Making a big financial decision in these Brexit-times is bewildering. And it's especially scary when you're a first time buyer trying to decide whether now is the right time to buy your first property. We're not only talking about a significant financial commitment, but a decision that's going to be with you every day of your life for years to come.
There's no denying that Brexit has introduced a lot of uncertainty into the UK economy - and nowhere more than in the UK property market. While it's easy to see change as a threat, or a reason to hold off on buying property, it's equally true that it introduces opportunity for those who keep their wits about them and know how to spot a good deal. Turning uncertainty to opportunity happens when you act based on facts and not fear. So we've put together five facts that help identify the biggest opportunities for first time buyers.
Fact #1: Brexit is causing uncertainty in the property market
Uncertainty around the terms and consequences of Britain's exit from the European Union on April 12th this year has undoubtedly had an effect on the UK housing market. With the Brexit deadline looming there is little agreement over whether Britain's withdrawal from the EU will ultimately benefit or harm the country and how long the recovery period will be, not least because the nature of Brexit is not clear yet
Brexit uncertainty is being reflected in the property market with prices of comparable properties in many areas showing no consistency, with some going up, whilst others come down or stay flat. And beyond this uncertainty, right now it's anyone's guess whether a hard Brexit will cause prices to slide or a good Brexit send prices soaring.
Opportunity: Although these are uncertain times, there are factors that will remain unchanged – like the need for individuals to sell their houses or buy, and the tendency to get on with life and find ways to make it work. On the one hand, Brexit uncertainty has brought some craziness to the UK market, on the other hand the length of most mortgage terms suggests a long-term investment - and it has been well proven that over the long term bricks and mortar are one of the more reliable investments to make. In fact, it's demonstrably true that the average price of housing in the UK rises and falls in tandem with the performance of the FTSE 100 - just take a look at this graph for a clear indication. And the lack of consistency in the market means that there are some bargains to be had. For first time buyers who understand the long-term benefits of borrowing against a mortgage, there is the potential to make real gains by buying a first home in 2019.
Fact #2: The UK housing market is experiencing a cycle, not a crisis
A UK property crisis would be characterised by plummeting prices and sliding sales. Although this is the case in some areas like parts of London and Aberdeen, in Liverpool and Manchester it's the opposite story. According to a report in the Financial Times on September 14 2018, property prices in five UK cities (including London, Cambridge and Bristol) are 50% higher than they were 10 years ago, while four cities are still at 2008 levels or lower - among which are Belfast and Liverpool. This mixed picture points to a series of property cycles depending on the location and price bracket of property.
Opportunity: As a first time buyer you may be able to get good deals if you're willing to think long-term and work the housing cycle in a given area. By getting familiar with average prices in UK cities in the last five years, you will have more choice when it comes to negotiating a deal on your first home. Remember, the more mobile you are, the easier it will be to find an area in which prices are suited to your budget.
Fact #3: Fewer buyers means more choice and negotiating power
In the sluggish market with low turnover we are seeing at present, sellers in a number of areas like London and the South East commuter belt are having to work harder to get potential buyers through the door, and buyers are making higher demands of sellers. In central London there is a 10% gap between asking and selling prices, while in Manchester and Birmingham it has narrowed to about 2.5%.
Opportunity: If you are buying now, negotiate hard on the price you're willing to pay. Just keep in mind that as a first time buyer, the original price you pay for your home will rise and fall over time. The long-term investment on property is almost always positive and more than simply a monetary investment, the property you buy will be your home.
Fact #4: The way people market their homes is changing
First time buyers do not always have the option of delaying a decision to buy. Circumstances may dictate that you move out of rented accommodation, and then there's what's referred to in the market as the “three Ds”: people unfortunately die, run up debt and fail to make their mortgage repayments, and they get divorced. Each of these circumstances often involves the selling of a home.
When it's impossible to wait out an uncertain market, homeowners are finding new ways to market their homes to buyers. One way is off-market sales - a popular growing trend. This is when sellers put the word out to selected potential buyers instead of publicly advertising the sale of their home. In recent years there has been a significant increase in the number of off-market websites - one example is Invisible Homes in Fulham.
This creativity in property market products and services is finding its way into the market in other ways. MortgageGym is one such example - our digital mortgage marketplace makes getting a mortgage more simple for a first time buyer by cutting out trips to the bank and all the mounds of paperwork that go with a first mortgage. Our innovative online mortgage process matches borrowers who need a mortgage with mortgage lenders in 60 seconds, and first time buyers are then guided through the process by their very own Mortgage Expert. Try our Mortgage Calculator - in just 60 seconds, you can find up to four mortgages you're likely to be accepted for, before you apply.
Opportunity: You may be able to access more choice in both the number of properties on the market as well as the price you're willing to pay - being aware of all the properties on offer by going beyond traditional sales channels and investigating alternative sources such as off-market sales gives you the best chance of finding that perfect home. And making use of some of the latest services for mortgage applicants can get you the very best financing deals on your dream property with minimal hassle and stress.
Fact #5: Rising mortgage interest rates are less of a concern than stressed affordability
In the case of a hard Brexit there's a real fear that mortgage interest rates will rise. And you're likely to be viewed less favorably by lenders as a first time buyer entering the market - especially if a disorderly Brexit results in rising unemployment, depressed economic growth, higher inflation and higher interest rates.
Interestingly, the challenge facing first time buyers has changed in the last ten years, from paying high interest on home loans to paying high deposits while also having to meet far more stringent mortgage requirements to qualify.
Opportunity: Do not be put off working to secure your first home out of a fear of rising interest rates. There are two reasons for this: you will always need a home, and the only sure-fire way to win at the property game is to take a long-term view. As interest rates rise the cost of rentals are most likely to rise with them, so you will not save anything by holding off on making your first purchase. Keep in mind that you're buying a home, not turning a quick profit. Britain is viewed as a desirable place to live - It's safe and economically stable and will continue to be, regardless of the outcome of the Brexit negotiations. Get a mortgage expert on-board to guide you through the process of getting over the affordability hurdle.
Experts agree that 2019 is the ideal time to buy your first home
In Experts' 2019 UK house price predictions carried out by the BBC, out of seven property experts, four said they believed the UK property market would rise, two expected the market to stay flat and just one expert predicted a fall in 2019. So, the experts agree: 2019 is a good year to buy your first home, and the sooner you buy the sooner you will start seeing the benefit.