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Frank Hovis

Buying A Holiday Home Is A Huge Waste Of Money

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Well we all knew that, but the Channel 4 Place in the Sun type property porn would have you believe that it's a money-making dream. Looks like enough people have had their fingers burnt that the tide is turning.

I only know two people who have had holiday cottages in this country, in both cases they ended up regarding the cottage as a total chore and sold it.

On Yahoo front page from lovemoney.com:

As millions of us come back from holiday, many will dream of owning a home in the sun - crazy property-struck fools that we are.

Right now, 5.4 million Britons are considering buying abroad, according to HSBC, even more than before the financial crisis. Have we learned nothing?

Spain and the Balearic Islands are the top dream destination, attracting 30% of buyers, followed by France at 16%. Italy, Portugal, Greece, Cyprus, the Caribbean, Florida and Turkey are also dream home hotspots.

If you've been seduced by dreams of a place in the sun, here's a measured word of warning. You've lost your mind, because buying a holiday home is the biggest waste of money ever.

Twice yearly, really

Before you protest, you happy holiday homeowners, here's the proof. The average owner visits their holiday or second home just twice a year, according to new research from household insurer Schofields.

They didn't plan it that way. Two-thirds expected to visit their bolthole far more when they originally bought it, but never get round to it.

Work, family commitments and lack of cash were the main reason people leave their holiday homes empty and forlorn, although an entrepreneurial 17% said they did so to maximise guest bookings.

Sun-baked and half-baked

A holiday home is an alluring dream. I regularly find myself browsing Spanish property websites to see how far prices have fallen, and whether they have fallen enough for my budget.

Prices are lower, skies are bluer. What's not to like?

But like most dreams, it eventually bangs its head against hard reality. The truth is, you've got too many other things to do.

Curse those jobs and families.

Bills, not thrills

You won't get to that holiday property as often as you like, but you will keep paying for it. First, there's the purchase price. Yes, Spanish holiday home prices have fallen more than 30% in the last five years, but you're paying in sterling, which is also down 20% against the euro.

Then there are local property taxes, legal fees, mortgage administration charges, and that's only the beginning. Your expenses don't stop when you exchange contracts, they're just getting started

You have to furnish your exotic new financial liability. Do it up. Pay for insurance. Carry out maintenance and repairs. Cover utility bills. Pay local taxes. You may have to hire a cleaner or stump up a monthly service charge.

And that's before you factor in the cost of actually getting to your property (although that won't be so expensive, as you're only going to visit twice a year).

X-rated expat tales

Plus there's always the chance you will end up buying the holiday home from hell, and lose everything. I recently spoke to British expats whose Andalusian retirement dreams were destroyed in an instant when the local police called to explain, not very politely, that they were the proud owners of an illegal home.

Nobody told them, not even their lawyer, that the developer hadn't got planning permission. Some lost hundreds of thousands of pounds. Several in the Valencia region saw their home torn down before their very eyes, without compensation. Others are stranded in the deserts of Murcia, with no running water or electricity.

Expat pain isn't restricted to Spain. Thousands of British homeowners in Cyprus risk losing both their holiday home and their UK property, in a vicious legal dispute over mis-sold mortgages.

I asked one couple, who were waiting to hear if their home in Almeria would be torn down, what advice they would give to the current generation of Spanish property buyers.

Their answer was succinct: "Forget it. Stay at home or go elsewhere."

Oh, I give up

Well, I've tried. I've done my best to make you see sense. It won't work. You still dream of a place in the sun, and in my dafter moments, so do I. So how do we make it match up to reality?

Before you go any further, ask yourself these questions:

Do you really want to go to the same place on holiday, year after year? Can you afford the flights? Do you have the time? Don't you want to see the rest of the world?

Even if you do want to go to the same place, wouldn't it be easier and cheaper to rent a holiday home instead, or stay in a hotel?

Can you afford all the costs of running a holiday home, including mortgage, insurance, maintenance, repairs, service charges and taxes, not to mention those twice-a-year flights?

Have you done your research? Do you know what similar properties are selling for? Is the local council planning to build a municipal waste incinerator in your backyard?

Is that bargain property really a bargain? Cheap isn't always cheerful, especially if you're stranded in a half-built complex a mile from the nearest communal water pump, or squeezed between the autoroute and municipal tip. Location, location, location are key words in any language.

Have you taken the right advice? You must appoint an experienced English-speaking lawyer, with no connections to your seller, estate agent or property developer, to avoid conflicts of interest.

Is your property legal? Your lawyer must confirm you have got all the necessary planning permission, licenses and consent. You must also pay for an independent valuation, even if buying in cash.

Is your mortgage in the right currency? If you earn your income in pounds, but your mortgage is in euros, you are at the mercy of currency swings, as many expats discovered when the pound collapsed after the financial crisis.

Are prices still in freefall? Spanish house prices could still plunge another 25%, according to newsletter Spanish Property Insight.

Do you plan to retire there? Visiting your property twice a year makes a lot more sense if you plan to stay for six months each time.

So what do you think? Do you still want a place in the sun?

http://uk.finance.yahoo.com/news/buying-holiday-home-huge-waste-082409006.html

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Do you plan to retire there? Visiting your property twice a year makes a lot more sense if you plan to stay for six months each time.

aka "if you live there" surely?

A second home is barking unless you are so moneyed that you can afford not to work.

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People actually convinced themselves it was better to buy a property in Cornwall, rather than just book into a hotel.

Now, every holiday they have has to be in Cornwall, to make use of the place.

Endless maintenance etc

Whereas... if they had just booked into a hotel, THEY CAN GO ANYWHERE IN THE WORLD!

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As a regular poster on here (his name escapes me) often points out, he hires a villa in Spain for €500 a month in winter, all bills included. Why the hell would you give up your freedom to travel where you wish?

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People actually convinced themselves it was better to buy a property in Cornwall, rather than just book into a hotel.

Now, every holiday they have has to be in Cornwall, to make use of the place.

Endless maintenance etc

Whereas... if they had just booked into a hotel, THEY CAN GO ANYWHERE IN THE WORLD!

It's crazy, isn't it? Everyone loses.

Relatives of mine have a second home(much gto my dismay). The costs must be enormous on a 'per night stayed' basis. Way more than a top hotel or short let property.

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As a regular poster on here (his name escapes me) often points out, he hires a villa in Spain for €500 a month in winter, all bills included. Why the hell would you give up your freedom to travel where you wish?

So you can bang on about it down the pub and because some people are inexplicably impressed by it seem to be the main advantages as far as I can see.

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So you can bang on about it down the pub and because some people are inexplicably impressed by it seem to be the main advantages as far as I can see.

It is a British snob ego class thing.

I can understand buying one if you intend to rent it out until you retire there but, for most, it is a mistake.

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People actually convinced themselves it was better to buy a property in Cornwall, rather than just book into a hotel.

Now, every holiday they have has to be in Cornwall, to make use of the place.

Endless maintenance etc

Whereas... if they had just booked into a hotel, THEY CAN GO ANYWHERE IN THE WORLD!

+100 My business partner has a house near Carcassone in France. Middle of country about 5 clicks from nearest town. Nice enough went there once but even though the sun doesn't like me I prefer sun sea and sand whether it be Whitstable or Pescara in Italy.

Anyway long and short of it his 'holidays' seem one long round of maintenance and admin. Long Drive taking old kitchen down, or getting there and mowing the Lawn sure he saves two bob on not using a hotel but in the scheme of things no big deal.

My list of 'free' accomodation now is:

Carcassonne France

Bourg St Maurice - French Alps -good mates ski chalet

Whitstable - Flat of good friends

Bisemti - In Italian mountains near Pescara mates again

Corfu - good mate got a villa there

Been all there once and they are all lovely places but they seem desperate to have friends out to break up the monotony and in truth they are ok once but after that slightly boring going to the same place

Edited by Greg Bowman

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Reminds me of this;

Was watching that program where the banker/whoever builds their 'dream house'. There was a couple that were getting past it, he looked like a banker and she an old bint.Well they spent £750k digging out a basement in their shitty london house, put in a led dace floor for their spoilt child etc...

And then,,

She starts boasting about thousands of pounds worth the solar panels and how it only costs £2/week to run the car! HELO - you have just wasted the best part of a million on crap then you are trying to save £2.

It is what I call boomer war mentality, I see it in my own family.

My grandmother lived in poverty when she grew up in the 1900's they had nothing and she had 5 sisters. All her life she would spend absolutely nothing unless she had to - passed away leavign the best part of a million behind after a lifetime of scrimping, savign and Tesco value. That mentality of scriping and saving was passed down to the 'spoilt generation' who have a misguided sense of scrimping and saving.

You will find the boomers fighting in the reduction isle of a supermarket, then step into the Land Rover evoque - They cannot mentally link the two acts together.

You wont find any/many generation Y/X with holiday hovels.

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Reminds me of this;

Was watching that program where the banker/whoever builds their 'dream house'. There was a couple that were getting past it, he looked like a banker and she an old bint.Well they spent £750k digging out a basement in their shitty london house, put in a led dace floor for their spoilt child etc...

And then,,

She starts boasting about thousands of pounds worth the solar panels and how it only costs £2/week to run the car! HELO - you have just wasted the best part of a million on crap then you are trying to save £2.

It is what I call boomer war mentality, I see it in my own family.

My grandmother lived in poverty when she grew up in the 1900's they had nothing and she had 5 sisters. All her life she would spend absolutely nothing unless she had to - passed away leavign the best part of a million behind after a lifetime of scrimping, savign and Tesco value. That mentality of scriping and saving was passed down to the 'spoilt generation' who have a misguided sense of scrimping and saving.

You will find the boomers fighting in the reduction isle of a supermarket, then step into the Land Rover evoque - They cannot mentally link the two acts together.

You wont find any/many generation Y/X with holiday hovels.

+1 Lol laugh.giflaugh.gif

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There are many things that are a waste of money including holiday homes and big cars......you can buy a holiday home for less than you can buy many big cars for.....it is not only the initial outlay, some places they can't give them away, it is more the upkeep to service and maintain it and whether it is made use of .........some people like to go to the same hotels year after year, others would prefer to travel to different places...horses for courses.

As with anything you buy to make personal use of......you buy it for what it can do for you, not for investment purposes, a holiday home should not be an investment, like buying a car is not an investment. ;)

Edited by winkie

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As with anything you buy to make personal use of......you buy it for what it can do for you, not for investment purposes, a holiday home should not be an investment, like buying a car is not an investment. ;)

Yes. Over the past few years I've noticed huge abuse/misuse of the term "invest". You don't "invest" in a new car. Or even a flash granite topped kitchen. Those are examples of consumption not investment.

A second home is only an investment if the sums genuinely add up such that it returns a market matching yield after all costs and does so in a way that doesn't imbalance your asset allocation. This is rarely the case for the non-wealthy.

Upthread, I said a second home only works if you're wealthy enough to not work. I've decided to caveat that and add "unless you're a teacher" and have mega-hols.

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Well we all knew that, but the Channel 4 Place in the Sun type property porn would have you believe that it's a money-making dream. Looks like enough people have had their fingers burnt that the tide is turning.

I only know two people who have had holiday cottages in this country, in both cases they ended up regarding the cottage as a total chore and sold it.

On Yahoo front page from lovemoney.com:

http://uk.finance.yahoo.com/news/buying-holiday-home-huge-waste-082409006.html

I don't think you can altogether generalise. Of course a lot of people rush into some 'dream' without doing any research or thinking through the practicalities or finances. But my sister and BIL had a small cottage in a fairly remote part of the Dales for many years and being keen walkers they used it a great deal - it wasn't far from their home - and also rented it out a good part of the year to other walkers. When they retired they moved into it to see whether they'd like to live in the area full time, and they did - eventually sold it and bought a larger house nearby. For them it worked very well.

Having said that, my daughter recently came back from hols inFrance and Italy, full of a scheme for buying a large wreck with lovely Italian lake views, admittedly very cheap, with a group of friends, and doing it up as a holiday home for them all to share. She is normally extremely sensible with money and I had a fit when I saw her email.. Basically I said personally I wouldn't touch it - what if one of the friends wants out? Who is going to manage and oversee the renovation? However much you think it' s going to cost, it will almost certainly be an awful lot more - DO LOADS OF THINKING AND RESEARCH! Etc. Thank God that seems to have died the death pretty quickly once she came back to Planet Earth.

I do see why people succumb to these dreams, only in many cases to find them more of a very expensive nightmare. .

Edited by Mrs Bear

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Reminds me of this;

Was watching that program where the banker/whoever builds their 'dream house'. There was a couple that were getting past it, he looked like a banker and she an old bint.Well they spent £750k digging out a basement in their shitty london house, put in a led dace floor for their spoilt child etc...

And then,,

She starts boasting about thousands of pounds worth the solar panels and how it only costs £2/week to run the car! HELO - you have just wasted the best part of a million on crap then you are trying to save £2.

It is what I call boomer war mentality, I see it in my own family.

My grandmother lived in poverty when she grew up in the 1900's they had nothing and she had 5 sisters. All her life she would spend absolutely nothing unless she had to - passed away leavign the best part of a million behind after a lifetime of scrimping, savign and Tesco value. That mentality of scriping and saving was passed down to the 'spoilt generation' who have a misguided sense of scrimping and saving.

You will find the boomers fighting in the reduction isle of a supermarket, then step into the Land Rover evoque - They cannot mentally link the two acts together.

You wont find any/many generation Y/X with holiday hovels.

Great summary of the false economy mentality of many boomers.

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To my mind Timeshare is almost as bad. Which idiots buy in to this crap?

Idiots that fall for the ultra high pressure sales pitch and sign on the dotted line there and then.

Years ago, my wife dragged me along to a time share sales do. They had offered some free gifts which were not conditional on buying anything and she couldn't resist. Of course, the offer was conditional on both husband and wife attending.

The sales pitch was relentless, with probably half those attending being undercover sales people agreeing how wonderful it was and "signing contracts". I was in my 20s then and felt like an idiot for walking away from the "wonderful opportunity", but walk away I did, much to the chagrin of the Mrs who was completely sold.

She got her free gifts, cheap tat, and after sleeping on it we realised what a narrow escape we'd had.

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I know a couple who bought a villa (i.e. little house) on an idyllic Greek island. Cheap flights, cheap food, option to use it or rent it, top bragging rights in the boozer. What could go possibly wrong?

Six years later, the cheap flights no longer go to the island, so it's an expensive fare to Athens, followed by a pricey scheduled hop or an overnight ferry journey. The value of the property is way, way below the mortgage they have on it. Even if they tried to sell it for peanuts, no-one would buy. To balance the books, they have sold their home here and are moving into a smaller place, still with a whopping mortgage that no-one their age ought to contemplate.

As for the "villa", they've not been this year, not even tried to rent it and I doubt they'll even go to close up at the end of the season. Ha, season, that's a laugh.

.

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People actually convinced themselves it was better to buy a property in Cornwall, rather than just book into a hotel.

Now, every holiday they have has to be in Cornwall, to make use of the place.

Endless maintenance etc

Whereas... if they had just booked into a hotel, THEY CAN GO ANYWHERE IN THE WORLD!

Quite agree. The world's a big place to visit. Why tie oneself down to one place?

I've always thought similar about caravanning. Quite expensive to invest in at first. Although you can choose your camp site of your free choice, towing a caravan and being limited to 50 mph (?) can't be much fun. Hotel rooms in a location of one's choice offer much more in the way of creature comforts.

:unsure: Do holiday home-owners see paying for a hotel room as the same as renting, like 'lower orders' tend to do? ;)

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Quite agree. The world's a big place to visit. Why tie oneself down to one place?

I've always thought similar about caravanning. Quite expensive to invest in at first. Although you can choose your camp site of your free choice, towing a caravan and being limited to 50 mph (?) can't be much fun. Hotel rooms in a location of one's choice offer much more in the way of creature comforts.

:unsure: Do holiday home-owners see paying for a hotel room as the same as renting, like 'lower orders' tend to do? ;)

If you do your homework you can get some really good hotel deals all over the continent....pre arrange, no deposit required, payment on delivery......owning anything comes with its restrictions and responsibility, not everyone's cup of tea, as already mentioned making friends with people who own lots of stuff they can never use.......freedom comes in many different ways, owning stuff is not always better than renting or borrowing with consent someone else's stuff.......after all many people 'house sit' getting paid to look after other peoples unused stuff. ;)

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actually I think that what is a 'waste of money' is very subjective. To some people, new or flash cars are a total waste, or eating out a lot, or expensive clothes, or re-doing a kitchenor bathroom that is perfectly good but not the stylish latest. Or Starbucks coffees everyday, or Sky, there are masses of things that are one person's indulgence and another's ludicrous waste.

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People actually convinced themselves it was better to buy a property in Cornwall, rather than just book into a hotel.

Judging by my most recent experience of a Cornish hotel, they're right.

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actually I think that what is a 'waste of money' is very subjective. To some people, new or flash cars are a total waste, or eating out a lot, or expensive clothes, or re-doing a kitchenor bathroom that is perfectly good but not the stylish latest. Or Starbucks coffees everyday, or Sky, there are masses of things that are one person's indulgence and another's ludicrous waste.

Indeed. I don't normally read the Guardian, but today's Money section has quite a lot of gems. Such as this one from the "pocket money" story:

http://www.theguardian.com/money/2013/aug/30/pocket-money-how-much

Ewan, 44, earns £100,000 as a medical researcher, and his wife, 44, earns £49,000 as a doctor four days a week. They have 21-month-old twins

More than 60% of my wife's salary goes on childcare for the twins, which costs £2,600 a month. It's crazy; the equivalent of putting your kid through Eton. They are at private nursery four mornings a week because the local state nursery didn't have enough places, and the rest of the time that my wife is at work we have to have two nannies. With two toddlers you need a second pair of hands or it's complete bedlam.

The whole time she was on maternity leave we hired a nanny to help her. We didn't feel it was a luxury, it was more like a necessity just so I could go to work.

We have a second property in Spain and between the mortgage on that, the mortgage on our two-bed London flat and childcare we have absolutely no slack in our income – in fact, we are dipping into our savings just to get by each month. We find it impossible to save at all, even for the children, although we'd like to. I feel quite relaxed about this. I see it as only a temporary situation – as the twins get older we'll pay less for childcare.

Elveden Forest Center Parcs

A Center Parcs visit is one of two holidays one family is planning to take this year.

We are planning to have two holidays this year: one in Center Parcs and one in Spain, but because we will stay with family there the kids will only cost £80 in flights.

We also take them on trips out about once a month, spending £30-£40 each time, and up to £50 a month on occasional toys and treats. On top of this we typically spend about £50 a week on each child, which covers their activities, clothes, food and a weekly creche session while we go to the gym.

We have been given a lot of toys and hand-me-downs by other parents. Our biggest single expenses were our £1,300 double-buggy and £200 playpen, which is huge.

I don't regret having bought anything we got new. It has all definitely been worth it. We made a choice to have children and while some of the costs are shocking, we are lucky to earn good salaries and we have enough to survive.

This particular couple chimes with us as our joint income is similar, but we don't have any kids nor property/mortgages. Our only big spends are multiple big foreign holidays every year but we still manage to put away a motherload of savings every month (most of which does not stay in cash).

I think this couple is heading for a shock if they are already spending that much on their kids. The costs can only go up. That being said, we are friends with many couples, some of whom jointly earn less than the doctor above alone but manage to raise children and stay in reasonable homes so it's all relative I suppose.

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