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Is 2021 a good time to buy a house?

homeowners guide

Buying property has long been a shrewd financial investment, whether you are looking to buy your first home, moving up the property ladder or investing in buy-to-let property. But with the ongoing pandemic having thrown a spanner in the works not just in the UK but globally, is now a good time to buy?

Interestingly, UK house prices went up by 10% between May 2020 and May 2021, largely as a direct result of two government incentives designed to boost the market against the impact of the pandemic: the stamp duty holiday and the Mortgage Guarantee Scheme. So let us take a closer look at the factors to consider when deciding if it is a good time to buy.

Stamp Duty Land Tax (SDLT)

The stamp duty holiday introduced in July 2020 tapered off in July 2021, reducing the SDLT nil band threshold from £500K to £250K on property sales completed before 1 October 2021. The tax will still apply on any amount above this figure until the deadline. From October onwards, the standard threshold of £125K will be re-introduced. For those just starting out on their property buying journey, it is now too late to take advantage of the stamp duty holiday unless the government decides to extend it further.

That said, since November 2017, first-time buyers in England, Wales and Northern Ireland benefit from stamp duty relief on a residential property worth £300K, with a reduced rate payable up to £500K. This will still apply when the stamp duty holiday ends.

There has been much speculation in the press recently about the end of the stamp duty holiday dampening demand for housing and the impact this may have on house prices. Not surprisingly, official data showed a marked downturn in completed residential purchases in July, while the Royal Institution of Chartered Surveyors (RICS) reported significantly fewer new listings, buyer enquiries and sales in August, concluding ‘house prices are still rising, but the pace of growth has slowed’.

Mortgage Rates and Deposits

Low mortgage rates and the return of 5% deposits are another factor that could sustain the housing market, at least in the short term. At the start of the pandemic last year, mortgage companies increasingly demanded started larger deposits, some as much as 15%, causing difficulties for many homebuyers.

The government’s 95% Mortgage Guarantee Scheme was introduced in April 2021 as a direct measure to reduce lender risk, making them more amenable to accepting 5% deposits. Many major lenders including NatWest, HSBC, Barclays, Santander and Lloyds have signed up to the scheme which is set to last until the end of 2022.

What’s more, you will no doubt be aware that mortgage rates are at an all-time low at present, which is good news for buyers needing finance. The most competitive rates are reserved for buyers with chunky deposits of 40% and more.

Other Government Schemes

First time buyers meeting certain eligibility criteria may also be able to benefit from the government’ new First Homes scheme, launched in June 2021 and designed to provide price-discounted new-build homes for first time buyers and keyworkers.

The property must be discounted by at least 1/3 against the market value, with the property price after discount being no higher than £250K (£420 in Greater London). The scheme is gradually being rolled out across the country, set to make around 1,500 homes available by the end of the year, and 10,000 properties in total.

Of course, there are also local shared ownership schemes available to help first time buyers with lower deposits.

When is the best time to buy property?

Traditionally, the best time to buy a property is when demand (that is, competition for the best properties) is lowest, meaning there’s a better chance of getting a good deal. This has tended to be during the summer when many people are on holiday or at Christmas.

That said, your timing may be entirely dictated by your personal circumstances – triggers for a house move all too often revolve around debt, divorce and death. Then there’s your financial situation to take into account. It is surely unwise to apply for a mortgage soon after starting a new job or if your credit score needs attention.

This year, of course, is not like any other. With the end of the stamp duty holiday, it may seem as though you’ve missed the chance to get a good deal. However, buying in an overheated market has its downsides too. Many buyers reported excessive pressure to make quick purchasing decisions, while delays in mortgage applications, home surveys and local authority search times will have placed additional stress on the process of moving home.

Perhaps now that the market is quieter, you will have more time and opportunity to view prospective properties in person and without any COVID restrictions, making a more considered purchasing decision as a result. Response times for mortgage applications and local searches will be shorter, while conveyancing firms and surveyors have more availability.

What’s more, as we slowly emerge from the many COVID restrictions, now is a good time to fully re-evaluate what we want from our homes, jobs and private lives, making property decisions that support our long-term wellbeing.

Cosey Homes are an established practice of Chartered Surveyors, structural engineers and building engineers with a wide portfolio of property related consultancy and reporting services. We cover the width and breadth of the country including London, Manchester, Newcastle, Bristol and beyond. For expert advice and guidance about residential property surveys or to obtain an instant quote, please get in touch.