10 Oct 2020

The State of Play on House Prices


House prices are currently on the rise.

Halifax’s house price index puts property price growth at 7.3% in September 2020, a substantial yearly increase.

As we’ve discussed on this blog before, pent up demand following the lockdown, combined with the government’s stamp duty surcharge, has served to heighten demand in the market. 

This increasingly rapid growth is the result.

Further increases on the cards

Price rises could actually get more extreme in the months ahead.

Indeed, Reallymoving has predicted inflation to get as high as 14% by November.

This would be a concerningly huge increase that would see prices continue to spiral out of control compared to people’s incomes.

The cooldown

If prices are rising you could see it as a no-brainer to get on the ladder as soon as possible, but the reality is quite different.

Some professionals are cautious about prices. There are fears they could fall once the effects of the pandemic-induced recession continue to kick in.

Then you’ve got the uncertain elements of Brexit, as well as the end of the stamp duty holiday on the 31st of March of next year, which could all have a cooling effect on prices.
Liverpool estate agent Adam Sutton has gone on record warning that people should sell properties before house prices crash, so there are certainly fears that this house price growth could be turned on its head.

Focus on the long-term

It’s a difficult environment to buy in at the moment, because it’s hard to tell who to believe when it comes to prices.
What we would say is if you plan to hold onto property for the long-term, any short-term ups and downs when it comes to prices are less important.

Fundamentally the cost of property tends to rise in the long run, so even if there is a fall over the next 12 months it’s not necessarily a huge deal.

No rush

Evidence does suggest that you shouldn’t rush to buy property just because of some of the house price growth figures being banded out, as we could see this growth replaced with a contraction next year.
Once the stamp duty holiday ends properties may sell for less as demand cools, though on the flipside you’ll have to pay the government tax.

First-time buyers

For first-time buyers the current environment isn’t a favourable one. 

There’s a lack of mortgages being offered for those with a small deposit, while investors and homemovers have been given a strong incentive to buy now due to the stamp duty holiday. In comparison first-time buyers were already exempt from paying as much stamp duty as the rest.
If you’re an aspiring first-time buyer we’d recommend you keep an eye on the government’s new 95% LTV scheme being developed, which could help those looking to buy with a smaller deposit when it comes to market.

As always, it’s best to consult with a mortgage broker when working out the best course of action regarding buying at the right time and with the right mortgage.

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