Is Now a Good Time to Buy a Home?

It is a dangerous time to buy a house. While nobody knows what the post-pandemic economy will look like, here is what real estate experts think will happen next.

Back in 2018, the Financial Times warned that the U.K. housing market could fall as much as 35% within three years of Brexit. That was after property sales had already fallen upwards of 25% from 2014 to 2017 in some areas of London.

Now, thanks to the coronavirus, the economy is even more volatile. Still, experts say it is a buyer’s market – as long as you are smart.

What to Know Before You Buy

According to Rightmove, a week after the government reopened the market, listings were down 65% down year over year. A Zoopla survey showed that 41% of people previously interested in moving are now holding off.

Those with capital should be investing. And while markets are down, many experts think they will go back up. Here are some tips to keep in mind when buying:

• Bid at least 20% below the asking price. Those who need money fast may be willing to accept your offer.
• Know that this is a long-term investment. It could take years for the housing market to get back to pre-2014 numbers. Or, it could go back up next year — nobody knows.
• Take advantage of low-interest rates when they are available. Be patient, as it may be difficult to find a mortgage lender willing to work with you for a while.
• Lenders may require larger deposits than normal. The upside is that if you can provide a higher deposit upfront, you will pay less interest over the life of the loan. Also, you may secure a better interest rate, too.

According to the CEO of FJP Investment, now is the time to prepare and to make sure all your books are in order.

House Price Predictions

Global real estate services provider Savills offers two predictions on how the market may change. The two models are based on two possible coronavirus outcomes. One predicts a 5% dip in 2020 and a 5% rise in 2021. The other sees a 10% drop this year and a 4% increase in 2021.

Knight Frank and Lloyds Banking Group offer similar forecasts. Both see a small drop this year followed by a small rise next year. That means the best time to find a bargain would be during 2020.

On the contrary, Marc Attwater, writing on behalf of the British Landlords Association, maintains that it is not a good time to buy property. He suggests waiting at least six months, as we may be entering a worldwide depression. He doubts that any property investor will get back into the U.K. market before November. He said that nobody really knows when the property market will finally bottom out.

Housing market analyst Anthony Codling recently said that prices are still on the rise according to the data from April. He explained prices were going up prior to lockdown, but since the Office for National Statistics has temporarily halted the U.K. price index, we do not know if the prices are now going down.

Buying During a Pandemic

Try to stay healthy. The U.K. government urges homebuyers to take appropriate precautions to stop the spread of the virus. You do not have to pull out of transactions, but you should follow these tips:

• Consider the health of yourself and others. You can use remote devices to make any necessary purchases online. If you find yourself in a situation where you need to meet with other parties, then do what you can to stay safe and healthy.
• Respect any stay at home orders that may be in place. If you are not allowed to apply in person or to take a tour of a house, then you should not break any laws to do so.
• Do not move into a new house on the same day the other party is moving out. You should try to stagger your moving dates.

What About First Time Buyers?

Because lenders typically require a higher down payment, it may be harder for first-time buyers to enter the market. If you are selling a property you already own, then you can use your profits toward the down payment on the new house. Those who do not have a property to sell usually do not have a large sum of money to put toward the down payment. This can make it very difficult for first-time buyers to find a house, especially right now.

One option for first-time buyers is to work on increasing the amount they have for a down payment. They might try liquidating their other assets and saving whenever possible.

Looking Ahead to a Possible Recession or Worse

It will take many years to recover from the economic effects of the pandemic, based on experts’ predictions. The housing market will also likely remain shaky throughout the recovery, mostly because of the pending recession.

According to DirectHouseBuiyer.co.uk, a recession was already on its way even before the virus. And since 1981, the U.K. has suffered a recession every 10 years. In fact, the last recession started in 2007, so many think the next one is overdue.

If enough people lose their jobs due to the recession, individuals will eventually have to sell their houses or default on their loans. That may lead to an oversupply of houses, which could cause property values to tumble.

Hyperinflation May Raise Property Values

Chancellor Rishi Sunak is offering billions of pounds in financial support, and the government is deferring tax collection. The value of the pound will likely drop as a result. That may lead to inflation, which would mean a spike in property prices.

Worst Areas to Shop for a House

Homes in Kingston and Bromley are worth 80% of what they were in 2014. Other parts of London have fared much better since Brexit talks began; Uxbridge and East London only fell around 5% during the same period.

The worst area to shop for a house will be where the market is most likely to flood. If we are heading for a global depression, there are certain communities that will feel it more than others. It may be wise not to purchase real estate in those areas.

Property values should remain constant in neighborhoods with people who are likely to survive an economic downturn.

Additionally, depending on how long the coronavirus lasts and how soon the next pandemic arrives, you may want to consider which areas have the best access to medical centers.

Some Demand Will Always Remain

There are many models that predict what may happen to the U.K. housing market in the future. And while they may be false and disagree – most projections recognize that there will always be a demand for housing.

Perhaps the market will become saturated with too many houses, or maybe lenders will close up shop and wait for a safer market where people have jobs again. But while all of the above ultimately affect property value, but there will always be people looking to buy.