In the aftermath of the Covid19 pandemic, the economy is in turmoil. The UK is facing a recession and yet the housing market is facing a so called mini-boom.
In fact, during July agreed sales hit a 10 year high – perhaps due to people being forced to think about their living arrangements after a long spell in lockdown. Along with this, a fantastic property news blog evaluates how house prices have fallen – as is often the case during a recession – meaning that many first-time buyers, landlords and other prospective buyers may see this as a perfect opportunity to make an investment.
But buying a house is probably one of the biggest investments you’ll ever make. So, it pays to be cautious and understand the potential risks.
House prices falling might seem like a bonus for buyers, but consider what will happen if the value continues to fall? You could easily end up with negative equity; in other words, your house won’t be worth the value that you borrowed to buy it.
This can be particularly true for new build properties. Ultimately it will only be a problem if you have to sell up. So, consider your financial stability, whether or not you can afford this property and if you have the intention to stay there for the foreseeable future. A quick sale in a recession could be a real problem.
During a recession banks tend to tighten up on the type of deals they are willing to offer first-time buyers. If you were hoping that a deposit of 5 – 10% might be enough, you could be disappointed.
Lots of people who have their heart set on buying during this time are having to opt for more complex mortgages that often require the help of a third-party lender.
A report in a fantastic property news blog looks into rental properties and how buying to let could be affected by recession. For some landlords it could be a lucrative time, as financial instability leads more people into renting than buying. But even so, landlords need to be aware of their local economy.
If you are renting in an area that’s been badly hit by lockdown, renters are still likely to have trouble paying up.