"Remember that the averages quoted in the media, and blanket headlines about what’s happening to UK prices overall, may not reflect what’s actually happening in your own local market"
- Kevin Shaw - LRG
As a general principle, the best time to buy a property is when prices are just starting to rise. The market moves in cycles, so if you can make a purchase at the start of a period of price growth, that should help ensure you build some good equity over the next few years, with less risk of buying and seeing prices fall.
However, identifying this particular time isn’t easy until some months or even a year or so later as when prices rise after a fall, they can ‘yoyo’ for some time to come.
So the actual ‘ideal’ time to buy for you will depend on your own circumstances, particularly if you also have a property to sell or are buying for investment purposes.
First-time buyer: when prices are just starting to rise
As a first-time buyer, you’re likely to have a relatively high loan-to-value mortgage, so it’s important to try to increase your equity as soon as possible. That will cushion you against negative equity if prices fall in the future and help fund a deposit when you’re ready to move up the ladder. The easiest way to do that is to buy when prices are at the start of a period of growth.
Trading up: when prices are falling
The key here is the fact that you’re buying a more expensive property than the one you’re selling, therefore you’ll save more on your purchase than you might be losing on your sale.
For example, if offers are coming in at around 5% below asking prices, the home you’re selling is on the market for £250,000 and the one you’re buying is £350,000. You may ‘lose’ £12,500 on your sale, but you may well be able to negotiate £17,500 off your purchase, meaning you come out of it £5,000 better off!
Trading down: when prices have been rising well and are nearing their peak
When you’re selling a property – particularly if it’s the most valuable one you’ll ever own - of course, you want to maximise the profit from your sale by selling at the top of the market. That said, the reality is that most homeowners who are downsizing have been in their current homes for long enough that they have seen the value grow well, and many have also paid off their mortgages.
That considerable equity makes it less relevant where the market is in its current cycle, what’s more important is finding the property you want and need in the location you’d ideally like to live.
Buy-to-let investor: when prices are falling
Prices fall when demand is lower than the number of homes for sale, and those who really need to sell may accept a relatively low offer to secure one of the few buyers out there. Buy-to-let investors can therefore often pick up a good deal while the market is falling – particularly those that can complete the transaction quickly - and often end up with a good amount of ‘instant equity’ when prices start to recover.
However, all these are simply general rules and ideal scenarios. In reality, given that we have a shortage of homes in the UK, what’s most important is that you move when it suits you financially and personally, and when you find a property you like. Holding off could mean losing your dream property, and whether the market is rising or falling at the time may not make a huge amount of difference if you are planning to live there for five years or more.
Finally, remember that the averages quoted in the media, and blanket headlines about what’s happening to UK prices overall, may not reflect what’s actually happening in your own local market. The best way to ensure you buy well is to speak to experienced agents in the area, who can advise you properly on local prices and trends.
