There were two significant influences on the housing market in 2016: stamp duty and the EU referendum result. Unfortunately, both have led to many contradictory stories regarding property prices and the 2017 outlook.
Following the decision to leave the EU there has been a lot of uncertainty in the UK housing market. Despite this uncertainty; house prices in the U.K have continued to grow. (Zoopla price data has revealed that the average property in the UK is currently worth £299,764.)
Paul and I have recently put one of our properties up for sale, and as a result I personally believe now is a good time to buy a property as there are plenty BMV (Below Market Value) deals available. It took me about 8 hours to sell my flat in 2015, I was inundated with offers in a matter of hours after carrying out an open house. Selling this property feels a lot different; offers and general interest have been much slower than they have been in the past.
I've listed some observations/personal opinions below:
- Recently, I have noticed that some properties have been on Rightmove and Zoopla for over 6 months. (A potential sign that the seller is probably getting desperate and will take a cheeky offer)
- I’ve also noticed a trend of property prices being reduced over the past two/three months, I get the impression that prospective buyers are being cautious and waiting to see what happens to the property market before buying ... Use this uncertainty to your advantage.
- I think this is a great opportunity to take advantage of seller’s uncertainty. If a property has been on the market for a long time I'd suggest putting in a BMV bid. Just because a property says £350,000 does not mean you can't offer £300,000. (Trust me it has worked for me)
- Nobody wants to buy a property and see a property crash three months later and likewise nobody wants to sell a property to then see that prices have risen three months later. This is the risk you take with property, however as a buyer this just highlights why it is important to buy BMV, that way if the market does crash at least you (hopefully) wouldn't have lost too much equity if any.
- The Office for National Statistics (ONS) have said that the typical property cost 7.6 times average annual earnings of employees in England and Wales. Considering that lenders do not tend to lend more than 5 times a salary; property prices are getting out of reach for many, maybe now is a good time to buy before prices become even more unaffordable.
- JLL has forecast that house price growth will be "subdued" and largely flat until 2019, with a slowdown in the number of new homes built. If this is the case then it can be argued that now is a good time to buy seeing as price growth is set to be minimal. On the other hand it can be argued that there’s no rush to get on the ladder as prices aren’t forecast to rise. Personally I’d aim to get on the ladder whilst prices are fairly stable.
- Many property experts argue that falling prices at the top end of the market and a slowdown among the rest has been caused primarily by changes to the stamp duty system, rather than Brexit. I believe this to be true. Figures by the Council of Mortgage Lenders (CML) showed would-be landlords borrowed £800m to buy new homes in January, down from £1.4bn the year before, and £900m in December. It seems there’s currently less landlords to compete with which can only be a good thing.
- I believe the slowdown in the property market we are now seeing is a price correction after the un-savvy investors rushed to buy before the stamp duty changes were implemented, this spike in activity led to many people purchasing property over the odds.
- Recent reports have claimed that 10 would-be buyers chase each home for sale in England and Wales. Whilst this may be true for some areas, I do not believe it is true for every area. It’s worth identifying areas with low demand. London is not the be all and end all!
- Interest rates are at a record low level. The average new mortgage loan in January 2017 came with an interest rate of just 2.05%, down from 2.49% a year ago and compared to 5.34% a decade ago. Now’s a great opportunity to find a mortgage with a low interest rate.
In conclusion, you don't need to wait for a property crash for you to get on the property ladder. If you can get a property significantly BMV then it can be the equivalent to buying a property during a crash.
Always remember, property is a long term investment. The recent Housing White Paper published by the Government states that the UK needs to build 250,000 homes a year to meet demand (last year it was 140,000) as long as the UK continues to struggle to meet this target; it is likely that prices will continue to rise as supply fails to meet demand.
Is now a good time to buy a property? I can't answer yes or no but I don't personally think there's a bad time to buy a BMV property.