This is a question I’m being asked a lot at the moment, together with “will I ever be able to afford anything in London?”
They’re questions about almost two different worlds. There’s property and then there’s London property. Property in the UK behaves very differently to property in London which why I keep wondering why we keep getting ‘average’ results for house prices in the UK. There’s no such thing. Property in many parts of the UK is moving in totally the opposite direction to London and the Home Counties. There is no average. So, wherever you live in the UK, should you invest in property now?
- Will property prices go up or down?
- Should I invest in property now or wait?
- How can I get a mortgage?
We’re getting such mixed messages from the ‘experts’ about property prices right now.
Every day brings a new prediction about how much prices will rise or fall.
The most recent has been Nationwide predicting a cooling off of price rises over the summer as the new mortgage rules kick in. Also in London estate agents have started to say, for the first time in ages, that sellers might be willing to take an offer, rather than warning them that they are likely to be gazumped.
On the other hand, the cash buyers, particularly those from abroad, show no signs of losing interest in London property particularly and even property in popular cities such as Oxford, Cambridge and Edinburgh.
Also there are property evangelists like Ian Samuels, who runs The Property Investor, a Manchester-based company, who says that despite house prices being out of reach for many, they will “never be this low again”. He says the next twelve months will be a ‘critical period’ for those wishing to make money from UK property investments, a leading housing expert has warned today.
Ian, author of new book Property Tycoon: A simple seven-step guide to becoming a property millionaire, says that we should be buying property this year so that we can reap the financial rewards of a property boom, expected between 2018 and 2020. He thinks this boom could see houses across the country rise by at least 25%, meaning in some areas the average family home could increase in value by £100,000.
He says the areas outside London are the ones offering the most potential. London prices, he says, are artificially inflated due to money being invested from outside the UK. But in other UK cities, the housing growth is likely to be steadier with areas such as Bournemouth, Brighton and Windsor likely to have the biggest hikes.
Yes, come the day, come the property prediction. It’s very difficult to know whether now is the time to buy or not, particularly as the views are different in different parts of the country.
Certainly the long-term prediction for property prices is up, simply because of supply and demand, not just in this country but around the world.
The world population is increasing at an alarming rate. Property in many of the major economies (certainly in the big cities) is going up in price, even in Berlin (Germany generally has seen almost no rise in house prices for the last 50 years).
In the UK our population is set to grow because of
- the current birth rate,
- the fact that we’re living longer and not vacating our homes as we used to,
- the fact that we’re increasingly unable to live with each other so single households are on the rise
- and we’re not building anything like enough properties to meet demand.
So long-term, property is a good bet.
My view? My view is that it’s never a good idea to panic-buy anything, particularly big things like property.
But, if you’re looking to invest for the long-term, now probably is a pretty good time to be looking at property as prices, though high, may be taking a bit of a breather at the moment.
- If you’re buying a property to live in, think about what it’s like for you, not how much it might fetch when you sell it. It’s nice to buy something that could appreciate in value of course but the fundamental question is whether it will be a good home for you.
- If you’re buying as a rental investment make sure the potential rents will more than cover your mortgage payments. The only way is up for interest rates so when they do rise this will have a material effect on your repayments and even a 1/2% rise can put a big burden on your finances. N.B. rental income in London is comparatively poor at the moment because of the very high price of properties and the glut of homes for rent. Better to look elsewhere for that.
- No one can predict how the price of something will rise or fall but if you’re looking for a property that will go up in value over the years do your research first. Look at what will be happening in the area in the short to medium term. If there’s a lot of building and general interest in the are then it could be a good bet long-term. Go for an area that is being looked after by its inhabitants. That’s a good sign that it will continue to be popular.
- If you have a good wad of cash to invest, see if you can split it and ‘gear’ your investment by buying two properties and borrowing money for the remaining cost of the homes. Particularly if you’re planning on renting them, you’re going to do better by buying two with mortgages than buying one debt-free. However, if you’re just looking to get an income from your money then you will probably be better off spending it all on one property and pocketing the full rent (minus whatever you have to pay in tax).
Try our mortgage calculator to see if you can easily pay the amount you would need to pay each month:
It’s certainly harder than it was to get a mortgage, although buy-to-let mortgages are a different animal and are based more on the rental you could get for a property rather than your own ability to repay.
Firstly speak to our partners, London & Country, as they are free mortgage brokers and can point you in the right direction immediately.
Then you will need to get together as much paperwork as possible to show what you’re earning, what you’re spending and what possible extra income you could have in the near future. At the same time it may be worth cutting down on spending just to make it clear that you can afford as much as you are asking for.
If this is the first time you’ve bought a house, download our free, easy guide to getting a mortgage here. It’s fun and friendly and easy to read so check it out!