Should you wait or go for it to get on the property ladder?

Home » Should you wait or go for it to get on the property ladder? Published: 24th February 2023 This Article was Written by: Jessica Burton   financial outlook , first time buyer , house prices

Recent forecasts of a property market downturn are making first-time buyers question when would be a good time to take their first step on the property ladder. Here the Anderson Harris team share their views.

The current economic pressures have prompted the likes of Savills to forecast property values could fall by 10% nationally over the coming year.

People are traditionally less comfortable buying in a market when prices are falling. As property has been such a good investment for many years now, there’s a new nervousness about buying if values then fall.

Putting things into perspective

While we are seeing property values reduce in some areas, different territories are encountering different levels of price falls. It’s worth bearing in mind that the 10% forecasted by Savills is a national average, and so it is important to understand the true picture in your target location.

Another thing to bear in mind is that, while things are looking less rosy in the short-term, there is an expectation that property prices will rise again.

Take the 5+year view

If buyers are happy to purchase property with a longer-term view in mind, they are less likely to be as affected by any imminent price falls.

That means thinking carefully about the type of property you’ll need for your specific circumstances (and your family’s) over the next 5 years. Now is perhaps not the time to go for a short-term purchase, ie one which you’ll have grown out of in a couple of years.

Opportunities for first-time buyers

With property prices falling, first-time buyers are more likely to pick up a property at a lower purchase price. Getting the timing right will be important here, and it will help to keep your eye on the local market and monitor the latest trends and forecasts.

Of course, first-time buyers are currently helped by the recent changes to stamp duty. Since 23 September 2022, the rates for residential property have been revised, increasing the 0% band threshold from £125,000 to £250,000.

The government also increased stamp duty relief for first-time buyers, raising the 0% band threshold from £300,000 to £425,000 and the maximum value of property on which they can claim the relief from £500,000 to £625,000.

This has really helped first-time buyers in high price areas like the South East. Bear in mind though, this relief is currently in place until 31 March 2025.

For those keen to sell property quickly in the challenging market, first-time buyers with no chain attached will be attractive purchasers, particularly if they have already pre-established their mortgage capacity (see next point).

Having a bigger deposit will also greatly help. With mortgage rates having risen so much in recent months, it makes sound financial sense to borrow less at a higher rate. Longer term, it is still better to borrow less at high rates than more at lower rates.

Going for it

Before you start looking at properties, talk to an independent adviser so you fully understand your buying capacity, and what criteria you’ll need to satisfy in order to get a mortgage offer. Lenders are adjusting their affordability calculations in line with the current costing of living rises, and so it helps to get a current picture.

Interestingly, while the Bank of England base rate has been climbing, fixed mortgage rates have been reducing for the last 4 months. There are signs that a price war is emerging among lenders, who are keen to get their share of a reducing market.

With an understanding of your mortgage capacity, you’ll be in a stronger position to act quickly once you see your ideal property on the market.

Summary

Everyone’s situation is unique, so whether you decide to delay or go for it in getting on the property ladder the rationale should be influenced by your personal circumstances. Talking to an independent mortgage adviser can help here as they can advise on the opportunities and risks to you.

A contracting property market, and the current stamp duty reliefs do present opportunities for first-time Buyers. As does the possible price war among lenders.

It is important though to closely monitor market conditions, and to regard your purchase as a long-term investment rather than a short-term one. Formulate a strategy and be clear about your options and financial capacity. With that to hand, you’ll be in a strong position to act when you see your ideal property for the next 5+years.

Can we help?

To talk to one of our First-Time Buyer specialists call 020 7495 6633 or email enquiries@andersonharris.co.uk.