House prices plunge as council acts on second homes

The local authority in Gwynedd charges a 150% council tax premium on second homes or holiday lets

House prices in a county where the council has introduced measures to crack down on second homes have fallen by more than 12% year-on-year, according to new figures.

The local authority in Gwynedd, north-west Wales, recently introduced a requirement to obtain planning permission to turn residential properties into second homes or holiday lets.

It is also one of a number of Welsh councils which charges a 150% council tax premium on such properties, having upped this from 100% in 2023.

The council, Cyngor Gwynedd, said its aim was to "increase the availability of high-quality, affordable homes for local people".

The fall in value represents the biggest annual drop of any region in the Principality Building Society's Wales House Price Index, covering residential property sales in the final three months of 2024.

The average house price in Wales has remained broadly flat year-on-year and is now £233,194, according to the building society.

Tom Williams and his family, who live in Lancashire, are struggling to sell the second home they own in Morfa Nefyn, Gwynedd.

"I have four grandchildren who had a wonderful time there every summer and it's been great, we've loved it," said Mr Williams, who has owned the house for 20 years.

Tom Williams has reduced the asking price for his house in Gwynedd by £40,000

Mr Williams and his wife put the house on the market in April 2024 but said they had had little interest from potential buyers, despite dropping the price by £40,000.

"I put it down to all the other properties in the village that are up for sale at the moment," he said.

Mr Williams believes some of the interventions by the council have prompted a lot of people to sell, while also putting off potential buyers.

Cyngor Gwynedd has been trying to address the shortage of housing for local people in tourist areas and has more than doubled the council tax charge on second and holiday homes.

Mr Williams' second home in Morfa Nefyn has been on the market for nearly a year

The council also recently introduced Article 4, which requires property owners to obtain planning permission to turn residential homes into second or holiday homes.

"I've spoken to a lot of families who have had homes there for generations and they're saying the same thing - how can we carry on with this?" said Mr Williams.

North Wales estate agent Dafydd Hardy described the housing market in Gwynedd as "mixed", with local interventions on second homes leading to "more properties coming on to the market".

But he said the price of a second home was often "outside the affordability of the local purchaser".

"What we need to see is balance in the market," he said, including "more house building as far as first-time buyers are concerned".

What's caused the price drop?

The new figures are based on seasonally-adjusted data from the Land Registry, but a lot of different factors can affect the picture that data ends up painting.

Factors such as interest rates, regional job opportunities, interventions in the local housing market by a council and even the number of transactions can all have an impact on house prices.

It means there is some uncertainty about what caused the drop in prices in Gwynedd in the year to December.

How have house prices changed in the rest of Wales?

Pembrokeshire saw the second biggest annual fall in prices at 8.9%.

The council there recently voted to reduce the council tax premium on second homes from 200% to 150%.

By comparison, Carmarthenshire saw the biggest year-on-year increase in house prices at 9.2%.

The council there is introducing a council tax premium of 100% on second homes from April.

Iain Mansfield of the Principality Building Society said the housing market across Wales had shown "resilience" over the past 12 months.

Sales were up by 28% year-on-year, which Mr Mansfield said demonstrated "greater consumer confidence" with lower interest rates making mortgages more affordable.

"I think we're seeing a more positive outlook for those people who want to buy a house in 2025," said Mr Mansfield.

Locals 'priced out'

Mr Mansfield said the "sizeable" drop in prices in Gwynedd over the past year was reflected in "some of the other coastal areas in Wales".

He said the drop could "potentially" be explained by "some of the interventions that have been made in the area around second home ownership".

Cyngor Gwynedd said "over 65% of Gwynedd's population was priced out of the housing market" and tackling the housing shortage was a "key priority".

It said it introduced Article 4 to "gain better control over the existing housing stock" and they were "continuously monitoring its effects".

It added some of the money raised by the council tax premium was used to enable "the development of new homes, the creation of supported accommodation for those facing homelessness and grants and loans to help local people secure housing, amongst many other projects".