Yahoo Finance More holiday homes are being repossessed, warns chief of Sykes Cottages
Holiday landlords are having their properties repossessed for the first time in years as they come under strain from high interest rates, the chief executive of one of Britain’s largest letting companies has warned.
Graham Donoghue, the chief executive of Sykes Holiday Cottages, said owners were having their properties taken over by banks after rising rates left them with crushing monthly repayments.
Mr Donoghue, who oversees a portfolio of 22,000 properties across the country, told The Telegraph: “They can no longer afford to meet their banks’ demand and they’re being repossessed.”
This happened to “handfuls” of properties last month “but that’s not something that in the six years that I’ve been here that has ever made its way to a trading meeting before,” he said.
Sykes has had to find new properties for the customers who had booked to stay in homes that were taken back by lenders.
More homeowners are likely to come under strain in the months ahead, with the Bank of England now expected to raise interest rates to 5pc before the end of the year.
Mr Donoghue said Sykes, which manages homes on landlords' behalf, has been fielding requests to raise their prices to cover the increased costs. However, the scope for higher rents is capped by demand.
It comes as Michael Gove, the Housing Secretary, prepares to launch a crackdown on the holiday home rental industry, which he claims has hollowed out communities and contributed to the housing crisis.
Mr Donoghue said: “I think there’s a misunderstanding where people think that property owners are raking in huge profits with high margins. But there are quite a lot of costs coming off the rental income.”
Earlier this month, Mr Gove launched a consultation on plans to introduce a requirement for holiday home owners to get planning permission before they can be let out. Gove has said he wants to stop local people being “pushed out of cherished towns, cities and villages by huge numbers of short-term lets”.
The Government is also planning to make holiday home landlords register their properties on a local database, which would carry an annual fee. Industry fear the cost of the new register could be as high as £1,000 a year.
Mr Donoghue said the Government had failed to understand the root causes of the housing crisis and risked destroying the local economies. He argued that letting out holiday homes helps to attract high-spending tourists to otherwise underinvested places such as Cornwall or coastal areas.
He said: “We need to make sure there are measures in place so that we don’t actually end up taking away local jobs and support for local economies to provide local homes.”
The holiday let sector contributes £27.7bn a year to UK GDP and supports 470,000 jobs, according to analysis by Oxford Economics.
Instead, he argued that second homes – most of which sit empty for much of the year – should be targeted.
“If you can demonstrate that you’re contributing significantly to the economy – paying your taxes and bringing in and supporting jobs – should they be taxed or treated in the same way as a second home, which is not contributing? I would argue they shouldn’t.
“There should be more penalties directed at second home [owners] to encourage them to contribute more.”
Holiday homes have been widely blamed for chronic housing shortages in tourist hotspots as out-of-towners have snapped up properties that would have been purchased by first-time buyers. Landlords have also moved properties out of the long-term rental market and onto short-term lettings sites.
Mr Gove’s crackdown includes plans to let councils charge double council tax on second homes. Last year, he announced new rules that have made it harder for holiday home owners to pay business rates instead of council tax, which is more expensive.
Mr Donoghue warned that extra costs for holiday home owners would push people to quit the sector, rather than raising money for the Exchequer.
He pointed to the example of Wales, where more stringent rules for when holiday let owners can qualify for business rates were introduced earlier this month.
“Wales is the one area where we are seeing more and more owners considering leaving,” he said.
For now demand in England remains high as holiday lets receive far more preferential tax treatment than traditional buy-to-lets. A quarter of properties let by Sykes were previously rental homes.
Demand from holidaymakers is also still rising, with bookings up 9pc on this time last year.
Mr Donoghue said Sykes was fielding more rental requests from people with animals than ever before after a boom in pet ownership during the pandemic.
The share of holidaymakers booking with pets has climbed by 5pc to 10pc each year since the pandemic began and they now account for two fifths of Sykes’ bookings.
“There’s definitely an element of more pets, more people will go on holiday in the UK,” Mr Donoghue said.