north Wales
                                                           and the highlands of Scotland. The authors did not
Buying in the UK                                           believe that trying to tinker with the type of demand
                                                           for housing would work. They believed that only by
Some 70 institutions, a mix of institution type size       increasing supply would tensions be lifted. However,
and geographic location, offer mortgages for second        this would not be easy, particularly given the
homes. While there are a number of specific second         restrictions on green belt development. To take
mortgage schemes, from discussions with several            account of problems of pricing locals out of the
providers relatively few are used. Increasingly the        market, planning consent for rural developments may
major lenders will lend for holiday homes on the           in the future need to be conditional on builders
same basis as for a main mortgage. Differentiation         incorporating a quota of low-cost houses for rent in
between lenders occurs between loan to valuation           their schemes to link in with local transport and
ratios and income multiples.                               employment needs.
As is the case for main residences, there are a number
of construction types not attractive for lenders -         Demographic change
timber frame properties, unusual brick and mortar          Given that second homes are predominantly owned
properties, pre-fabs and over three-storey marina          by the over 45 age group, an indicator of potential
style properties where difficulties with freeholds can     second home growth is the proportion of the
arise.                                                     population in the 45 and over age bracket. Between
                                                           1996 and 2021 the largest growth in the population
Buying overseas
                                                           will be among 50-64 year olds (+46% see Table 5),
No aggregate data is readily available giving details      predominantly baby boomers born in the 1950s and
of how second homes are purchased abroad.                  1960s. Many of these will be in the empty-nester/
Anecdotal impressions suggest that cash buyers             pre-retirement phase of life.




HOUSING FINANCE NO 48    NOVEMBER 2000                                                                             49
TABLE 5: AGE STRUCTURE CHANGES IN THE POPULATION PROJECTIONS                                          lending tap being turned off. Few banks will lend
FOR ENGLAND 1996-2021, 000s
                                                                                                      money for investment in equities but almost all of
                                 1996                2021 Increase 1996 – 2021 Increase 1996 – 2021
Age                              000s                000s                 000s                   %    them have fought for business in the buy-to-let
15-24                        6,054               6,213                  158                     3     property market, and second homes may become a
25-34                        7,922               7,072                 -851                   -11
35-49                       10,230              10,030                 -200                    -2     further market niche to be developed.
50-64                        7,686              11,190                3,504                    46
65 and over                  7,752              10,255                2,502                    32
20 and over                 36,740              41,743                5,003                    14     Future growth of second homes abroad
All ages                    49,089              53,715                4,626                     9
Source:   ONS 1998-based National population Projections PP2 no 22, The Stationery Office, London     Many of the factors affecting future second home
                                                                                                      developments in the UK, apply equally abroad. The
Growth is also projected to be strong among the                                                       one main exception is the climate which is a major
retirement ages of those aged 65 and over, up 32%                                                     driver for second home purchase abroad. The value of
between 1996 and 2021. Overall there are projected                                                    sterling relative to other currencies is a major factor
to be between 5.7 million and 6 million more people                                                   and as city estimates suggest that the euro will
aged 50 or over in 2021 than in 1996.                                                                 strengthen against sterling in the coming years there
                                                                                                      may be some falling off in the demand for second
In terms of households the numbers of empty-nester                                                    homes in the euro area. But hot spots in areas popular
and pre-retirement households aged 50-64 is set to                                                    with second home-owners from abroad will continue
increase by 2.3 million households between 1996 and                                                   to move ahead. Demographic trends throughout the
2021. Of these about 0.75 million are couples of                                                      major western European countries are fairly similar
which around 550,000 are cohabiting.                                                                  with the baby boomer generation dominating the
The impact of these changes in population and                                                         second home market and increasing competition for
household composition on the number of second                                                         property in the better resorts. This may be fuelled by
home households could be considerable. Much will                                                      greater awareness as a result of the Internet and
depend on whether more households choose and/or                                                       digital television catering to affluent Europeans.
are able to release equity from their main residence                                                  Fuel prices will act as a constraint on the growth of
and house prices continue to appreciate steadily in                                                   the second home market curtailing marginal visits to
the coming years. For the baby boomers                                                                domestic and overseas properties as the cost of travel
contemplating retirement, property will in many                                                       becomes too expensive. For holiday home-owners
cases be bound up with a choice of lifestyle. A                                                       periods of transport disruption in the next year will
second home will be part of that lifestyle be it close                                                affect bookings and could lead to mortgage
to a golf course or yachting marina or in a smart city                                                repayment difficulties if no budgeted cash inflows
centre pied-à-terre.                                                                                  materialise. In a more difficult economic climate,
For lenders this represents a possible opportunity to                                                 lenders may need to address what larger additional
develop targeted equity release products, especially                                                  borrowings by way of remortgage/further advances
for households close to the end of paying off their                                                   are used for, in order to monitor the second home
mortgage, yet who may be interested in a second                                                       market more closely.
home. The latter can generate some extra income, has
the chance of capital appreciation, and can receive tax                                               Conclusions
relief on mortgage payments if let out as a holiday                                                   The number of households in England with second
home.                                                                                                 homes currently total nearly 400,000 with this
In view of the large increase in numbers among the                                                    number set to increase on the back of favourable
45-64 age group in the coming years their attitudes                                                   demographic trends, rising personal disposable
towards property will be a crucial one, particularly                                                  incomes and the investment potential property
their willingness to leverage their property equity to                                                provides. Having a second home abroad may
improve their lifestyles. This could have a major                                                     increasingly be a lifestyle decision tied in with a main
effect on the second homes market. Buying a holiday                                                   leisure interest such as golf or sailing.
home or city flat that can be let out under the
                                                                                                      Rising house prices is a major driver in funding the
Furnished Holiday Homes scheme can provide an
                                                                                                      second home market. Households in London and the
attractive supplementary pension fund with tax relief
                                                                                                      South East have particularly benefited from the ability
on the mortgage.
                                                                                                      to use increased equity in their main residences either
For the second home buyer, using mortgage funding,                                                    wholly or partly to fund second home purchases
the cost of mortgage servicing is currently favourable                                                normally by remortgaging or by way of a further
and there seems little imminent prospect of the                                                       advance. Rising house prices have also increased the




50                                                                                                                  HOUSING FINANCE NO 48     NOVEMBER 2000
value of second homes. As a result it is estimated that   intervention through tax penalties on second home-
the value of second homes in England total some £25       ownership or a sharp reversal in the fortunes of the
billion, up from £19 billion in March 1999.               services sector, the second home market is likely to
                                                          continue to see steady growth both in the UK and
For mortgage providers most opportunities will be
                                                          abroad aided by the improvement in transport links,
competing for remortgage, further advance and new
                                                          especially low cost air travel. As such the second
mortgage business from outright owner-occupiers,
                                                          home market becomes part of the broader leisure
seeking to raise funds for a second home purchase.
                                                          industry creating a wide range of opportunities for a
No clear picture can be obtained of the use made of
                                                          range of service industry providers.
equity release funds. Anecdotal evidence suggests
that up to around two-thirds of buyers abroad are
                                                          References
cash buyers, with many using remortgages.
Some 70 lenders, according to a recent Moneyfacts         King, D. (2000) ‘Projected Patterns of Population and
survey, indicated they offered second mortgages, in       Household Growth for England 1996-2021’, Housing
many cases on a similar basis to a first mortgage with    Finance, CML, London
differences found among income multiples and loan         Garratt, D. (2000) ‘Consumer Confidence and UK
to valuation ratios. Specific second-home mortgage        House Price Inflation’ Housing Finance, CML,
schemes are available, although there has been very       London
little demand. Mortgage brokers play an important
role in the second home market although funding is        Tewdwr-Jones, M. and Gallent, N. (2000) Rural
more often by remortgage. The average value of a          Second Homes in Europe, Ashgate Publishing Ltd
second home bought in England is £100-120,000
                                                          Green, A.E., Hogarth, T., and Shackleton, R.E.
with a loan to valuation ratio of 50-60%.
                                                          (1999) ‘Longer Distance Commuting as a Substitute
The use of the Internet will increase the awareness       for Migration in Britain: A Review of Trends, Issues
and interest of people in residential property and is a   and Implications’, International Journal of
valuable tool in searching for property and local area    Population Geography, 5, pps 49-67, 1999
information away from home. Short of government




HOUSING FINANCE NO 48    NOVEMBER 2000                                                                            51
                    APPENDICES                          APPENDICES
Appendix 1                                                      ESTIMATED REGIONAL SPREAD OF SECOND HOMES IN ENGLAND,
                                                                1999-00*
                                                                                                                                                            000s
The following assumptions were made in estimating
                                                                North                                                                                       37
the value of the second home market:                            Yorkshire and Humberside                                                                    23
                                                                Midlands                                                                                    37
1. A growth rate of 10% of second home-owners in                East                                                                                        41
                                                                London                                                                                      35
   England from 248,000 in 1998/9 (tax year) to                 South East                                                                                  44
   273,000 in 1999/00                                           South West                                                                                  56
                                                                Total                                                                                      273
2. Using the 1996-99 regional spread of second                  * based on 10% growth
   homes in the SEH as the basis for estimating the
   regional spread of further second home growth
   (see Appendix 2)
                                                                Appendix 3
3. Basing the second home price per region on the
                                                                HALIFAX REGIONAL STANDARDISED INDICES OF HOUSE PRICES
   standardised average all house type price in the
                                                                                                                   March 1999                       March 2000
   Halifax quarterly House price index for Q1 1999              North                                               53,890                           56,706
   and Q1 2000 (see Appendix 3)                                 North West                                          58,016                           61,653
                                                                North*                                              56,000                           59,200
                                                                Yorkshire & Humberside                              53,382                           57,301
Appendix 2                                                      East Midlands                                       61,494                           68.147
                                                                West Midlands                                       68,138                           78,806
REGIONAL SPREAD OF SECOND HOMES IN ENGLAND, 1996-99             Midlands*                                           65,000                           73,200
                                                                East Anglia                                         68,901                           81,309
                                                         000s   Greater London                                     114,666                          148,676
North                                                     31    South East                                         102,683                          123,733
Yorkshire and Humberside                                  19    South West                                          76,223                           93,284
Midlands                                                  30    Wales                                               57,697                           62,940
East                                                      31    Scotland                                            59,956                           64,671
London                                                    28    * Two regions combined for calculation of second home values as DETR samples combined for these
South East                                                36      regions
South West                                                43
Unknown                                                    6
Total                                                    224

ESTIMATED REGIONAL SPREAD OF SECOND HOMES IN ENGLAND,
1998-99
                                                         000s
North                                                     34
Yorkshire and Humberside                                  21
Midlands                                                  34
East                                                      37
London                                                    32
South East                                                40
South West                                                50
Total                                                    248




52                                                                                      HOUSING FINANCE NO 48                         NOVEMBER 2000

				
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