Is Now the Right Time to Buy a House in the UK

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At Direct House Buyer we have previously discussed how the uncertainty of the Brexit vote caused a slump in house prices and furthermore the actual result caused a massive blip in property sales and of course a massive fall in the value of our pound. The question of whether or not it’s the right time to buy or sell your house in the UK needs to be answered from the perspective of what type of house buyer you are. For example the London property market is in a completely different bubble than the rest of the UK and if you are an overseas property investor there are other further factors to consider such as the current value of the pound and investment return potential. For these reasons this article will be discussed from the perspective of different types of buyers.

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Should First Time Buyers Get on the Ladder Now

First time buyers have had a rough ride in the property market and have been dubbed “generation rent” as so many people find it impossible to raise the initial deposit and also have a job that is of adequate Loan to Value to become approved for a mortgage. Statistics show that back in the day 64% of those born during the 1960’s owned a house by the age of 35 Now only 44% buy their first house by the age of 35 and this figure is set to continue to decline. For those who can remember “back in the day” when the average house would cost £20,000 incomes where around £10,000 so you could technically buy an entire house in a few years. Nowadays, it may take 20 years worth of income to pay off a house so technically you could say it is now 10 times harder to get onto the property ladder. For those who can, often the bank of mum and dad plays a big role with both a substantial deposit and a guarantee to ensure that a mortgage can be attained. For those who have to save the money themselves it can take many years due to the high cost of living and also having to pay rent whilst they save. London-map-in-words

The Challenge of Buying in the London Property Market

In recent years many commentators have classified London as a completely different market than the rest of the UK and this is continuously highlighted in the vast difference in Average property values when compared to the rest of the UK. Currently Central London properties have a average value of £750,000 whereas the average for the rest of the UK is around £290,000. As mentioned in a previous article the price of London property has continuously been pushed up by the popularity of Buy to Let investments and Landlords purchasing property via Buy to Let mortgages. Unfortunately buy to let mortgages have a different approval criteria which is based upon being able to rent the property for 25% more than the achievable income. However, this has created a great imbalance in society as a residential mortgage is based upon an individuals income which did traditionally keep property price increases inline with wage increases. We now see even small one bedroom flats in London becoming unobtainable for those on a average wage and due to the prominence of Landlords, would be buyers are being forced to rent.

Buying a House Away from London is Becoming the Only Option

The Evening Standard has recently reported that the under thirties are migrating away from living in London at a rate that has never been seen before. In-fact, there has been a net migration with approximately 30,000 more people leaving London than those who have moved in. The article goes further to discuss that it’s the commuter belt areas that the under thirties are choosing to move too and even though travel is more expensive and time consuming the saving on buying a equivalent house is around £450,000.

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Should Foreign Investors Buy in the UK

For the overseas buyer the UK property market has been seen as great safe haven investment that can provide great returns. Many people were spooked by the uncertainty of exiting Europe and then once again concerned when we actually did, but it now appears that these fears have surpassed and there are some great reason why now is the the right time to buy a property in the UK:

  1. The Cheap Value of the pound – The pound is at it’s lowest rate compared to the dollar that weve seen in years, it fell sharply after the Brexit result and hasn’nt really recovered. Currently standing a $1.30 to the pound it’s a great opportunity to buy cheap and make a substantial profit from the dollar inevitably returning a similar level to 2014 when it was around $1.70 to the pound or even the levels seen in 2007 when it was over $2 to the pound. That could be a profit of between 30-40% without property prices even increasing.
  2. There are more properties currently for sale – Since the decision to leave the EU there are currently 2% more homes for sale. At the same time the number of transactions have become less meaning that there is likely to be a number of homes that have been on the market for longer than the seller intended and some opportunities to grab a bargain from desperate sellers.
  3. There is still a discount available due to Brexit – Since the Brexit vote property prices across the UK are down 2% – this isn’t a massive reduction but small enough to not cause concern and also a sign that it could just be a blip and that house prices in the UK will continue to be a safe bet.

The Rest of the UK

For your average UK citizen it does seem that now is a good time to get on the property ladder, if you can! Prices remain strong and the fear of Brexit seems to be over. As mentioned above the average house price has only fallen 2% since the vote and even during the worst recession in history prices only fell 15%, only to quickly bounce back and continue to rise. From looking at this it seems apparent that prices aren’t going to fall further and waiting longer to get onto the property market will only cost you more when you eventually can. Also, Interest rates are at a historic low and even though there has been much speculation that interest rates may rise, it hasn’t happened, in-fact they only became lower and even if they do rise that probably won’t put a halt on the increase in house prices, as prices continued to rise at a rapid rate years ago, when interest rates were far higher. Essentially it’s the continual rat race of owning a property and the lack of house supply particularly in city areas where they can’t possibly build more that will continue to push prices up.

In summary, it has always been the right time to buy a house in the UK, if you are able too! The biggest concern lies with the first time buyers who don’t have the bank of mum and dad and have the almost impossible task of saving a large deposit, whist living in rented accommodation and then also having to achieve a sufficient income to meet loan to equity mortgage requirements. What needs to be highlighted to our current generation rent who wish to become house buyers is that time is running out. What buyers mostly don’t appreciate is that once you reach the age of 45 it becomes even harder to attain a mortgage (due to the lenders becoming concerned that you may not live the full 25 year mortgage term) instead after the age of 45 you will have to start taking out shorter mortgage terms meaning that your monthly payments will be far higher and you may end up living in a smaller property than if you had manged to get on the property ladder at a younger age.

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