The race is on. In fact, it’s been on for several weeks – ever since it became chillingly clear that Chancellor Rachel Reeves is likely to hike capital gains tax (CGT) in her Budget on October 30.
Fearful of what’s to come, many second-home owners are now desperate to sell before Reeves gets to her feet in the House of Commons and spells out her plans, which could easily come into effect at midnight that same day. And who can blame them?
Currently, CGT is payable on the profit from the sale of assets, such as a property that is not a person’s main home.
CGT on second homes and rental sales is 18 per cent for basic rate taxpayers and for higher and additional-rate payers it is 24 per cent on any gains, but in what is being construed as Labour’s war on second homes, that rate is likely to rise in line with income tax at 40 to 45 per cent. That’s almost double.
Time running out: Author Tilly Bagshawe has put Brook House, her second home in the Cotswolds, on the market for £2.85m
Throw into the equation how many local authorities are being allowed to charge double, and in some places such as Pembrokeshire in Wales, triple council tax on second homes – as from April next year – and it’s no wonder there’s been a ‘surge in properties up for sale in holiday hotspots’, according to Rightmove.
And Money Mail can reveal second-home owners and buy-to-let landlords trying to sell up are slashing prices by tens of thousands in a desperate bid to escape the market.
Estate agents are under pressure. ‘There has been a significant increase in properties on the market which currently are owned as holiday homes,’ says Josephine Ashby of John Bray Estate Agents, based in Rock and covering North Cornwall.
‘Factors such as increased Capital Gains Tax, council tax rises and potential changes to inheritance tax have encouraged many vendors to market now ahead of the budget.’
Among regions most affected by this property turmoil are parts of Hampshire, Sussex, Kent, Devon and Cornwall, which are traditional hotspots for second homeowners and saturated with properties.
Typically, prices are being cut by 10 per cent, especially in the £500,000 to £700,000 market.
Katie Burrin, director at estate agent Bay Tree Estates in Felpham, West Sussex, says: ‘The new Government has stopped many prospective buyers in their tracks.
‘They have decided to sit on their hands and wait until after the Budget before deciding what to do.’
House prices rose by 4.7 per cent year-on-year in September, according to figures from Halifax. But experts believe the figure masks the price falls in pockets of the market, such as second home and buy-to-let properties.
Burrin says: ‘This time last year the market was just as busy – but prices were more robust because people were less concerned about the cost of buying a home.’
She adds: ‘Meanwhile the prices of some highly sought-after second homes and buy-to-let properties have fallen by as much as 10 per cent in recent months as sellers try to attract interest in their properties.’
There’s a growing consensus that raising CGT and allowing councils to penalise second-home owners is going to do anything but ‘grow the economy’, a refrain that’s beginning to sound more and more shrill the longer Sir Keir Starmer and his gang are in charge.
What’s likely is that an increasing number of people will buy second homes outside Britain if they feel the government, at local or country level, is against them.
What’s more, with rental properties already in short supply, the widespread sale of second homes could exacerbate the housing crisis, pushing rents even higher as demand continues to outpace supply.
Paul Hayhow, head of new business at Haslams Estate Agents in Reading says: ‘Many clients are electing to sell their properties now. For some, these homes were intended to fund their retirement and the idea of surrendering up to 45 per cent of their capital growth is a harsh reality that wasn’t part of their retirement strategy.’
Move: Ian and Jane Roberts are selling their cottage in Totnes, Devon, for £285,000 despite it being a much-loved family holiday home
War on second homes is particularly prevalent in Scotland where anyone renting out their property now has to buy a licence to do so, which can end up costing thousands of pounds once you factor in new rules about electric sockets, fire alarms and other related charges.
The fact is that second-home ownership in Britain stands at only 3 per cent of the housing stock, compared with 10 per cent in France. And it’s even higher in countries such as Norway and Sweden.
That figure will decrease further in Britain following speculation about what’s being called Reeves’s ‘horror budget’.
The question now for many desperate second-home owners is whether they can complete their sale before October 30.
It’s not only holiday-home owners with plush seaside villas who will suffer if CGT is raised.
Eleven years ago, Ian Roberts and his wife, Jane, from Cobham, Surrey bought a barn-conversion second home for £225,000 six miles outside Totnes in Devon.
‘I was brought up nearby in Torquay so it was a way of keeping in contact with friends from my school days,’ says Ian, 51, who is a finance director.
‘It’s in a quiet location on a farm and my two daughters, Emma and Sophie, have been able to play and run free there.’
Garden Cottage was structurally sound but it needed ‘freshening up’ decoratively.
So, Ian spent several thousand on new curtains, blinds, heated towel rails and carpets as well as a new glass roof for the conservatory.
It has proved to be a good investment. The whole family loves visiting Totnes, with its wine bars, boho coffee shops and ‘alternative’ vibe, as Ian puts it.
He lets the cottage to holiday makers occasionally and visits with his own family at least five times a year. Its main benefit has been that it is close to the home of his 82-year-old mother.
Now, however, as the two girls are in their teens and with exams looming, Ian can foresee the family using the cottage less often. Consequently, he has it on the market for £285,000 with Marchand Petit estate agents.
If CGT rates rise, as they are expected to do, Ian faces a steep tax bill, which he thinks would be grossly unfair.
‘It’s terribly disappointing that the government has so little understanding of the benefits of holiday homes,’ says Ian.
‘By letting the cottage we provide a service. Some people don’t like or can’t afford to stay in hotels, and guests bring considerable income to the area.
‘The cottage also helps our children keep in touch with their grandmother.’
Over in West Sussex, among Felpham properties on the books of Bay Street Estates – which Katie Burrin says offer great value – is a £525,000 four-bedroom villa by the sea.
Listed in August for £550,000, dropped to £525,000 a month later, it is now open to offers of £500,000 for a quick sale. One of the bedrooms has bunk beds for four, making it an ideal holiday pad.
Nigel Fitzsimmons of the estate agent White & Brooks, which has branches in Bognor Regis, Chichester and Gosport, says: ‘It’s a great time to buy because the market is saturated with properties – put up for sale by owners worried about how the Budget might leave them worse off.
‘This opens up an opportunity to have the pick of the crop and negotiate the price down for best price.’
Reduced: A seaside semi in Felpham, West Sussex has been reduced by £50,000 to £500,000. One of the bedrooms has bunk beds for four, making it an ideal holiday pad
It’s the same story with Luke Payne, at the Canterbury branch of Kent-based estate agent Miles & Barr, who says areas such as Canterbury, Broadstairs and Ramsgate ‘look great value’ as pre-Budget jitters have seen prices fall by as much as ten or 15 per cent.
He points to properties such as a four-bedroom detached home in Cliffsend, near Ramsgate, as an example.
The property was sold for £730,000 in October 2022 but listed for £699,950 this April.
Then after Labour came into power on July 5 the price dropped to £670,000. Over in Hampshire, Kevin Swanney, at estate agent Pettengells is selling a three-bedroom bungalow in the village of Hordle for £700,000 – still available despite being reduced from £770,000 in August.
Sally Collings, branch manager at estate agent Miller Town & Country in Tavistock, Devon, believes a general rise in house prices across the country hides the true picture.
She says: ‘Properties priced around the £200,000 mark are flying out the door – with many people wanting to downsize to escape the rising cost of living and hike in fuel bills.
But for homes costing between £500,000 and £750,000 there is a hiatus as buyers pause to await the outcome of the Budget and cross their fingers for a further base rate fall.
‘It provides a great buying opportunity as there is still a strong supply of people wanting to sell – particularly those who own buy-to-let property or second homes by the sea, Some are open to negotiation to drop prices by thousands of pounds because they are concerned about how they will survive new Landlord rules and expected tax hikes coming in.’
Devon hotspots where you might pick up a seaside bargain include Salcombe, Totnes, Newton Ferrers and Modbury.
A five-bedroom detached family home in Salcombe with room for a boat – just a few minutes walk from the beach – has a guide price of £899,950 with estate agent Luscombe Maye after dropping it from £925,000 in September.
In sought-after Totnes the same agent dropped the price of a three-bedroom detached cottage by £20,000 to £515,000 earlier this month in a bid to get a sale before the Budget.
Best-selling author, Tilly Bagshawe, 51, has long been a fan of the Cotswolds, particularly the charming village of Lower Slaughter.
She and her American husband Robin Nydes, 67, a businessman, used to spend summer holidays and weekends there and bought the six-bedroom Brook House 12 years ago.
‘It was an idyllic spot for the boys when they were young,’ says Tilly, a mother-of-four, whose best-known novel is Flawless. ‘The river is quite shallow and they could go off with their nets fishing all day. It was wonderfully old-fashioned.
Later, in their teens, there was lots to do socially in the Cotswolds and the house was big enough for their cousins to come and stay.’
Hotspot: The picturesque town of Falmouth in Cornwall (pictured) has long been popular with second home owners
Tilly, whose sister is the author and former Conservative MP Louise Mensch, has used Brook House herself regularly in a professional capacity – it’s a model setting for her Swell Valley series – and she also lets it out, making £160,000 in rentals in the last tax year.
Now, however, she and Robin spend increasingly long periods of time between their homes in London and Los Angeles, so, they have put Brook House on the market for £2.85 million with agents Butler Sherborne.
The Bagshawes stand to make a profit of about £500,000 on the sale. At the current rate of 24 per cent, they face a tax bill of £118,560. At 45 per cent it would be £222,300, that’s an increase of £103,740.
Tilly believes that this taxation hike will discourage people from running holiday lets, severely impacting rural communities.
‘Holiday cottages have been part of life in the Cotswolds for generations,’ she says. ‘The same renters come back year on year and they are welcomed.
‘Renting a holiday cottage is a lifestyle thing – it’s a great way of keeping families together.
‘Farmers have been encouraged to diversify and convert their outbuildings into holiday lets then they get hammered for it,’ she says. ‘I know many restaurateurs who depend on trade from visitors and they will be in danger of losing their businesses if this goes through.
To say that this will bring more affordable homes onto the market is absurd. I can’t see a first-time buyer being able to afford Brook House or others like it.’
In the Berkshire village of Mortimer, Lime Tree Cottage is just across the road from St Mary’s Church.
The attractive three-bedroom house is a four-minute walk to Mortimer station, from where there are regular trains to Reading and onward to London Paddington, all within 45 minutes.
The owner, who wishes to remain anonymous, lives in London and needs to sell Lime Tree Cottage to help pay off the mortgage on his main home before he retires.
‘I wasn’t in a particular rush to sell but then it became obvious that the new government wanted to take advantage of any low-hanging fruit such as second-home owners,’ he says.
Lime Tree Cottage presents itself as the ideal ‘doer-upper’, a chance for new owners to tailor it to their specific needs, and it comes with a pretty garden at the back and off-street parking at the front.
Initially, it was on the market for £400,000 with Haslams, in Reading, but is now being sold at auction with a competitive guide price of £300,000 in the hope of making a quick sale before the Budget.
‘It’s not a nice feeling when you sense that the government is coming after you. What I find unacceptable is how Sir Keir Starmer and Rachel Reeves are justifying all these financial raids by banging on about a £22 billion black hole in the nation’s finances – and constantly talking the economy down.
‘Far better, surely, to let people keep their money and spend it as they see fit. Second homes are good for growth and form a vital part of people’s financial planning.
‘This government seems determined to perpetuate uncertainty – and has an unhealthy dislike of anyone who owns a second home.’
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