For individual buyers, or those entering the market for the first time, the financial landscape is increasingly steep
The recent council tax hikes on second homes in Wales have introduced new challenges for buyers, investors, and local communities alike. Alyson Horton (pictured), an independent mortgage adviser who started her own business ATW Mortgages in 2019, is finding that an increasing number of her clients and potential clients are asking for her advice on how to deal with these pressures.
The tax hikes, which have reached as high as 200% for unoccupied second homes in some areas, are supposed to address the growing issue of vacant properties in rural and coastal towns. However, in Pembrokeshire, one of Wales’ second home hotspots, adjustments have been made to reduce the premium to 150% for the 2025–2026 council tax period. These hikes are reshaping the holiday property market.
“If you are a portfolio customer and have a spread, you can ride the higher bills,” Horton explained. “If one's bringing in the money, you might have to pay out a little bit more. Sometimes, people I find with big portfolios can ride the cost of things.”
However, for her individual buyers, or those entering the market for the first time, the financial landscape is increasingly steep.
For those of her mortgage clients that are undeterred by these changes, Horton advocates for a strategic approach to mitigate costs. Central to this is letting properties for at least 182 days annually, which qualifies owners for business tax relief. Without this threshold, properties are subject to the full weight of council tax premiums.
“I recommend letting their property for around two years with a progressive holiday letting company to try and attain that 182-day ruling,” Horton told Mortgage Introducer. “The mortgage lenders assess it on 26 weeks’ rental income and, the remaining 26 weeks of the year, they can go and live in that house if they want to. There’s a company in Saundersfoot which is a leading and progressive management agency—they are on Booking.com, Trivago, Expedia, Airbnb, everything to get the bookings.”
Yet, even with these strategies, meeting the requirements can be challenging.
“The only way that you’re paying council tax without any business relief is if you don’t achieve your 182-day booking, but that can be quite challenging,” says Horton. The effort to let properties intensively isn’t just about compliance—it’s about keeping the investment viable for her buy-to-let investors in a changing regulatory and market environment.
Some of her clients have been looking for cheaper ways to get on the housing ladder, but Horton has to warn some of them away from less traditional properties. For prospective buyers, the stakes are particularly high when dealing with structures such as wooden chalets. Horton also explained why these properties, often marketed as affordable alternatives, come with hidden risks.
“They’re not mortgageable,” she has to tell her clients. “It’s a depreciating purchase, just like buying a static caravan. At the end of the mortgage term, the property would have depreciated in value.” She adds that the short leases associated with such properties, often located on caravan parks or golf courses, make them even less attractive as investments.
“It might say you’ve got a 25-year ruling with that property,” Horton added. For her clients who are still set on unconventional properties, she suggests considering static caravans in bustling parks, which often avoid council tax issues and are easier to rent out.
“Pick a bustling caravan park, give it to the owner, and say, ‘Please, can you rent this?’ They haven’t got council tax issues then,” she said.
The policy changes that are affecting her BTL clients are not just about raising tax revenues—they are an attempt to address the growing issue of “ghost towns”.
“There’s a lot of empty properties across the county, and that’s creating ghost towns in many local towns,” she added. “I had a coffee in the village. Now, in the town, there isn’t a soul walking down the street.”
Horton believes that the council tax premiums encourage owners to rent out their properties, thus bringing in visitors and bolstering local businesses. However, she is quick to point out the limitations of this approach.
“It will bring the economy, but it won’t create a community, will it?” she said. “Walking down the high street, getting a coffee, going to get some bread from the local baker on a random Tuesday in November—it’s not going to fulfill the community’s goal.” The heart of a town, she argues, isn’t just economic activity but the presence of year-round residents who participate in local traditions, sports clubs, and churches.
Horton also highlights the disparities in how these policies impact locals. For residents like herself, rising council taxes are coupled with declining public services.
“Our council taxes are increasing, right?” she told Mortgage Introducer. “And what we’re getting for the increase is worse. We’re worse off in terms of even rubbish collection.” These inequities add to the challenges faced by communities that are already under strain from second-home ownership and tourism-driven economies.
Despite the hurdles, Horton remains practical in her advice to buyers.
“To purchase a holiday home, it’s a luxury item,” she stated. “If you can’t afford it from your surplus income, it’s not the right investment.”
Her message to would-be mortgage borrowers is clear - buyers must approach these investments with their eyes wide open, fully accounting for costs, regulations, and potential returns. Success in this market requires more than just financial readiness—it demands careful planning, adaptability, and an understanding of the broader implications of their investment.
“Nobody wants a house that’s empty,” she added.
