You’re not the only one if you want a home away from home. A second home doesn’t mean a home you let produce rental income but a property used as a holiday or weekend home, providing an escape whenever the mood takes you.
In 2018-19, 772,000 households reported having a second home, according to the English Housing Survey, primarily occupied by family/friends or used as a place to stay while working away from home. Since 2008-09, there’s been a steep rise in the number of second homes in the UK and a matching decrease in European and non-European countries.
Before you join the club, prepare for long-term responsibilities.
Second home ownership is more prevalent in London, with the most active additional home market in Kensington and Chelsea. The higher propensity to own a second home is driven by wealthy homeowners seeking to increase their private portfolios rather than investing in buy-to-let opportunities.
The question now is: is buying a second home in London a good idea? We’ll make our case, and you can decide the verdict.
There Are Many Benefits to Owning a Second Home in London, Including
Getting Access to London’s Prime Property Market
London is one of the most expensive cities in the world, meaning it enjoys fantastic capital appreciation and high real estate ROI. Your hard-earned capital can buy you a share in a prime property market, so owning a second home is satisfying and lucrative alike.
There’s a high demand for property in London and a shortage of supply, which translates into the fact that house prices are frequently on the rise. Co-ownership has become a viable path to second home ownership. Family members or groups of friends can come together to purchase a holiday or weekend home.
Taking Advantage of The Rich History and Culture
The capital of the UK has a long, rich history that stretches back to ancient times. It’s the seat of the government and the country’s financial centre, having always been a densely populated and wealthy area.
From Shakespeare to Buckingham Palace and the Beatles, London is an influential culture centre, carrying broad mindsets and never interrupting other’s business.
Unfortunately, the capital seems expensive and inaccessible to Brits outside of London. It’s hoped that London finds better ways to share its success with the rest of the nation.
Saying Goodbye to Money Wasted on Rentals
London offers numerous opportunities for fun and relaxation, regardless of the location, so if you enjoy its bustling energy, owning a second home makes perfect sense.
Say goodbye to renting and hello to home ownership. You’ll have a place you can call your own, where you can build relationships with the community and feel at home. It must provide a pleasant and comfortable stay to indulge in your favourite activities.
If you love cooking, your second home must have a large working island, a social area, kitchen corner units, and ample storage space. A second home means a new chapter in your family’s life, a fresh new start.
Essential Things to Consider Before Buying a Second Home
If you don’t visit London often, you can rent the property, so it can be a good source of income as long as the rent charged is higher than the mortgage repayments.
Maybe you’re purchasing a second home just for your benefit, and in that case, you’ll be increasing your outgoings. There are certain aspects that you’ll want to take into account before buying a holiday or weekend home, as follows.
Can You Afford It?
All the financial responsibility falls on your shoulders, so buying a second home will stretch your finances. As a rule, mortgage lenders have stringent requirements; if you’ve paid off the mortgage on your main home, you’ll be just fine.
A bigger mortgage deposit means you’ll have paid off more of your second home in the beginning, meaning lower monthly repayments. Your debt-to-income ratio will be a considerable factor as far as holding two mortgages is concerned, so you may find it challenging to make ends meet. Of course, there are many other factors to consider, so it’s best to reach out to a financial advisor.
How Will It Affect Your Taxes?
If you purchase a second home, you must pay a 3% Stamp Duty surcharge on top of the standard Stamp Duty rate. You’re only exempt from Stamp Duty if you purchase a property valued under £40,000 or the share of the property you buy is valued under £40,000. If you sell your primary residence within three years of buying a second home, you can get a Stamp Duty refund.
Needless to say, some tax implications depend on what you use the second home for. You must pay income tax on any profits if it’s a furnished rental home.
Who Will Maintain the Property?
Keeping the property in prime condition can be challenging when your vacation home is across the country.
Ask a neighbour to keep an eye on the house when you’re not there. If you want to rent the property to build wealth and save for retirement, hire a property management service provider.
The professionals will do everything from arranging landscaping to housekeeping services. Houses remain in tip-top shape when used, so don’t let your second home remain vacant for too long. Regularly using heating and cooling and water systems, not to mention occasionally using the appliances, keeps everything running smoothly.
Wrapping It Up
A second home can offer much-needed respite from daily life, even if it comes with costs and challenges.
Don’t be overwhelmed by the bureaucratic processes behind house buying. Indeed, real estate transactions are complex, but you can avoid errors and omissions by working with a professional. When it comes to furnishing and decorating the second home, don’t overdo or underdo it.
For example, if you don’t want to lift a finger in the kitchen, have all the basics – coffee maker, microwave, air fryer, etc. Finally, have a plan for the home. How will you maintain it?