Second home taxes hit property growth in key region
Average house prices in Gwynedd, a popular second home and holiday let hotspot in Wales, dropped 7.3% in the second quarter of 2025.
This is according to he Principality Building Society which claims the drop is likely influenced by policy shifts such as the Welsh Government’s adjustments to second home taxation and the impact of new planning regulations.
Gwynedd’s council already imposes a 150% council tax premium on additional homes, while across Wales additional homes attract a 5% surcharge on top of the normal Land Transaction Tax – the Welsh equivalent of stamp duty.
On top of that, to register a holiday let as a business – and thus receive less punitive taxation – the property in question has to be made available to let for at least 252 days of the year and actually let for at least 182 days. And for approaching a year the local authority in the county have adapted a so-called Article 4 Direction, meaning owners have top win planning consent to turn a primary home into a holiday let or second home.
Gwynedd’s performance contrasts with the average price of a home in Wales as a whole reached £238,098 in the second quarter of 2025, up 0.7% year-on-year.
However, this is still 4.6% below its peak of £249,000 in 2022.The figures have been released by Principality Building Society in its Wales House Price Index for Q2 2025 (April – June), which demonstrates the rise and fall in house prices in each of the 22 local authorities in Wales.
Despite ongoing affordability pressures, the steady rise in the number of transactions – which reached over 10,000 in Q2 (up 13% on last year) – suggests growing buyer confidence despite persistent cost-of-living challenges and elevated rates.
Torfaen recorded the highest quarterly price change of any local authority at 14%, driven by periodic high-value sales and limited housing supply. Carmarthen also reported an increase of 6.3%, while Flintshire saw a 3.3% quarterly rise.
Other areas, including Gwynedd, saw prices fall in Q2, dropping 7.3% from the first quarter of 2025. The building society says this drop is likely influenced by policy shifts such as the Welsh Government’s adjustments to second home taxation and the impact of new planning regulations.
Principality Building Society’s research, based on HM Land Registry data, reveals that Q2 is the fourth consecutive quarter with more than 10,000 sales, suggesting property sales are showing signs of recovery.
Speaking about the figures, Iain Mansfield – Principality’s chief financial officer – says:
“The housing market in Wales continued to stabilise in the second quarter of 2025, with prices holding broadly flat compared to the start of the year. Encouragingly, the steady increase in transaction volumes signals increasing confidence among buyers. While market conditions remain challenging, a downward trend in mortgage rates is helping to create a more favourable environment for buyers. This shift is contributing to a gradual uplift in consumer confidence as we move into the second half of 2025.”
The Bank of England base rate cuts is anticipated to drive further affordability for buyers in Wales, contributing to the increase in property transactions against a backdrop of rising rental rates. Compared to the same period last year, the average two-year fixed mortgage rate has dropped from approximately 5.56% to around 4.68% in 2025.
While house prices remain stable year-on-year the cost of renting the average home has increased by 8.5% in the 12 months to May .
Housing supply remains a key challenge in Wales and across the country, particularly affordable and social housing. Policy changes including the Welsh Government’s commitment to increasing the supply of affordable homes and plans to implement the recommendations of its Affordable Home Taskforce aim to address ongoing supply challenges and ease pressures on the housing market.
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