Sellers could see ‘downward pressure’ on house prices

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A week may be a long time in politics. But in property, it’s an eternity. It is now clear that the Budget, with its tax and stamp duty giveaways, risked changing everything within the property market. What was the initial impact?

Well, within just hours of the stamp duty announcement, estate agents and their seller clients were on the phones, looking to wrap up all of the deals that couldn’t quite be done before now the Exchequer had dropped a few more thousand into buyers’ pockets. 

Sellers quickly realised buyers now have a few more quid in their pocket. And, as a result, the offers being asked for went up. 

But the events of the last 72 hours, when the pound’s value dipped, have changed everything once again. 

And property insiders are nervous to say the least. The nervousness is not so much around what has happened yet – but it is more about what comes next because all previous dips and crashes have started slowly and then caused enormous damage over years.

So far people are holding their nerve – it has, after all, only been a few days of relative chaos in the market. But estate agents, buyers and sellers are watching events avidly and awaiting developments.

If the ship is steadied within the next two weeks, this will be nothing more than a blip. Much longer and we will see downward pressure on prices.

What to do if applying for a mortgage

Understandably many people are concerned about applying for mortgages. My advice would be to approach any application by looking ahead. 

Consider what you would do if interest rates were one percent, three percent, five percent or even seven percent higher than today. Could you afford to pay the mortgage?

If rates rise quickly – and it appears that they might – values will start to drop. Consider how you will feel if the property is worth less than you paid.

Also, ask yourself, are you in it for the long term? Prices can rise and fall and if you aren’t selling up, it doesn’t really make much difference to you financially.

But might you need to move in a hurry, say to change jobs or be nearer to a partner or family? If the price has fallen and you have to sell, you’ll take the hit regardless of the mortgage amount.

My final advice is to be calm and objective. Many things have recently appeared to be the end of the buoyant property market – Covid, Brexit, the energy crisis and more, yet it has recovered and prices have risen.

Whether you buy or not depends as much on your own circumstances as it does on world events. But, over the last 30 years in property I have only ever regretted the property I didn’t buy. 

There are a lot of people watching the news unfold this week, through their fingers, fearful of rate rises and price drops.

Yet there are perhaps millions hoping for just that… believing high rates will surely mean prices will fall and finally, they will get their chance to buy their first property. 

I’m sorry to say, it doesn’t work like that. If interest rates do rise and that leads to a house price crash it will actually become far more difficult for first-timers to buy. 

Why? Well, the rates themselves. Higher rates mean it costs more to borrow than a year ago.

What’s more, affordability ratios would be tightened and the general economic shock in the whole economy, which would lead to bankruptcies and job losses, will mean banks are even fussier about who they would lend to.

Many who would want a mortgage simply couldn’t get one, whatever the amount.

And finally, for years to come, buyers would avoid making their first purchase, waiting to see if prices fall further.

This would prompt a huge increase in demand for rental property at a time many landlords will have sold up to reap the benefit of higher prices and better returns with money in the bank.

We could now be witnessing the beginning of the transition from property crisis to full-blown housing emergency.

Jonathan Rolande is the founder of House Buy Fast.

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