The ups and downs of the UK property market
A new Help to Buy scheme will be introduced by the UK Government to complement the existing NewBuy scheme (a government backed 95% mortgage scheme aimed at helping first-time buyers and homeowners buy a new-build home with a deposit of just 5%), allowing all homebuyers rather than just first-time buyers to take advantage of shared equity loans of up to 20% of a new build home’s value, thus attempting to make mortgage borrowing more attractive to lenders.
This will imply that home movers will be able to join first-time buyers in being able to bump up their deposit with the help of an interest-free loan for any new-build home worth up to a sturdy £600,000. If they put down 5%, then they can borrow an extra 20% to get to a 25% deposit level and access better mortgage rates and lower monthly payments.
However, one of the main problems with this new property boom plan, is that the life support machine of 0.5% base rate means the last property bubble hasn’t even properly burst yet, with prices still near historic highs compared to earnings, despite the slump in transactions since 2007.
The national property market is today more fragmented than ever before, with the bright spots being all about location. London and the South East, for example, are riding high but other regions are still suffering, and if you drill down further, a postcode lottery is the order of the day. In fact, a desirable town or district may have buyers chasing down properties and driving selling prices up, whereas a less in-demand spot just down the road could see properties piling up unsold.
If UK residents want to move home, knowledge of their market and sensible pricing is essential. That means looking beyond the headline prices. The Land Registry’s most recent quarterly data, which provides the broadest measure of actual house prices paid across the board also including both new-build home sales and properties that have not been sold at least once in the past 17 years, showed a decline in the months to December 2012 but prices up year-on-year.
The cost of moving is also exorbitant. Those buying family homes in areas where a relatively modest property costs more than £250,000 face a stamp duty bill of at least £7,500, add estate agent and solicitors’ fees and moving can set an ordinary family back £15,000 or more, without even having to find the extra cash for a 25% deposit on a more high-priced home. Estate agents still report of a stand-off between sellers and buyers, with the former reluctant to cut prices and the latter averse to paying over the odds. Sellers must either have a sought-after property to sell in an in-demand area, or be willing to lower their expectations, if they want to get a sold sign up outside their house.