The Effect of Second Homes on House Prices

Rising demand for second houses has caused higher prices, especially in local property hotspots such as tourist areas like the Lake District.
This can cause economic problems. In particular, local first time buyers may be forced out of the market. Therefore, they will either have to rent, or they may be encouraged to leave the area. This can cause a shortage of labour and damage local economies e.g. shops can’t get people to work. In addition, it can change the nature of local areas because it is populated by ‘visitors’ as opposed to people who live there throughout the year.

On the other hand, people who buy second homes may bring wealth and spending power into the area. It depends how long they spend in their second house. If it is only 2 or 3 weeks a year then the area will not benefit. If they rent the house cheaply to local people in the intervening years it will be less damaging.

It also depends whether supply can increase to meet the demand for second houses. The problem in the UK is that it is often difficult to build new houses, especially in these tourist areas most affected by people buying second houses.

The motives for buying a second home are often split into:

• Desire to have holiday home / 2nd house.
• Desire to make capital Gains from rising house prices. With change in fortunes of UK housing market, there may be less demand in forthcoming years.

Forecasts for Second Homes in the UK

In addition to tourist areas. Demand for second homes is also increasing in University towns, where parents can sort out accomodation for their children and have the potential for capital gains. Towns like Bradford and Manchester have the best potential for future capital gains.

Popular Areas for Second Homes in the UK

London, Snowdonia, Birmingham