Talk me out of this idea or not (buying a property for holiday rental)

[SteamyTea]

1 minute ago, ProDave said:

Why

I meant the paperwork to sell a house, not when it has been sold.

[ProDave]

3 minutes ago, SteamyTea said:

I meant the paperwork to sell a house, not when it has been sold.

You get plenty of time to do that during the sale process.  However it all completed in a strange way, having been kept waiting for weeks due to problems on the buyers side, we had notification right at the end they were ready to complete in 3 days.  Our solicitor had a busy 3 days as he had not been given warning of this sudden rush to complete after a long wait.

[Crofter]

On 26/01/2024 at 01:51, SteamyTea said:

Has every single one of them always been owned by non locals?  Who sold these properties to the business people?

 

It's not a question of blame, it's a matter of market distortion.

Properties are bought up by money from outside the area, money that people living in that area cannot earn. You then get the current situation where the available jobs and available houses are out of sync.

 

This has been a problem in rural Scotland for decades. But in the past it was just wealthy retirees who could sell their ex-council flat in Birmingham for enough money to buy a four bedroom house up north. Local buyers couldn't compete.

 

Today you have the added problem of these properties being potentially viable investments as STLs, which distorts the markets further.

 

I imagine it's similar to the London property investment bubble but in miniature, and with predominantly English money rather than Saudi or Chinese.

[SteamyTea]

12 minutes ago, Crofter said:

It's not a question of blame, it's a matter of market distortion

Market distortion happens everywhere, it is how markets work.

 

If a local sells a house, say for £200k, and that place becomes a holiday let, then there is potential an extra £200k in the local economy.

Say that holiday let raises £20k/year in revenue, it still takes a decade before it has recouped the original amount.

But you have to add to the original £200k any money that the visitors spend locally, say another £20k/year.

 

I think the real problem is locals don't want to get extra properties built.

As you well know I am all for more house building in all places. 

I often wonder why people are so against new developments.

[Crofter]

The problem is that teachers, nurses, and even doctors are unable to find accommodation. Private sector businesses cannot recruit because whilst there is no shortage of people will would take the jobs, there is nowhere for them to live. So the economy and the community suffers.

Example- my local pub is only open a few days a week because of lack of staff. My last employer would be inundated with applicants for jobs and have to turn down promising candidates from outside the area, in favour of local school leavers who would often quit within the year when they left the island to study etc.

[SteamyTea]

1 minute ago, Crofter said:

The problem is that teachers, nurses, and even doctors are unable to find accommodation

Then one of two things needs to happen.  Build them accommodation or pay them more.

 

3 minutes ago, Crofter said:

Example- my local pub is only open a few days a week because of lack of staff.

The one of two things needs to happen, pay them more or the business owner needs to get a better business plan i.e. do they have a viable business.

4 minutes ago, Crofter said:

My last employer would be inundated with applicants for jobs and have to turn down promising candidates from outside the area, in favour of local school leavers who would often quit within the year when they left the island to study etc.

What was the rational for turning down suitable candidates, other than they were not local?

Sounds like a bad policy to me, or bad business ethics.

[Crofter]

1 hour ago, SteamyTea said:

I think the real problem is locals don't want to get extra properties built.

As you well know I am all for more house building in all places. 

I often wonder why people are so against new developments.

 

I can only speak for my own experience but I didn't receive a single objection to my planning application. People in my area are generally aware of the shortage of housing and we have enough space that most development won't adversely affect other people's views etc.

 

Building houses up here is quite expensive, plots are cheap but can be hard to develop. I spent half my budget getting the driveway and services in.

 

I would estimate that most new builds are done by incomers. Those built by locals tend to be built in land owned by the family.

[Crofter]

Just now, SteamyTea said:

What was the rational for turning down suitable candidates, other than they were not local?

Sounds like a bad policy to me, or bad business ethics.

That there was no point offering a job to somebody who did not have accommodation lined up. You're just wasting everybody's time.

It's got nothing to do with your place of origin, nationality, etc etc. You can't do the job if the nearest house you can rent is over a hundred miles away.

There is close to zero long term rental accommodation here.

[SteamyTea]

11 minutes ago, Crofter said:

That there was no point offering a job to somebody who did not have accommodation lined up. You're just wasting everybody's time.

Then the company needs to look at its medium term viability.

 

These are exactly the same things I hear and see down here, except we have 5 million visitor days a year, so a much bigger problem.

What is not a real problem is the number of holiday lets, in reality they make up a tiny fraction of the whole, though people often say that it is the biggest problem and that 'nearly all house' are holiday lets.

 

If renting, of any sort, in any area, is a problem, and it seems to be so, then the problem is lack of building, not really anything else.

Near me there was a proposal to put in 1100 houses, there was strong opposition, and it got turned down at the planning stage.

They still built 1100 houses, just dispersed around the same locality.  All that did was increase the price of building, which is not what is wanted.

I often wish they would build a new town down here, so 250k units over a few years.  If planned right it could be quite nice and not take up much room.

If each 'plot' including services took up 625 m², then that would be 160 km², 4.5% of the land area.

 

[ProDave]

Some random thoughts from how I see it, yes as an "incomer"

 

House prices here are too cheap.  That is to say is is almost impossible to buy a plot, build a house and then sell it for what it has cost.  e.g what we eventually sold our 5 bedroom house for was not a lot more than it cost to build our new 3 bedroom house, and if we had persisted with selling it 8 years ago when the market was moribund we would probably have needed to drop the price to the point the 5 bedroom house would have sold for less than the build cost of the new 3 bedroom house.  While we could sell our 3 bedroom house now for a little over the build cost, we would then not be able to build another 3 bedroom house for that money as material costs have gone up so much.

 

Coming from the south, it is laughable to hear the talk here of "affordable housing"  There are plenty of houses at the lower end of the market that a couple on minimum wage should be able to buy comfortably. 

 

It is not house prices or affordability  that drive youngsters to the city.  They simply find rural life too boring.  I don't think it will be long before our daughter leaves home and the city is where she wants to be.  I am completely the opposite, having been brought up as a child in a city, I could not wait to get out to the countryside and have no desire to go back.  I don't know how you solve that one.

 

IF we did go ahead with this holiday let plan, and at the moment it is looking very unlikely, we would be wanting to employ the services of somebody local to look after it.  I still don't know if that would be something easy to find or it we would be shunned and nobody would be interested?

 

It is the burden of regulations that is putting me off mostly, and threat (likelyhood) of more like "tourist tax" that worries me.

 

But also the property market is very skewed here, almost compressed.  Having just sold a 5 bedroom house we would like to have bought a 2 bedroom house for a lot less, but what I am finding is the one we are considering is only 1 bedroom, and on the market for half what we got for the 5 bedroom house.  That to me is just way too much.

 

[Gone West]

52 minutes ago, ProDave said:

I don't think it will be long before our daughter leaves home and the city is where she wants to be.  I am completely the opposite, having been brought up as a child in a city, I could not wait to get out to the countryside and have no desire to go back.  I don't know how you solve that one.

It will probably solve itself. My daughter lived in London and New York for a few years and then moved back to the area where she was born. It all got too busy and noisy for family life.

[Crofter]

8 hours ago, SteamyTea said:

Then the company needs to look at its medium term viability.

It's a multi national company with sites in four continents. It's viable, but the local operations can struggle to recruit mostly due to accommodation.

 

8 hours ago, SteamyTea said:

 

These are exactly the same things I hear and see down here,

I'm not aware of the situation (you're in Cornwall?) but I would hazard a guess that in a more densely populated place, accommodation shortages simply mean longer commutes. I'm an hour from the mainland, and it would be another hour and a half again before you started reaching genuine accommodation options. It's simply not possible to work here without accommodation. Oh and of course almost zero practical public transport doesn't help.

 

8 hours ago, SteamyTea said:

 

What is not a real problem is the number of holiday lets, in reality they make up a tiny fraction of the whole, though people often say that it is the biggest problem and that 'nearly all house' are holiday lets.

Another Skye poster gave some figures up thread, and it definitely is significant here. And it's worse on other islands. Back in 2005 when I was studying rural development the figures for Jura were 50% second homes.

 

 

8 hours ago, SteamyTea said:

If renting, of any sort, in any area, is a problem, and it seems to be so, then the problem is lack of building, not really anything else.

Correct, the only real way to sort things out is to build more houses. And we're not short of land. But building here is, as I've said, not cheap. Most plots are tricky to develop, services can be a good distance away, and obviously you need to sort out your own sewerage system. Materials cost more and certain services simply aren't available. What I would have given to have been able to nip in to Screwfix! It's a 250 mile round trip. If you want a specialist trade like blown cellulose insulation, good luck to you. And almost every supplier will add hefty delivery fees, that's if they deliver out here at all.

 

8 hours ago, SteamyTea said:

 

 

[Crofter]

7 hours ago, ProDave said:

 

7 hours ago, ProDave said:

 Coming from the south, it is laughable to hear the talk here of "affordable housing"  There are plenty of houses at the lower end of the market that a couple on minimum wage should be able to buy comfortably. 

I'm sure housing affordability is a problem in most places. We simply build too few houses to sufficiently depress prices.

 

But I'm really not sure that a couple on full time NMW can buy a house. At £10.42/hr and 40hrs a week, gross income is £21.6k. You can secure a mortgage on 1.5x that if it's dual income, so after tax that's £27.75k.

Even at a generous 5x multiplier that gives you a loan of less than £140k.

 

A tiny two bedroom house on my road (it's got coombed ceilings downstairs, that's how small it is) needing complete refurbishment recently went for over £160k. It's simply out of reach for anybody on a low income.

 

 

 

7 hours ago, ProDave said:

 

It is not house prices or affordability  that drive youngsters to the city. 

Different issue to the lack of available (not just affordable) long term rentals for essential workers.

 

A few years back I worked for the UHI and studied this very issue. I could look up the reports we published if anybody is interested.

It's complex, and pretty far off topic for this thread. Cultural inertia (staying= failing); lack of opportunities whether work or study; lack of affordable accommodation. Most people we interviewed hoped to return to their rural area after maybe a decade away- but only a few do.

 

 

7 hours ago, ProDave said:

 

IF we did go ahead with this holiday let plan, and at the moment it is looking very unlikely, we would be wanting to employ the services of somebody local to look after it.  I still don't know if that would be something easy to find or it we would be shunned and nobody would be interested?

It will depend on the location. A friend down in Argyll, who has been resident there for decades, couldn't get anybody to do cleaning let alone the harder to find maintenance and management. I hear it's also very difficult in the outer islands. We got lucky on Skye because we had some contacts.

 

7 hours ago, ProDave said:

 

the property market is very skewed here, almost compressed. 

That's an interesting observation. There's a minimum amount that any habitable house will go for, but you get much better value as you go up the price range. This high demand for smaller properties is probably driven by the holiday homes and the lack of alternatives like flats.

 

7 hours ago, ProDave said:

 

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[ProDave]

9 hours ago, Crofter said:

But I'm really not sure that a couple on full time NMW can buy a house. At £10.42/hr and 40hrs a week, gross income is £21.6k. You can secure a mortgage on 1.5x that if it's dual income, so after tax that's £27.75k.

Even at a generous 5x multiplier that gives you a loan of less than £140k.

Clearly prices are higher on Skye than here.  

 

A couple on min wage would earn £43347 and a mortgage 3 times that gets them £130K then add a 10% deposit  gets them to £144K they can spend on a house.  Plug that into a search on hspc.co.uk and I counted at least 50 properties they could buy.  That is way easier than when I bought my first house down south, where even earning considerably more that a basic wage, I had to borrow a higher salary multiple with a higher deposit and I struggled to find anything and I literally bought the cheapest property for sale in the county, and then struggled to pay for it for the first couple of years.

 

There are not loads more small cheap houses for sale, because it is impossible to build them cheap enough.  I don't think planning is an issue, as long as you propose building within an existing settlement, it seems quite easy to get planning here even in the countryside.

 

 

[Crofter]

2 hours ago, ProDave said:

Clearly prices are higher on Skye than here.  

 

A couple on min wage would earn £43347 and a mortgage 3 times that gets them £130K

Our back wouldn't lend based on the full combined income. Best they would do was factor in 50% of the second income.

I believe your numbers are also pre tax.

So in the real world a three fold multiplier of a couple on NMW gets you to about £83k. Which might buy you a plot up here. Of course no bank is going to lend this hypothetical couple money for a plot, and they're not going to have any money to develop it.

 

A related factor for those in NMW jobs is that they may lack sufficient job security for a bank to offer a loan.

 

2 hours ago, ProDave said:

That is way easier than when I bought my first house down south

Single or dual income?

 

2 hours ago, ProDave said:

There are not loads more small cheap houses for sale, because it is impossible to build them cheap enough.  I don't think planning is an issue, as long as you propose building within an existing settlement, it seems quite easy to get planning here even in the countryside.

Agreed. There's a minimum price to building any house. Whether it's one or five bedroom, the plot, fees, and services are going to cost almost the same. I built my cottage as cheaply as possible and half my budget went on those things.

 

Planning isn't a big issue, we've never objected to a development, nobody objected to ours. It's a small community, everybody is either related or knows everyone else. It would be pretty awkward down the pub if you bumped in to your neighbour whose plans you had just ruined.

 

Land ownership is something of an issue. Huge blocks of land owned by estates who will not sell off plots. Forestry Commission likewise. Still plenty of land but if it's nowhere near a road and services it's just not going to be viable. And such land is less likely to get PP if it's not part of a developed area anyway.