Buy to let market in Wales
Citing a local population who have been priced out of owning a property in their own country, the Welsh Government has taken the bold step of announcing an increase to the maximum level of council tax premiums for second homes, as well as new local tax rules for holiday lets – both of which could force landlords in Wales to sell property fast.
New rules will take advantage of the planning, property and taxation systems, starting with an astronomical rise in the rate at which some properties can be taxed. As of April 2023, the Welsh Government will allow its local councils to set council tax premiums for second homes and long-term empty properties to suit their area’s circumstances, and the maximum level will increase to 300%.
In addition, the criteria for self-catering accommodation that is liable for business rates is changing as of April 2023. Currently, a second home owner who makes their property available to rent for at least 140 days a year and secures holidaymakers for at least 70 of those days pays preferential business rates on their second home.
This is changing so owners will have to make their property available to holidays for at least 252 days in a 12 month period, securing guests for at least 182 to benefit from business rates. Second home owners who don’t meet this new criteria will have to pay council tax.
The move is designed to close an ‘empty homes’ loophole, which currently sees second home owners who aren’t serious about running genuine holiday accommodation that contributes to the local economy benefiting from cheaper business rates.
The changes will come as a blow to landlords in Wales who have converted their long-term lets into short-term holiday accommodation, or periodically let out second homes via Airbnb, making the most of the staycation boom when it suits them.
Unlike traditional rentals where the tenant pays the council tax bill, this cost isn’t passed on to holidaymakers. Landlords pay the bill in its entirety, perhaps trying to recoup costs indirectly in the form of higher daily or weekly accommodation charges – if the market can tolerate it.
The changes to second home taxation come at the same time as almost all restrictions on international travel being lifted and a peak in Welsh property values. As revealed by the Office for National Statistics, Wales was the UK region with the highest price increases at the end of 2021, witnessing a 13% rise between December 2020 and December 2021.
County areas that have seen the biggest house uplift in the last 12 months included the Vale of Glamorgan, Pembrokeshire, Ceredigion, Bridgend and Wrexham – five locations where house prices have risen by 17.6% or more in the last year. Unsurprisingly, the top four areas enjoy swathes of attractive coastline that have proved popular with holidaymakers.
Landlords for whom the holiday let books no longer balance may be tempted to cash in now before council tax skyrockets, property values perhaps start to dip and people dust off their passports.
LandlordBuyer has the immediate funds to purchase holiday lets and second homes in Wales. Our team can provide an instant cash offer for a single property right through to a portfolio of holiday accommodation. You can start now with our online cash offer.