Holiday lets, second homes and values in a restricted market

With Gwynedd Council set to make planning necessary for change of use from a main dwelling to a holiday let/second home, some initial thoughts on the possible impact on values…

Controlling the amount of holiday lets/second homes will probably mean there will be fewer of them, and fewer new ones. Scarcity can mean something becomes more valuable. However, for holiday lets in particular, the value does have a ceiling, as it has to be viable as a revenue generating asset. Holiday letting fees are market based, so you don’t have unlimited earning ability. If the purchase becomes too expensive, the return on investment doesn’t compete with other potential property investments, and so makes less sense.

For holiday lets, smart buyers will be using a valuation based on income, like you would a HMO (house in multiple occupation). Will this mean it’s going to be more valuable than the main dwelling next door? Maybe, but not necessarily. It depends on how desirable it will be to live in the house full time. Using HMO’s as an example, they will tend to be more valuable than a house in some areas (eg. student areas) but the value would probably be higher for a main dwelling use in a nice suburban cul-de-sac favoured by retired buyers.

With second homes, such as a coastal bolt hole used by the family in the holidays, again, its going to depend on the location and surroundings. If it’s in a location ideal for a second home - coastal, off the beaten track, in a resort, then it could well hold more value as a second home. But it will depend on who the second home buyer is competing against. In a remote coastal location, you’re not going to be competing with many potential homeowners, as they tend not to be very practical places to live.

So the best I can do is “maybe, it depends”. Sorry for not providing a definitive answer, but as with any valuation, you look at all the factors and weigh it up. The planning use is important, but so is the old maxim of “location, location, location”.