The market for second homes expanded rapidly in the early 2000s, fuelled by readily available credit and an expanding tourist sector. Low-cost airlines also opened up previously unserved regions to buyers, especially the British, who drove the market in those years.
When the global financial crisis hit in 2007, national housing markets suffered, personal finances were squeezed, and demand for second homes fell. Now, growth has resumed, but the sector looks very different from before. These are the nine trends shaping the second-home market today.
1. A digital revolution
Online short-let rental services have expanded rapidly and are increasingly competing with the hotel sector. Instant booking, mobile platforms, feedback and rating systems make these services appealing to tech-savvy millennials, time-poor business travellers, and globally mobile students and professionals. This has helped diversify and broaden demand beyond the traditional holiday rental market, providing more opportunity for owners to let on a full- or part-time basis.
2. Investing for income
In a low interest rate environment, investors are seeking out income-generating assets. Today’s second home buyers need properties to work for them financially and, increasingly, to make a profit. The majority of second home buyers today purchase with the intention of renting out the property in some form. The proportion of buyers buying a second property solely for their own use has fallen from more than 90% in 1971 to less than 40% today.
3. Demand for stats and services
Almost half of second-home owners want their property to at least earn its keep when they are not using it. Buyers in this category need to know about achievable rates, letting voids and operating costs ahead of purchase. They are an increasing source of demand for letting and management services (digital and conventional), as well as on-the-ground hosting, hospitality and housekeeping services.
4. Changing finance
Demand for smaller, cheaper properties has grown since 2013, as diverse buyers have returned to the market. Immediately after the global financial crisis, the market retreated to prime, established locations and was led by wealthy, capital-rich individuals with little or no reliance on mortgages or other borrowing. The gradual easing of credit conditions since has led to a modest resurgence of borrowing, but nothing to rival the early noughties.
5. Apartment expansion
As lending opens up again, and at record low rates, the lower tiers of the market are expanding. In 2017, 37% of sales were properties priced under $200,000. Based on our survey sample, the average price of a property purchased last year stood at $291,000 – 37% lower than a decade before. This has gone hand-in-hand with the expansion of the apartment market, which accounted for 34% of the properties purchased in our sample during 2017, compared to 26% in 2007.
British buyers dominated the European second-home market before the global financial crisis, accounting for 29% of buyers in 2007 (based on our sample). Today, many more nationalities are participating in the global second-homes market. In 2017, the British share dropped to 17% as the demand base diversified. British activity is now back to where it was a decade ago, but other national groups have risen faster. Dutch purchaser numbers have doubled in that period, for example.
7. Spain resurgent
Spain has grown in appeal as its housing market recovery continues. It accounted for just over 21% of all sales within Europe last year, up from its low point in 2011, when its share was just 11%. Back on the radar for many prospective buyers, Spain was cited as the top foreign destination for their next investment by British, Dutch, German, Italian and Portuguese survey respondents, among others.
8. Fluctuating flights
Air routes continue to have a profound impact on where people want to go and where they want to buy. While the opening up of new routes can have a strong positive impact on local property markets, so too can route closures (or the threat of them) have a strong negative effect. So the fortunes of some second-home owners are intimately connected to the fortunes of flight operators. Those on routes served by multiple airlines are likely to be less exposed.
9. Homebody Brits
Buyers are increasingly likely to purchase in their home country rather than abroad. This is particularly true of the British. In the last three years, some 39% of Brits in our sample bought their short-let property in the UK. Conversely, only 14% bought at home in the years preceding the global financial crisis. This trend is likely to continue, as a property in the same country as the owner seeking to maximise income is easier to visit, manage and service.
The Savills Second Homes Spotlight highlights the ways international second homes have changed over the last decade.
The Savills Home/Away survey was carried out in February and March 2018. Savills World Research surveyed 4,300 property owners who let their properties on HomeAway in seven major markets (US, UK, France, Spain, Greece, The Netherlands and Portugal). The sample included owners from across Europe, Canada and others. A second survey was carried out of 7,700 renters planning their next trip on HomeAway from the same seven countries.