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Getting onto the housing market can be a daunting step. Buyers move from the certainty of a rental property where the single variable is the monthly cost to the more precarious situation where their capital is at risk with the added worry of rising mortgage payments. After all, if you are borrowing significant sums, you don’t want to end up in negative equity and if you’re buying with more equity you don’t want to see your investment fall in value. In an inflationary environment there will, however, be real upward pressure on rent. Overall, this should improve the relative performance of a home you own. Even if it doesn’t feel that way.
Typical holding times for a first property are between 5 – 10 years. If your aspiration or requirement is to move more quickly than that, I’d suggest you pause. Try to buy a property that will suit your requirements for longer. Don’t make too many compromises to get onto the ladder. Instead, look for properties that you can grow into through renovation.
Those looking for new build properties will find themselves with a strong hand to play. Housebuilders will be feeling the pinch. Their costs of building will be rising but the pressure to sell units will intensify. Could deals be on offer? Yes. And will you benefit from the guarantees that exist on new homes? Absolutely. However new build properties don’t offer as many opportunities to expand, convert, or upgrade. Flats and houses that have a loft conversion opportunity, scope for a side return extension, possibility for a conservatory or require renovation will offer better opportunities to improve your returns.
One question people often ask is how to retain value in an uncertain market. There’s no simple answer to this. Because trends will vary. If you have good space, a good location, outside space or off-street parking? All these factors improve the saleability and value of an asset. Similarly, a good kitchen and well-arranged and decorated bathrooms always improve value and saleability, no matter what prevailing market conditions you have. And remember, if you are selling into a poor market, you’ll be buying into one too. So that means saleability is often more important than intrinsic value.
No matter what the national picture, your ability to sell a property will largely come down to the state of the local market. A good location can often weather a national slump in prices. If you are thinking of selling then presentation is more important than ever. Rightmove, and our Instagram orientated age, has increased the appeal of a slick, freshly-painted, photogenic home for buyers who will quickly swipe on to the next property if too much is amiss.
Some think a new kitchen is a sure way to add value… but this is mostly likely one area of the house that buyers will want to put their own stamp on. That said, clean windows, clean carpets, and a house that doesn’t smell all make a property more sellable.
Often decisions to sell are taken relative to the market, but I have always advocated selling because you want to move and identifying the place you want to move to, regardless of the timing. This notion of selling, renting to sit and wait for a market correction to secure a deal is a mug’s game unless you have the patience to put your life on hold. And yes, you might find that bargain but is it worth it for the stress and uncertainty?
With interest rates rising and inflation biting, now is not the time to borrow every last penny. Have some wiggle room should the market or economy take a downturn. And always remember that a fall in house prices is only an issue if you want or need to sell. Markets correct themselves over time and a longterm investment will probably come good in the end. Particularly if you’re in a popular location, with great space and amenity. If you can sell, it’s likely that the market will deteriorate for the rest of the year. The key to moving is your sale and less so the purchase, as you can probably find something you like in a less heated market. Don’t be panicked into a sale or purchase, don’t accept a low-ball offer just to get a sale. Hold your nerve.
I have always been a fan of buying a house that has opportunities to refurbish. That means you end up with a home that’s decorated and configured in the way that you want. In usual market conditions this is nearly always a winner. However, I’d urge a little caution. In this type of market renovations don’t achieve full value. This creates an opportunity to find a property that has had everything done (perhaps not always to your style or décor choices) but at a price that doesn’t reflect the full cost of the works undertaken. And don’t forget that the global shortage in supplies and escalating raw material costs plus a localised shortage of labour and stock means that any refurbishment project is likely to go up in price and be delayed. Do you really want to be living on a building site? Not unless that property is a ’for life’ purchase. This is where the real opportunity lies. Because of the paucity of demand, it’s arguable that a vendor of a property that needs work, will be keen to get a deal done. Providing you with a superb opportunity. Proceed with caution and make sure this is a home you can live in for a while. But think again if you expect to get all the money, time and effort of undertaking a renovation reflected in the end value.
The worst time to downsize is when there’s a real demand for property at the cheaper end and a paucity of demand at the top echelons. As household budgets are squeezed, this scenario is becoming more likely for the coming months, so if you plan to downsize, do so quickly. Make sure you secure a sale before you buy your new place. You don’t want to be owning two properties with all the complications and tax expense that come with it.
Also by James Max
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