Mortgage lenders have reported a recent surge in house prices, with the average cost of a home rising to £224,123. Moving house in 2020 or 2021 will need perfect timing. let’s take a look behind, and beyond, the inflated figures.
What’s caused the increase in house prices?
Having been cooped up in our homes for months, it’s not surprising that many of us have found that we could do with a change. Estate agents have been busy during the post-lockdown summer, processing the pent up demand.
Buyers have been motivated by the recent stamp duty changes. Until March 2021, there will be no stamp duty to pay on properties with a price tag of less than £500,000. This incentive, a temporary boost to the housing market, amounts to a significant saving for buyers. During an unpredictable year, the chancellor is encouraging us to move now, rather than wait to see how the market fares.
Working from home is set to continue for many of us. This has driven further activity in the housing market, as buyers reevaluate their accommodation based on new lifestyles. for some, seeking a home with a separate office makes sense. Space, rather than location, could quickly become the most important factor adding future value to a property.
Everyone is aware that the economy is going to give house prices a very bumpy ride before the end of 2020. How many buyers have rushed through a purchase before the storm? Perhaps they’ve done so to ensure the maximum price on the property they are selling.The advice from mortgage lenders Halifax and Nationwide is to look out for serious downward pressure on house prices later in the year.
What will affect house prices in the near future?
The impact on the housing market from the measures to control COVID-19 has been delayed, thanks to government policies designed to mitigate immediate hardship. Despite the media reporting a boom in house prices, economic forecasters are expecting a very serious recession.
The end of the furlough scheme, rising unemployment, and the impact of failing businesses will begin to be reflected in property values. In fact, according to the IMF, house prices in Europe have been overvalued for quite some time. The only way is down.
Job losses due to COVID-19 have affected the young disproportionately. Currently, evictions from rental properties are legally on hold. Once the young unemployed, or precariously employed, leave their rented accommodation, this could trigger a flooding of the market in some areas as private landlords sell up.
Attractive interest rates and a stamp duty holiday may not prove sufficient to maintain the housing market as it is now.
Is now a good time to move house?
Purchasing a house is much more than just a financial decision, unless you are speculating on the housing market. When to move house in 2020 will depend on your individual circumstances. Here are some examples:
To gain the highest price for your current house, it could be worth selling quickly before there is a drop. If you intend to downsize and have no intention to move again for a while, now is the time to get your home tidied up and valued to see where you stand.
An upgrade is always desirable, but is it necessary right now? It may not be the time to take on higher mortgage repayments, especially if the house you are moving into is likely to be worth less in a few months time.
The fortunate few with secure incomes may wish to take that risk if the perfect house becomes available. Otherwise, focus on building value and space into the home you currently own, perhaps with a loft conversion or extension. Or you could buy down (in size or location) and then extend and improve the new house.
Ready with a secure job, a decent deposit and an excellent credit rating? You may be able to pick up a bargain before too long, especially if interest rates remain low. it makes sense to keep paying rent, or to put up with mum and dad’s house for a while longer.
Once stability begins to return to the economy, buy-to-let properties may be available at attractively low prices. However, it could be a while before landlords can be sure to get the level of rent they would prefer.
2020 has brought a societal shift as well as an economic earthquake. House prices will soon reflect this. Cities are losing their cultural appeal. If you have a house in the country, hold on to it.
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