Published: 24/10/2022The media loves to scaremonger and it’s almost impossible to find an article which doesn’t warn the nation that it’s a terrible time to buy or sell at the moment. However, if we delve deeper into what’s actually happening and break things down, is all as it seems?
There is no denying that over recent years, it has become more and more expensive to buy property. Let us rewind to early 2021; whilst the stamp duty holiday aided house moves and purchases for many people, it did result in a sharp rise in UK house prices. Increasing houses prices forced slower buyers out of the running, simply because their ideal property moved beyond their budget. Essentially, buying a property became more expensive.
2022 has added new financial pressures. The general cost of living has increased, limiting people’s ability to save money, not forgetting that increased out-goings can impact on lending potential. More recently, there has been a sharp rise in mortgage rates, making monthly mortgage repayments higher than we’ve been used to over recent years and there is little sight of them decreasing. Again, buying a property has become more expensive.
But what about rental prices? The cost of renting has shot up by a minimum of 15%, with parts of the Capital seeing rents rise by 22% as people flock back to city living. Tenants now are paying more money than before and even with rises of mortgage rates, it’s still typically cheaper to own a property and pay off a mortgage than to pay rent in central London. With sky high rental costs eating into a tenant’s potential to save, it has again made buying a property a challenge.
“We have noticed growing numbers of tenants become fed up with increasing rental fees” says Caroline Offergelt, Head of Sales. “They still dream of owning, so even though mortgage rates are very high, tenants would rather buy now and pay off their own mortgage than pay increasingly rising rental costs. They realise that if they don’t make the move soon, that they may not be able to buy at all for some time.”
Is a crash imminent?
The real answer to this, is no one really knows. The same experts who are predicting price reductions of 10% over the next two years are the same people who said UK prices would plummet -15% due to the pandemic, and instead prices rose. They got it wrong then so there is nothing to guarantee they’re right now. But big statements sells papers!
As a buyer, it’s tempting to listen and hold off a search/purchase in the hope that prices will drop and you’ll be able to afford more. But with rising living costs and mortgages at new highs, buying a property simply isn’t going to get significantly cheaper any time soon. The rise in living costs and rents have already caused people to dip into their savings, meaning many buyers will not be in a position to save enough money to truly benefit even if there was a house price adjustment.
Active and savvy buyers are now in a very strong position and have a window of opportunity to take advantage of a quieter market, where some buyers have paused their searches and taken their foot off the gas. As a homeowner, it can feel like the media is telling you it’s a terrible time to sell, but with buyers being told to wait until 2024 to purchase, you need to ask yourself if you are really willing to wait two years to test the water? If prices do soften, then you’d be looking to sell at a lower price in two years, as opposed to selling now.
In short, buying a property is not going to become a whole lot cheaper soon and even if house prices drop, saving money needed for a transaction is going to remain challenging. If you want to buy, you need to speak with a broker and also learn what you’re money can get you; be prepared to make some compromises in the London property market because being inflexible typically means you will be looking forever. If you want to sell, speak with us and we can give you an honest overview of the market and guide you through your options.
Finally, securing your sale is crucial in any market. Our Law Society backed reservation agreements lock in the agreed sales price whilst protecting and preventing from fall throughs. This is the reason why we have a 100% success rate from sold to completed.