Has the St Ives ban on second homes backfired?

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Just a few months ago the residents of St Ives voted in favour of a ban on outsiders buying new builds as their second homes. At the time the feeling was that investors from outside of the area were pushing local house prices above and beyond the affordability of first-time buyers. As a consequence the local authority introduced a referendum in May in which 80% of residents voted against second homes. So, what has happened in the preceding weeks?

Property purchase enquiries fall

While it is dangerous to take a relatively short period of time in isolation the fact that there has been a 10% drop in purchase enquiries in the St Ives region is very telling. As is the fact that some neighbouring towns, with Hayle in Cornwall mentioned, have seen a slight increase in purchase enquiries over the same period of time.

At this moment in time this reduction in purchase enquiries seems to have had a limited impact upon property prices in the region but time will tell. Simple economics show that reduced demand for specific assets will limit the upside in the short to medium term. As a consequence, there is every chance that property prices in the St Ives area will underperform in the medium term which will impact the wealth of local residents.

Outside investors feel unwelcome

Local estate agents have confirmed that while the ban on second homes for outside investors only covers new builds there has been a drop in demand for all types of property. The suggestion that prospective buyers from outside of the region feel “unwelcome” is controversial but the referendum decision back in May says everything.

The short-term issue of house prices will obviously dominate the next few months but if you consider that each holiday let is rented out for at least six months of the year, what impact will this have upon the local economy? It stands to reason that if St Ives sees a reduction in holiday let properties then this will impact the number of visitors which will impact the local economy. At the time of the referendum the local authority and residents of St Ives were warned to consider the consequences but feelings were very strong culminating in the referendum result.

Is there any way back for St Ives?

It is far too soon to call the death knell for the St Ives property market, indeed a reduction in the number of outside investors will only moderate future price rises, but it does not exactly make the region welcoming to visitors. It is highly unlikely we will see a U-turn regarding the second home referendum decision although once it starts to hit local residents in their pocket this view may change. However, this should stand as a warning to other towns and villages across the UK who have benefited from outside property investors but have now decided to shut them out.

The fact that the ban on outsiders investing in second homes only relates to new builds has also caused some confusion with many wrongly assuming the ban covers all types of property. It will be interesting to see how the local authority reacts to any underperformance in property price movements in the future. Will they regret holding the referendum?

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