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Everything you need to know about the market to make your move

Martin Castilla            No comments            Sep, 27

Even for seasoned observers, the housing market is baffling. Here’s how buyers, sellers and renters can navigate the twists and turns

This season’s housing market is like a particularly cryptic Easter-egg hunt. You think you’ve worked out how to find that hidden treat, but then some unexpected twist flummoxes you and your rivals surge ahead. In other words, selling and buying are likely to prove even more stressful than usual.

Estate agents had been reporting that the chief characteristic of the market so far this year is a shortage of homes for sale. They argue that this had pushed values higher than expected — asking prices have risen by 1.3% in the past month, according to the property portal Rightmove. However, new figures from Nationwide show that sale prices fell 0.3% in March.

Then there’s a host of additional complications, including tougher mortgage rules, the lingering effects of stamp-duty changes and uncertainty now Article 50 has been triggered. While the market may appear as happy as an Easter chick, it’s actually more like a duck: calm on the water, but in a real flap below the surface.

Just ask downsizers Robert and Alex Welford, 62 and 60. Their five children have flown the nest, so the couple are selling their five-bedroom house in Walton-on-Thames, Surrey, for £1.795m (01932 548000, knightfrank.co.uk). A couple of years ago, it would have been a straightforward transaction and the couple would be in-demand cash buyers. This year, it’s not working out that way.

“Stamp duty on homes like ours is higher than before,” says Robert, who runs an aerial photography business. “After testing the market, we’ve reduced the price, effectively paying the duty for the buyer. On top of this, there’s not much choice among three-bedroom homes in the Southampton-Chichester corridor, which is where we want to live.”

It’s not just downsizers who are finding this a tough market: every sector has comparable challenges. Here’s our guide to navigating the process, what to watch out for and how to come out on top.

Downsizers Robert and Alex Welford have had to reduce the asking price of their home in Surrey

Sellers
This group are in the driving seat — just about. A Bank of England business report analysing the first quarter of 2017 reveals that in some parts of the UK, there are fewer than half as many homes on sale as there were before the downturn in 2008. “There were signs of gently rising demand for housing, outstripping the number of properties available for sale,” it says. The National Association of Estate Agents says this drop-off in supply against a seasonal rise in purchasers means there are 11 buyers chasing every home on sale.

Because of the complex market, however, estate agents warn against vendors pushing up asking prices unreasonably. “The market is sensitive and it’s often self-defeating to be overly ambitious,” says Jonathan Inglis, head of Strutt & Parker’s Chelsea branch. “A retrospective reduction is usually more costly than correctly pricing the property in the first instance.”
Top tip Start with a lower asking price to encourage competitive bids.
First-time buyers
There’s a huge north-south divide this spring — and, for once, it’s the north that wins out. Research by Adzuna, a jobs search engine, shows that a 15% deposit on a typical first-time property in Yorkshire would take a first-time buyer nine months to accumulate if they could save all their take-home pay: in London, it would take 28 months.

If you can’t move to a cheaper region, some advisers suggest tapping up the family. “As first-timers are now in their thirties and forties, often with a family, there’s a bigger emotional obligation on parents or grandparents to help,” says Louise Ridings, a buying agent with Stacks Property Search.

Nationwide recently introduced the Family Deposit Mortgage to help first-time buyers. If you have a mortgage with the lender, you can borrow against the equity in your home, then gift it to a “family member”. The definition is wide: it includes children, stepchildren, spouses, civil partners, parents, siblings, grandparents and grandchildren.
Top tip A parent can become a mortgage guarantor, providing they meet lenders’ criteria.
Second-steppers
Andy Price, an offshore surveyor, and his wife, Lisa, a sports lecturer, admit that it has been “exceedingly difficult” to find their next home. “There just haven’t been many available,” says Andy, 30. The couple, who bought their first property in Thorverton, Devon, four years ago, want more space and a larger garden; they have found a house nearby, but can only seal the deal once they sell their three-bedroom cottage (£225,000; 01392 215631, struttandparker.com).

A typical second-stepper who first bought in 2012 will have £120,000 equity when they trade up, according to Lloyds Bank — barely enough for a deposit in many areas. So buyers in this category are advised not to rely on email and telephone when trying to get agents to put them at the front of the queue for property details. “Meet them face to face,” says Spencer Cushing, manager of Abbotts agency. “Most will be looking after 100 buyers, and you want to make sure that it’s you they think of when the perfect new instruction comes in.”
Top tip Get your mortgage offer and conveyancing solicitor ready to go.
New-build buyers
The market for new homes is strong outside London — last week, eight flats in a converted house in Leamington Spa sold out in just four hours. The best bargains are likely to be found in larger schemes, though, so put on your best poker face and negotiate.

Even the big developers — which are now building more homes than at any time in the past decade — must please shareholders scheme by scheme, so they are anxious to sell off plan before a spade has hit the ground. If you purchase at this stage, or hold your nerve and buy the final home in a development when the builder is keen to clear the decks and move on to a new project, you may pay up to 10% less than at other times.

Don’t stop there: you can drive an even harder bargain. “All developments have snagging issues, so make sure you get 18 months to two years of cover in addition to the new-build warranty,” suggests Roarie Scarisbrick, partner at the buying agency Property Vision.
Top tip Check the price of similar existing properties to calculate the “new home premium” you’re paying.
Downsizers
A lot of people are rattling around in big properties. Government data reveals 8.1m “underoccupied” homes, with two or more spare bedrooms, and some agents in the southwest, Wales and the Lake District say up to 50% of buyers are empty-nesters. According to many analysts, there is a shortage of specialist retirement properties, but sales in such schemes are often slow, with concerns from buyers over premium asking prices, high service charges and the prospect of living only with older neighbours.

Whatever properties downsizers want to buy, the biggest problem is how long some take to sell their larger homes. They tend to do less preparation in the form of decluttering and redecorating. “They’ll probably have 20 years of furniture and memories to deal with, and may not feel confident to move quickly,” warns Damian Gray, head of Knight Frank estate agency’s Oxford office.
Top tip Don’t wait to find the ideal home before putting your larger property on the market.
Tenants
It’s tough out there, with demand outstripping supply in most cities. In February, 25% of letting agents affiliated to the trade body Arla reported rent rises in the preceding year. The good news is that these were usually small, with HomeLet, an insurance firm, claiming the typical increase in 2016 was 0.8% — less than half the rate of inflation.

Yet the ancillary costs of renting remain high: the average UK tenant must stump up a £970.48 deposit when moving in, according to the Deposit Protection Service.
Top tip The average tenant stays for more than four years, so more renters now request long-term deals — saving money for them and landlords.
Buy-to-let investors
Here’s another win for the north: in Manchester, house prices rose by 8.8% in the year to February, says the property consultancy Hometrack. Yet a typical terraced house there costs only £135,215, according to the property portal Zoopla — in London, an equivalent home would be £696,646.

So rental yields will be far higher in the north, with much lower stamp duty when you buy and the prospect of greater capital appreciation. The auction house Allsop reports that the East Midlands and Yorkshire are strong performers for landlords: each shows an annual return of 11.25% over a five-year period for a base-rate taxpayer, or 9% for a higher-rate payer. But the old rules still apply even in new hotspots — areas with growing jobs, improving transport links, good schools and no obvious glut of homes being built are likely to be the best bets.

Buy to let (BTL) is changing, with phased cuts in landlords’ mortgage interest tax relief starting on Thursday, and the expectation that investors may soon pay higher charges to letting agents if fees to tenants are banned. Many BTL lenders require new borrowers to prove their rent will cover 135% of monthly repayments.
Top tip Consider property crowdfunding schemes — they’re regulated by the Financial Conduct Authority and allow smaller sums to be invested.
Holiday-home buyers
While demand for BTL has bounced back, despite the 3% stamp-duty surcharge, sales of holiday homes are sluggish. Good weather may change that, as might the prospect of income from letting to Brits shunning foreign holidays made dearer by the pound, which has lost 10% of its value since the EU referendum. A survey by the rental service HomeAway suggests that 20% more Britons are considering a staycation than in 2016.
Top tip Holiday homes with designated parking let better than those without.

THE YEAR SO FAR

  • Prices in prime central London fell by 0.3% in the first three months of the year; they’re now 6.1% off their 2014 peak (Savills).
  • Asking prices rose by 1.3% in the month to mid-March, far more than usual at this time of year (Rightmove).
  • A quarter of London letting agencies report rent falls this year — only 8% have seen increases (Arla).
  • The most expensive location in England is London (average property price £491,000). The northeast is the cheapest, at £124,000 (ONS).
  • Manchester is the city with the fastest-growing house prices (8.8% in the year to March), followed by Portsmouth, Bristol and Glasgow. London is in 10th spot (Hometrack).
  • Who needs letting agents? A survey in February found 38,000 active listings for London properties on Airbnb (AirDNA, an analytics firm).
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