Why Now is a Great Time to Buy Property!

The economic climate continues to challenge our thinking and indeed our approach to financial matters in general. It is no surprise that during these times our instinct is to adopt a more conservative attitude towards spending, particularly if the amount we are due to forgo is significant and long term.

Yes, the global economy remains uncertain and there may well be significant fall out from unresolved issues like the European saga; all of which may ultimately have a dampening effect on the housing market and house prices. However, when we look a little more closely, there seems to me to be an argument to suggest that now might actually be a great time to buy; particularly if you are a first time buyer.

The thing to remember is that the actual sale price of a property does not always determine its affordability. For instance, if property prices dropped by a small percentage and simultaneously mortgage repayments rose, then the actual cost of buying becomes more difficult. In today’s market however, the reality is that home buying is now far cheaper than renting – which is the total opposite to three years ago. Then, the average cost of buying was about a third higher than the average cost to rent paid for a similar property. In 2008, the cost of buying sat at a hugely prohibitive 47% of disposable income; when it is now only 29%. I suspect this expectation that buying is still the more costly option may be a major reason for buyers hanging back. As a prospective buyer you may wish to consider the following:

1. The cost of renting is still on the rise. The average monthly UK rental is currently sitting at a staggering £715 per calendar month. This cost will continue to rise as long as people remain in limbo patiently waiting for that perfect moment to buy.
2. The average mortgage repayment figure has fallen over recent years, due to a fall in house prices and low mortgage rates. Whilst deposit expectations remain high, the benefit is that you are forced to take a lower loan amount, and therefore have lower repayment costs long term. When the market finally returns and property prices start to rise again, you will also benefit from a healthy capital balance. Should a buyer secure a fixed term mortgage over the next 3-5 years, this safety net may well see them through the toughest part of the recession.
3. Current inflation rates are rapidly eroding the value of your hard earned deposit, if you have already saved the necessary funds to buy. Whilst it remains in the bank you are effectively losing money. An investment into property should realise a healthier return in the long run
4. Finally, the stamp duty relief scheme for first time buyers is due to end on March 24th 2012. The timing is relevant for anyone who is looking to secure a mortgage, as it is normally only promised for 3 months. My advice to buyers is to book an appointment with your financial advisor, establish how much you can borrow based on your earnings and deposit holding and then view as many available houses as possible and haggle hard! After all, it is currently your market.