‘Handout homes’ drive UK second property market

Direct Line’s UK Second Properties Index

‘Handout homes’ - properties bought by one person for the use of another - are fuelling the UK second properties market, according to the Direct Line UK Second Properties Index, launched today in conjunction with the Future Foundation.

The Index reveals there are currently 327,000 ‘handout homes’ in the UK. A quarter of these (83,000) were purchased by parents to house their children while students at university - a 26 per cent increase since 2000.

This ‘university effect’ has become a tangible driver of the UK second properties market and is set to continue, with student occupied second homes hitting the 100,000 mark by 2010.

The Index, published annually and the first of its kind to chart all UK second properties and not just holiday homes, reveals that the overall market currently contains 2.6 million second properties, up from 2.3 million five years ago. There are currently 24,809,000 homes in the UK in total1.

Categories of second property

• Buy-to-let properties constitute the largest section of the UK second property market with 1.6 million properties currently rented from private landlords (60 per cent)
• Properties inhabited by non-paying tenants such as friends, house-sitters or extended family members - 293,000 (11 per cent)
• Holiday homes - 253,000 (9 per cent)
• Pied-a-terres (bases for work) - 58,000 (2 per cent)
• Properties with no prescribed purpose/unoccupied -100,000 (3 per cent)

Second properties versus first-time buyer homes
Annual growth in the number of second properties will outstrip that of first-time purchases over the coming decade.

• By 2015 the number of second properties will reach 3.3 million, a rise of 664,000 or 25 per cent
• In contrast, fewer than 300,000 first-time buyers will enter the market annually by 20152 - this represents a 17 per cent decrease from today’s figures (364,300)3.

Holiday home hotspots
Most popular areas for holiday homes include the Scilly Isles, where ‘country getaways’ represent 25 per cent of all housing stock, South Hampshire (11 per cent), Argyll and Bute (11 per cent) and Berwick-upon-Tweed (8 per cent). (A full list of hotspots in Appendix A)

Among the reasons cited as influencing the choice of holiday home locations include:

• The natural beauty of the location (73 per cent)
• Clean air (63 per cent)
• Easily accessible from main residence (59 per cent)
• Friendly locals (44 per cent).

Second property occupancy rates
In addition, the Direct Line UK Second Properties Index reveals almost two thirds of second property owners never occupy these properties - 60 per cent rent them out and a small minority (4 per cent) leave them empty throughout the year.

The Index also reveals that those using their properties as holiday homes spend on average just seven weeks a year in these properties, although 5 per cent occupy them for more than six months.

Burglary and maintenance costs
UK holiday homes suffer around 80 per cent more break-ins than owner occupied homes, which in light of the occupancy rates is not surprising.

Buy-to-let properties are less likely to be burgled than holiday homes. One in twenty (4 per cent) holiday homes have experienced burglary in the past year, compared to 1.5 per cent of buy-to-lets.

The Index reveals average costs for maintenance of second properties vary depending on their purpose:

• Buy-to-lets - £1760 a year
• Holiday homes - £2400 a year
• Other second properties, such as residences for dependents or a base for commuting - £2420 a year.

Andrew Lowe, Head of Home Insurance, Direct Line, comments:

”The continued boom in house prices, the rise in parents buying properties for their children and the growth in tele-working are among the key drivers of the UK’s buoyant second properties market.

“Our annual Index puts the average value of a second property at £166,000, reaching as much as £249,000 in London compared to £159,000 in the West Midlands and £145,000 in Wales.

“With burglary a real risk for many holiday homes and maintenance costs reaching a high of £2400 each year, owners need to think seriously about properly insuring their second properties and treating them as important assets to be protected, as they would their main homes.”

For more information and a copy of the Index, log on to www.directline.com

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Simon Ziviani / Direct Line Press Office
0208 2562270
Email: simon.ziviani@directline.com

Notes to Editors:

The Future Foundation, consumer think tank and strategic consultancy, was commissioned by Direct Line Home Insurance to undertake its second annual Direct Line UK Second Properties Index. Data was also gathered and analysed from an omnibus survey conducted amongst second property owners by YouGov on behalf of Direct Line Home Insurance from 7-11 April 2006.

Other data was brought together from a variety of sources including the British Household Panel Study (BHPS), Survey of English Housing (SEH), English Housing Condition Survey (EHCS), the Future Foundation’s Changing Lives Research and UK Census Data.

Footnotes

1. 2001 Census data England & Wales/General Register Office for Scotland
2. Based on extrapolations that numbers of first time buyers will continue to decline at the rate they have done in the past decade.
3. Council of Mortgage Lenders 2006

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