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Is now a good time to buy a home in London?How lockdown and Brexit could affect house prices

The stamp duty holiday and low interest rates have led to a surge in house buying but is now a good time to buy or is the bubble set to burst?

In property, as in comedy, timing is everything. Spurred on by the stamp duty holiday and an increased emphasis on quality of life and working from home, many young Londoners are poised on the starting blocks, having successfully tapped up family for a cash injection or spent the last lockdown saving.

However, are the incentives enough of a reason to buy your first home or invest in a bigger one? Or will making a major life decision in cursed 2020 result in a bad case of buy now — pay later?

Is now a good time to start house-hunting?

There is no harm in starting to look, and Andrew Groocock, regional partner at Knight Frank, thinks you might as well get on with it. “We are currently in a very balanced market, the likes of which we haven’t seen for a number of years,” he explains.

“Normally there can be a mismatch with a lack of properties and too many buyers — meaning lots of competition — or vice versa.

“Lots of people are making big life decisions at the moment; upsizing, moving out of London, looking for more outside space, which means there is a healthy level of stock available.

“Consequently, as a buyer you don’t have to make a snap decision as soon as you walk into a property, and there are plenty of options for you to view and compare before deciding which one is right for you.”

On the downside if you find a property you will also find yourself in a massive queue of buyers currently trying to buy and finding themselves waiting weeks for basics like mortgage surveys and conveyancing.

“There are lots of pinch points along the way and it is very frustrating,” says buying agent Henry Pryor. “Everything is taking longer to process.”

I’m worried about buying a property now

Do: be very clear about how much you can afford to pay out on a mortgage every month (bear in mind that taxes are inevitably going to start rising as the Government starts repaying the fortune spent on fighting Covid-19).

But the hard truth is that if you wait for the perfect time to buy a property you will wait forever.

“There is never a perfect point to catch the market as there are always unknowns, potentially positive or negative, so it really depends on your own personal circumstances,” counsels Dominic Agace, chief executive of Winkworth estate agency.

His view is if you have a deposit ready to go, your job is secure, you are committed to staying in London for at least the medium term and you can take advantage of low interest rates to get a good fixed-rate deal, then there is no practical reason to delay.

“I would start my search and see if the influx of properties currently on the market has produced the right one for you,” he says. “If you can afford to pay the mortgage comfortably, then that should help you make the right decision.”

Don’t: let your desire to keep up with your friends/escape your grotty rental/just get on with life push you into making rash decisions.

House buyers should always take their time, and do plenty of research to make sure they are not overpaying — really study those property portals.

Don’t set yourself a deadline to buy, or you might end up regretting your purchase. Never get into a bidding war — even if you’ve found a property you like. There are lots of identical properties in London.

Will house prices crash next year?

Forecasting property prices is an inexact science, but most commentators agree that prices are going to grow gently over the next few years.

Latest forecast says London house prices will rise 20% by 2025

Knight Frank forecasts that London prices will grow by 15 per cent by 2024, while Savills thinks they will go up by 12.7 per cent during the same period.

What that means is that a property you pay £400,000 for today could — and we stress could because a forecast isn’t a guarantee — be worth £50,000 to £60,000 more in a few years’ time.

Taking the historic view, property prices have been on an upward trajectory since before most millennials were born, up by an average of 6.9 per cent per year since 1980.

Will Brexit make house prices fall?

Maybe. There is talk of basic costs for shopping and bills going up, which will impact on your ability to pay a mortgage, but the true answer is that nobody is quite sure what will happen in January.

If there is serious economic disruption then Mathew Loach, the regional director for London at Yopa, warns that the result would be “an immediate and drastic short-term slowdown in the market”.

The second national lockdown followed by the end of the furlough scheme means buyers need to be mentally ready to deal with short-term bumps in return for potential longer-term gains.

Should I be rushing to buy before the Stamp Duty holiday ends?
Yes, you can save up to £15,000 on buying costs. But don’t fall for it, says property expert Henry Pryor.

Stamp duty holiday propels house prices to fastest rise in four years

“There is a feeding frenzy going on at the moment, the market is red hot. It is a bit like back in March with loo roll. In April when the stamp duty holidayends house prices will fall back and your money will go that little bit further.”

However, even though £15,000 isn’t much in the context of London prices, if you use the money to bump up your deposit you will have more spending power.

“To a first-time buyer or second stepper the stamp duty saving is massively valuable when you consider how difficult it can be to save on London salaries,” says Mr Groocock.

“This saving enables buyers to push themselves another step up the ladder, meaning that perhaps they can now afford a two-bedroom flat instead of a one-bedroom, or buy in a more desirable area.”

Interest rates are really low right now. If I wait, will I miss out?

Rates are low, but mortgages are currently hard to come by if you have a deposit less than 15 to 20 per cent. Mr Agace believes cheap loans are here to stay, and the scenario might even get better for buyers next year.

“With transactions slowing once the stamp duty holiday comes to an end we may well see higher loan-to-value mortgages return again, with interest rates potentially going negative and certainly no sign of them rising,” he says.

Is buying in London still a good investment?

WFH is certainly encouraging buyers to look beyond the M25, and you can get more bricks for your buck. But investment-wise Loach thinks the capital is always going to be the best bet in the long run.

“If we look over the history of the London and wider UK housing market property prices in London have always outperformed the rest of the country,” he said.

“When we do eventually return to normal London will still have amazing infrastructure, brilliant public transport, and fantastic employment opportunities, along with lifestyle perks. London will always be desirable among local, national and international buyers.”

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