In recent months, there’s been a shift in the UK housing market, with a surge in demand for homes featuring self-contained annexes, or as they’re affectionately known, “granny flats”. This trend comes as a direct response to local councils intensifying their crackdowns on second homes.

Purplebricks, a leading online estate agent, has reported a significant six-month surge in enquiries for properties that boast an annexe. This is a change from earlier in 2023, where interest was minimal. Between August last year and early January, they recorded around 10,000 such enquiries.

Council Tax and Cost-Saving Measures

A key factor driving this interest is the potential for significant council tax savings. An annexe is exempt from council tax if it’s home to a relative who is either 65 or older, permanently disabled, or severely mentally impaired. For those with a family member under 65, a 50% reduction can be applied for.

The AirBnB Factor

There’s also a growing trend of buyers seeking properties with annexes to tap into the lucrative AirBnB market. In Greater London, for instance, owners can rent out a room for up to 90 days a year, with other councils setting different limits. When not rented out, if the annexe is used by the family, it qualifies for a 50% council tax reduction.

Under the UK government’s Rent a Room scheme, homeowners can earn up to £7,500 tax-free annually by renting out a spare room, or in this case, an annexe.

A Word from the Experts

Sam Mitchell, CEO of Purplebricks, highlights that annexes offer a dual benefit – they provide a smart solution for families caring for elderly relatives and also present a savvy investment opportunity. This trend, he notes, is a response to the uncertainty faced by second home owners.

Examples of Available Properties

Purplebricks’ listings include a variety of properties with annexes:

• A six-bed house in Cannock, Staffordshire, priced at £525,000, featuring a one-bed ground-floor annexe.
• A three-bed farmhouse in Pembrokeshire, with a four-bed annexe, set on 19 acres of land including a fishing lake and stables, marketed at £895,000.
• A five-bed home in Wakefield, with a separate one-bed bungalow, available for £650,000.
• In Truro, Cornwall, a five-bedroom detached house with a three-bedroom annexe is being offered for £725,000.
• A four-bedroom house in Sleaford with a self-contained annexe is on the market for £600,000.

Regional Responses to Second Homes

• In Wales, the Labour Government enabled local authorities to increase council tax on second homes by up to 300% since April last year.
• In Scotland, from April this year, second homes will be treated like long-term empty homes, potentially leading to double council tax.
• In England, local authorities are seeking more powers to manage empty properties and holiday homes.

Conclusion

The shift towards homes with annexes is a clear indicator of how UK residents are adapting to changing property taxes and looking for smart investment opportunities. This trend not only benefits homeowners looking to save on taxes but also addresses some housing market challenges by providing additional living spaces.