Bad time for First Time Buyers

I know a first-time buyer who has been convinced that prices were going to fall for the past 2 years. That individual is still renting and prices have moved significantly upwards over that period. If he continues to wait there is no guarantee that he will benefit from any adjustment. If there is an adjustment, will he save on his purchase price compared to two years ago? To assess that he would also need to take into account the rent he has paid versus the mortgage he would have probably locked into 2 years ago on a 5-year fixed? You can sit on the platform and watch the property train roll past or you get on and be on the journey with everyone else. We have a fundamental problem with how we view property. If you are buying to live in one, then you are buying because you want to, regardless of the market conditions. You are buying security of tenure, a property that will be your castle, that you can improve and make your own. It is only a profit or loss when you want to realise it. You might pick up a bargain, but, the most important factor is that you can afford the mortgage payments. Don't be fixated on the rates, as the days of incredibly low interest rates have probably disappeared for a long while. If a buyer has the luxury of waiting and they think UK prices are going to tank, then maybe it is worth waiting. We are likely to see some softening in prices, but these will be regionalised and probably more focused on mid-higher value properties. The fact remains we have 880 properties per 1000 households in the UK. So, any adjustment will be short-lived and waiting is going to come with its own costs.

I think the main advantage that a first-time buyer has is that the value of their deposit doesn't reduce with house prices like it could with someone moving house. This generally means they have greater negotiation power and can move quickly if they see a bargain property and take advantage of a dip in prices. The flip side of this is that with the cost of mortgages going up, I have clients who are first-time buyers who are reassessing how much they want to borrow or becoming reluctant to stretch themselves in a way that they might have done before. The reduced amount of properties coming onto the market and the reduced spending power of first-time buyers coming in at the bottom of the property ladder has the potential to have a negative impact on the entire property market.

Context is key here. Yes, rates have gone up but the alternative is renting where costs have skyrocketed and continue to do so due to a dearth of supply and queues of prospective tenants for every property. This is going to get worse as landlords continue to leave the market en masse. At the end of the day, a potential mortgage rate of 6% is still better than effectively paying 100% on renting with nothing to show for it. Plus if your rate is fixed, you're not vulnerable to your landlord hiking the rent in 6 months' time.

Providing buyers understand that owning a property with a mortgage involves having a security over their heads, there shouldn't be a bad time to buy a home. However, often people want to make money on the property overnight and will be concerned about the impact of a recession on house prices heading in 2023. In our eyes, though it's always about time in the market and not timing the market. Help to buy is a big loss not only to first-time buyers, as it allowed a huge number of people to take a step on a housing ladder all while stimulating builders to build more homes and in doing so creating more jobs for workers.

If you can afford it, have visited a broker and are fully aware of what it's going to cost you and what the risks are, then yes now is a good time to buy your first home. This is especially the case given ever-increasing rental costs and the lack of rental properties available.