Is Now A Good Time To Buy A House? Some Things To Consider Before You Do

The property market is booming, but does that actually mean it's a good time to buy?

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If you’re umm-ing and ahh-ing whether to bite the bullet and buy a new home at the moment, you’re not alone. While there’s normally a seasonal slowdown in housing market activity over the summer months, the coronavirus pandemic and subsequent lockdown has meant the market is experiencing a mini-boom as restrictions ease and people reassess their priorities in life.

Rightmove reports it’s been the busiest month for sales in 10 years, with home movers putting more property on the market and saying ‘yes’ to more sales.

Homes are also selling quickly. Property site Zoopla said in mid-August, three-bedroom homes were selling in 27 days on average, which is 12 days faster than the same period last year.

Meanwhile Miles Robinson, head of mortgages at Trussle, says in the first two months of the market reopening, they saw an 182% increase in first-time buyer mortgage applications and 176% increase from next-time buyers.

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What’s behind the boom? Well, the housing market came to a standstill earlier in the year when the government introduced lockdown, which has led to everyone rushing to get back to normal once restrictions eased – and also resulted in a bit of a backlog of houses to sell.

On top of that, most people haven’t been too fussed about going on holiday due to quarantine issues – and instead are wondering where they can move to next. Preferably somewhere with a garden if they’ve been cooped up in a flat for the past six months.

Many people appear to be reprioritising where they live, with some recognising that if they can work from home for such long periods, they no longer need to live in crowded and expensive cities and can take advantage of a more laid-back lifestyle in or beyond the commuter belts or nearer national parks or the coast. A lot of people are leaving London, says Rightmove, with the out-of-city exodus driving prices in places like Devon and Cornwall to new records.

Property expert John Howard, who has worked in the industry for 40 years, points out that during lockdown people have had time to assess what they want to do, where they want to live and have, in some cases, decided to bring forward their future plans by a number of years.

“People are looking to move out of the big cities where perhaps they’ve spent the lockdown period and move to more semi-rural areas partly because they no longer need to go into the workplace everyday and are seeking a better work-life balance,” he says.

“The time of year also has a lot to do with it as well. Traditionally spring/summer is the time most people look to move and get settled before Christmas. Will the property market be so active in November or December? I doubt it.”

Then there’s the cherry on the cake: the stamp duty relief, which has given plenty of people the impetus to crack on and move. Sales agreed are up across all sectors of the market: 29% in the first-time buyer sector, 38% in the second stepper sector and 59% for larger, top of the ladder homes, says Rightmove.

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So, is it a good time to buy?

It really depends on your situation. The stamp duty holiday which lasts until the end of March 2021 means it’s obviously cheaper to do so now rather than in a year’s time – it could mean savings of up to £15,000 on properties worth up to £500,000 in England and Northern Ireland, and £250,000 in Wales and Scotland.

But for those first time buyers who already benefited from this tax break, it might be worth holding off until April 2021 when competition starts to ease off again – as competition only drives up prices, and currently there’s a lot of it.

For those who will save some cash because of the stamp duty holiday, it’s worth noting the money that you save will probably have to go towards stumping up a bigger deposit on a mortgage. The recession means banks are tightening their purse strings when it comes to the amounts of money people can borrow.

“Lenders are more wary about those with smaller deposits and there’s currently a very limited number of high loan-to-value mortgage products available,” says mortgage expert Miles Robinson. “This means it may be harder to buy a home if you don’t have a big enough deposit saved up.”

Some lenders are even saying no to loans from the so-called ‘Bank of Mum and Dad’. Nationwide’s policy states that borrowers looking to get a mortgage that covers 90% of the cost of their home must prove no more than a quarter of their deposit was gifted to them. They want to know people can afford to pay their way.

“If you’re looking to buy a new home, it’s worth considering whether you can save a bigger deposit of 15% or higher to give yourself more options of mortgage deals, and be prepared that deals and criteria are changing regularly,” says Robinson.

People might particularly struggle to get mortgages if they’re furloughed or self-employed, so it’s worth speaking to a mortgage broker to assess your options and whether it’s something you can definitely afford.

They can help you navigate the system, which can be pretty confusing if you’re new to it. Be aware some brokers charge fees, so do your homework first.

Emma Harvey, director of mortgages at MoneySuperMarket, says “now could be an opportune moment to buy or sell your property” but flags it’s important to have the right borrowing arrangements in place.

MoneySuperMarket is currently getting a lot of interest in fixed rate mortgages on its website as people want security during economically turbulent times. “Whether you opt for a fixed or tracker deal, you should make sure you understand how the product works, for example with any fees or overpayment, and how changes in interest rates could impact your monthly bills,” says Harvey.

“You should also make sure that you’ve budgeted properly so that you can afford your chosen mortgage. Creating a detailed monthly budget is always a good idea and can help you avoid any unwanted surprises.”

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House prices are soaring

The average UK asking price rose to £320,265 in July but that’s not to say you won’t get a bargain in some areas – the top line is: don’t be afraid to haggle. You’re more likely to bag a deal if the property has been on the market for some time, the seller wants a quick sale or you’re the only bidder, according to Which?

Most people will want a good deal if they buy before March 2021, however rural locations providing green space have never been more popular. In some regions, demand is driving up prices, meaning there’s a greater risk of getting into bidding wars and having to fork out even more.

Homeowners are bringing more properties to market than in any month since 2008, according to Rightmove. There are 44% more properties coming to market compared to the same period a year ago, though there are considerable regional variations.

“Home movers are both marketing and buying more property than we have recorded in any previous month for over 10 years, helping push prices to their highest ever level in seven regions,” says Miles Shipside, Rightmove’s director and housing market analyst.

“Those expressing the most desire to move on are unsurprisingly in London and its commuter belt. London has 69% more properties coming to market, with the South East at 60% and the East at 56%.”

With more buyers in the market, it’s good news for sellers as it could increase your chances of securing a sale – and a decent chunk of cash.

Kevin Shaw, managing director of Residential Sales at Leaders Romans Group (LRG), says it’s unlikely there’ll be a sustained boom in prices as the recession gets underway. This means you *could* end up getting a better deal later in the year when winter hits and prices drop.

But you need to weigh this up against whether you’ll then be putting pressure on yourself to get everything done before the end of March if you want to save money on stamp duty tax.

Expect delays

If you are looking to buy and want to make the most of the stamp duty holiday, it’s worth trying to avoid the added pressure of being stuck in a chain. Chain-free homes are your best bet right now as if the chain that you’re in collapses, you’re back to square one – not great when you’re on a deadline.

Record levels of pent-up and new buyer demand mean there is extra pressure on the lending and legal areas of the home moving process, so it might be slow-moving. The average time between agreeing a sale and moving in was already around three months before lockdown – and is likely to go up.

Mortgage lenders and conveyancers may struggle to cope with the increased workload, not only now but as pressure rises further in the run up to March 31 when the stamp duty holiday comes to an end.

Shipside says parts of the lending and legal sectors are having to cope with capacity constraints, as some staff will still be on furlough while many are still working from home. “Patience will be required,” he adds. “To minimise the risk of missing the March 31 stamp duty deadline it’s best to plan well ahead. This busy pace of the market looks set to continue in the short term, and although the market has proven resilient since reopening we still need to be mindful of the wider economic concerns as the year progresses.”

Ultimately, buying a house is a bit of a gamble. But if you’re planning on staying there for some time, it’s likely to be a good investment. John Howard says as the recession takes hold, the popularity of some areas (and therefore the house prices) might go down depending on employment in the area. But, in other areas, it might stay the same or even go up.

“The one thing we do know is that over the last 50 years, property prices have gone up more than most other investments,” he says. “The saying ‘make hay while the sunshines’ is, I think, very relevant in this current market – next year and the year after could look very different.”

But Gareth Shaw, head of money at Which?, urges people to proceed with caution. “Despite this short-term boom in the property market, we’re living in very uncertain times and people should think carefully about whether now is the right time to buy,” he advises.

“While the stamp duty changes mean some home movers will make considerable tax savings, buying a property is a huge commitment and people must not be tempted into an offer without first doing their own research into the market.”