Second holiday homeowners appear to be having a rough time of it at the moment. Not only are they being pressurised by their friends/family to let them stay in their holiday lets for free or at a discounted rate; they are now facing tax relief losses.
According to new reports, the government is now planning to make tax reliefs harder to access to help reduce the country’s deficit. So whereas in the past, this property investment niche offered property investors the attractive prospect of being able to offset their mortgage costs against their personal income, they will now no longer be able to do this.
And you don’t have to be a genius to see that this is going to be a harsh blow for property investors…
Nearly 25% of the 65,000 property owners currently letting their holiday homes will no longer be eligible for this relief from 2011. That is unless they ensure that their properties meet the following requirements.
For instance, their property must be available for let for a total of 210 days of the year. That is 70 days more than it is now and nearly two-thirds of the whole year!
But this is not all…
The property must actually be let for at least 105 days a year – up from 70 days – and any losses incurred from mortgage interest and repairs can no longer be offset against other investment incomes i.e. shares or savings.
Now I can partly understand why the government is being so strict. After all the country is in a bit of a mess; but this is a really harsh blow by the government to both property investors and the property market alike.
Many second holiday homeowners got into the business to keep their second homes occupied whilst they were away, and make a bit of a profit on the side. But with these new rules, they are going to have to go the extra mile to make these second properties a worthy investment…
I personally think the government needs to rethink their strategy, especially in terms of their attitude to the buy to let market.
At the moment they appear to be penalising the one niche which has made up for their own shortfalls in providing new property developments and housing for the country. And with the social housing list expected to hit the 0.5 million mark, they are only working to make the situation worse…
Something definitely needs to change. It is just a question of when will the government come to their senses.
Wendy xx