The property market has been on a roll in recent months, but whether or not this can continue into 2021 remains to be seen, with the Stamp Duty cut ending and unemployment rising.
At the time of writing the most recent house price index (HPI) from Nationwide Building Society suggested that house prices were growing 6.5% year-on-year in November. This was an acceleration from 5.8% in October. Indeed, November’s figure is the highest since January 2015.
There is no doubt that the buoyancy in the market is in part thanks to the Government’s Stamp Duty suspension. Without it, the ongoing coronavirus crisis would have severely dampened confidence in the market. Indeed, many purchases have been brought forward by this measure.
But for those considering whether to buy for the first time, sell a property or move home now, it draws an inevitable question over whether it is the right moment to strike, or if waiting till a slump occurs would be shrewd.
For first-time buyers, options are severely limited when it comes to taking the first step onto the ladder – even more so than usual. Thanks to the coronavirus crisis, the availability of typical first-time buyer mortgages has collapsed in the past six months.
The picture is not as bleak as it was, with 90% loan-to-value mortgages now trickling back onto the market according to financial data provider Moneyfacts. This should hopefully open options back up to those thinking about buying their first house, but this is by no means a “normal” market to buy in.
Luckily there is no need to “time” the market. Whether or not now is a ‘good’ time for someone to take their first steps onto the ladder is something of a moot point. Generally, you’d be looking at a 25-year mortgage – by which time the relative fluctuation in price at the time you bought will be a fairly distant memory.
For those already on the ladder but looking to move up, perhaps looking for more space or a new area to live in, then whether now is a good time becomes more of a judgement call. While the Stamp Duty cut will likely help lessen the costs of moving, it can take so long to complete on any move that the temporary tax cut no longer applies.
This is something of a self-fulfilling prophecy though, as once the full tax rates return, demand will likely be depressed and price rises will slow or even reverse. Plus, considering that next year the Office for Budget Responsibility (OBR) predicts that unemployment will hit a high of 7.5% in the second quarter, demand could be set to fall off a cliff, unless the Chancellor reignites the Stamp Duty cut in his March Budget.
Finally, for downsizers – those whose kids have perhaps left the family home and want something a bit smaller to manage – they face a similar issue to existing homeowners looking to move.
These are not normal times and anyone considering such a big financial decision needs to have this front and centre of their minds.
Circumstances vary greatly, so if you’re unsure about what to do, don’t hesitate to get in touch to discuss.
Jon Doyle is Founder and Financial Planner at Juniper Wealth Management. Advising clients since 2008 he has guided clients through good time, bad times and the ugly. With a clear vision on how advice should be delivered and strong opinions on how we should be investing money in order to live the life we want to live free from money worry.