A Good Time to Sell or Buy?

Whether or not it is a good time to buy or sell a property will always depend on a number of factors. These include the personal circumstances of the people involved and the specific property as well as the wider housing market conditions and the availability of mortgage finance.

The UK’s housing market currently combines a perplexing mix of conflicting signals. From government initiatives to encourage sellers and first-time buyers, to stringent lending conditions and general uncertainty about the future prospects for residential property prices – the message for buyers and sellers is unclear.

The Global Financial Downturn and the UK Property Market

Since the global financial downturn during 2008 worried property owners and prospective buyers having been trying to work out whether the time is right to enter the property market. It is widely accepted that UK property prices peaked in 2007 after years of precipitous rises. However, the financial downturn did not signal a crash in the housing market as seen during previous recessions. Instead the housing market stagnated.

First-time buyers found it increasingly difficult to obtain mortgage financing due to tightened lending conditions. Those who did manage to find a mortgage discovered that there was very little availability of suitable properties. Homeowners who might otherwise have put their properties up for sale may have been put off doing so because of the requirement to obtain a Home Information Pack. Owners who had purchased properties at the top of the market were loath to sell at a loss and many decided to let their property instead, in the hope that prices would pick up again. The limited availability of properties meant that prices stayed relatively constant.

Government Initiatives to Stimulate the Property Market

The UK’s coalition government announced in May 2010 that they were suspending the requirement for Home Information Packs. It was hoped that this would stimulate the sluggish housing market by increasing the number of properties available. It appears that more properties did come onto the market following this move. However, an increase in supply without a matching increase in demand usually leads to a drop in prices – and it does appear that prices have gone down slightly. Nonetheless, the sharp correction in property prices that many had anticipated has yet to materialise.

The abolition of the Home Information Packs came in the wake of the previous government’s suspension of stamp duty for many first-time buyers. This move was intended to lure first-time buyers into an uncertain property market.

The Future for the UK Property Market

Two years on from the worst of the financial crisis and the prospects for the UK’s property market are still unclear. Whilst there may be more mortgage products available, the lending criteria applied by most banks and mortgage companies remain strict. A substantial deposit will be needed in most cases and the interest rate for borrowing is unlikely to be as attractive as might be expected given an unusually low Bank of England rate.

There remains a great deal of uncertainty about the economy as a whole. The optimists believe that the UK is financially out of the woods and that the recovery is well established. The cynics warn of the notorious “double-dip” recession and fear that the mechanisms put in place to help the UK recover from the recession have been removed too soon. The impact of a second downturn, should it come, could potentially be more dramatic for the residential property market than the first.

The Outlook for Buyers and Sellers

Prospective buyers may feel the economic uncertainty surrounding the housing market particularly keenly. Some observers have said that it may be five to ten years before property prices stabilise – or stop falling. Purchasers who have heard the horror stories of those who bought property at the top of the market in 2007, and now face years of being in negative equity, are naturally reluctant to fall into the same trap.

Undoubtedly, the abolition of the Home Information Pack makes it a far better time for the uncertain seller to try their luck in the housing market. Decent properties, in well established areas, at reasonable prices remain attractive to purchasers. A home owner who has equity in their property, and did not buy at the peak of the market, may still be able to walk away from a sale with a handsome profit. Equally, a buyer with a good deposit and an affordable mortgage offer – and who qualifies for the first-time buyer stamp duty exemption – might find that the time is indeed right to invest in bricks and mortar.