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Following the recent upheaval in the property market due to stamp duty changes in April, and of course Britain voting to leave the European Union – There is a huge cloud of political and economic uncertainty across the UK, but it’s not all doom and gloom as the perfect storm is brewing for UK property buyers.
Last week, Halifax announced that property process only grew 1.2% through April and June – usually this period sees a much steeper increase as it’s traditionally the start of the house buying season. This lack of growth is bad news for sellers and investors, but fantastic news for those of us looking for a place on the property ladder.
What does this mean?
Although you’ll still have to fork out for stamp duty whenever you buy a property in the UK, payable on completion. Despite the cost and the pain, stamp duty charges have dampened down house prices regardless of the current imbalance between supply and demand. If you’re buying a property in order to let it out, or as a second home, you will still have to pay a 3% stamp duty charge.
The change to stamp duty has helped mortgage approvals recently, with the volume of mortgage approvals increasing by 1.3% through April and May – this follows on from the rush to complete house sales before the charge came into place in March.
Should I buy?
Overall, growth looks set to continue slowly throughout the summer – It’s not a brilliant situation for investors looking to expand their portfolio or to get returns on existing investments, but gives first time buyers a unique opportunity.
If you’re a buyer looking to capitalise on these opportunities, then get in touch with our expert team and find out how we can help.
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There is no denying that Brexit and the chaotic uncertainty that we are witnessing will have an impact on housing markets across the UK. However, one thing is certain economic market forces will prevail. The effects may not be as short lived as some eternal optimists claim however the market will find its balance that is for sure.
What will happen?
Without knowledge of how markets and macroeconomic policy affect the property market it is easy to think uncertainty is the only problem, If only! It is known we British are a resilient and resourceful nation, and those qualities will be needed to ensure that we come out the other end stronger and stable. Other nations in Europe and around the world will naturally wish to trade with us and given dropping sterling value the UK represents a decent value proposition for property investors from abroad for whom the drop in pound sterling has meant more affordable investment options in the UK.
Of course it impossible to predict the future, from a property perspective, this will most definitely have a downward pressure on prices. This may present opportunities for first time buyers and investors. The UK property market has always been cyclical and very much boom and bust since accurate records have begun its always been the same. The wise will look to sell especially those downsizing and buy sooner rather than later, in case the prices drop sharply and the buyers should be buying and fixing their mortgage rates while they are still relatively low, just in case the interest rates rise rapidly.
Renting is the other side of the coin, a simplistic view maybe the falling pound may drive a rush of overseas landlords, outside of London it seems optimistic. The increase in Britons returning from living in Europe (currently living in unencumbered villas in Spain etc.) coupled with the lack of freedom of movement for Europeans (mostly tenants) coming to the UK will result in an interesting situation.
The variables involved mean there isn’t a clear path of what is going to happen, but buyer’s remorse is kicking in for more than just the leave voters, the pound is dropping and our economic outlook has been reclassified as negative by Moody’s, it’s only a matter of time before the property market starts to slow down. With all change there is an opportunity for those who see it, selling or buying now could be a golden chance that we regret not taking.
Maybe it’s time to sell?
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During the years of uncertainty and global recession, people not only in the Redditch or Bromsgrove areas, but people all over the world decided to batten down the hatches and ride out the storm.
Homeowners waited for house prices to recover. They didn’t readily want to move house for various reasons including the fear factor around their job stability or just simply because the drop in prices meant that they didn’t have enough deposit to buy a bigger property.
However, recently we are seeing a new phenomenon in the housing market. House prices in most areas in Redditch and Bromsgrove are back to or in some cases even higher than pre-recessionary levels, but the property stock levels across most high street estate agents are worryingly low. So this raises a very important question and that is why?
Why are people reluctant to put their homes on the market and make the move?
One explanation is very concerning! When speaking to prospective sellers some have actually given the response that they feel as the market and economy strengthens their property value will further go up! When asked what their future moving plans are, they usually reply that they will be looking into buying a bigger or more expensive property i.e. moving up the property ladder. This raises the most important point in ‘what is a dry market for available properties?’
Let's consider an example of a Mr and Mrs Smith who own a terraced house in Redditch worth around £100,000. They are looking to move up the ladder to a semi-detached house in Bromsgrove worth around £200,000. This means that they need to bridge a £100,000 gap in order to move from their current residence to their new dream home.
Now let’s suppose that Mr and Mrs Smith decide to hold off putting their house on the market for sale, expecting their Redditch home to further increase in value. Let’s assume that Mr and Mrs Smith are right and the market value increases by a further 10%, Mr and Mrs Smith have now got a terraced property in Redditch worth around £110,000. But the question is that have they really gained an extra £10,000? Technically no, they have not gained even a penny by waiting instead their dream semi-detached house in Bromsgrove has now also gone up by 10% with the increase in market value. They will now have to pay £220,000 for their onward purchase. This means that Mr & Mrs Smith will now need £110,000 to bridge that gap!
Even though their property in Redditch has increased in value by £10,000, yet they actually lost £10,000 by waiting for the market value to further increase, as the bigger property that they were looking to buy also increased in value.
Until sellers are educated with this fundamental market logic, there will continue to be a shortage in the properties available for sale. In our opinion, NOW is really a good time to sell property especially if you are upsizing.
So, if you have been considering to move up the property ladder, then you could really benefit from speaking to AP Morgan, your leading local Estate Agents in Redditch and Bromsgrove.
Please ask to arrange a FREE and No-obligation Market Appraisal of your property, where you will be provided with an up-to-date valuation of your property and an insight into the local property values and trends as well as the best possible advice on moving house under your own personal circumstances.