Is now the right time to invest in property?

**Collaborative post**

Whether you are looking to buy your dream home or make your money work for you with a buy-to-let investment, you may be uncertain as to whether it is still a good time to buy since house prices have been at an all-time high in 2021. 

Indeed, property prices have sky-rocketed since 2000, when the average house price was £89,597 versus £264,000 as of August 2021. 

And – despite the complete shutdown of the UK property market from March-May 2020 thanks to the global Covid-19 pandemic – the pent-up demand, low mortgage rates and Government incentives introduced to reinvigorate the housing market from July 2020 saw transactions surge and property prices rise an impressive 8.5% in 2020 and 10.6% between August 2020 and August 2021. 

Prices were even higher in June 2021, when the average UK house price hit £266,000, the highest growth in 17 years. And, interesting, the biggest price spikes have not occurred in London or the southeast of England as in years gone by, but in more rural and affordable areas like Cornwall, Wales, Yorkshire and the northwest of England.

But now that a major incentive introduced by the Government in 2020 – the temporary reduction to rates of stamp duty tax – has ended as of 30 September 2021, along with assistance such as the furlough scheme and the self-employment income support scheme, what is in store for the housing market and are we likely to see property prices come down significantly? 

In spite of the Covid-19 pandemic and the Brexit fallout (which has seen the economy contract by 10%) industry insiders are still cautiously optimistic about the state of the housing market and property prices in the coming years. Savills Estate Agents have forecast a 4% increase in average property values for 2021 overall and there is an expectation that average property values will continue to grow between 2021-2025, potentially by as much as 21%, despite future tax rises which are due to come into play in the next few years. 

Whilst we have seen the market slow somewhat after the initial stamp duty deadline in June, the demand to keep current house prices afloat is still there and the number of property transactions in the UK increased by 64% from August to September 2021 as buyers sought to meet the second stamp duty deadline. Since 30 September, we have still seen plenty of interest from buyers seeking to make changes to their home lives in the wake of the pandemic with more space inside and out and proximity to rural areas and countryside still big priorities. The number of first-time buyers has also increased. 

So, when it comes to buying a property, whilst demand is still high and price deflation may not be something we need to worry about in the immediate future, as with any investment, you should still be looking to make more from the purchase than you have spent. 

Although of course when it comes to a property for yourself, your own quality of life is also high up on the priorities scale, so the property has to work for your current and future lifestyle in addition to being a worthwhile investment. It also goes without saying that you should never spend more than you can afford to in the hopes of recouping the money down the line. Whilst a bricks and mortar investment may seem the most secure option, there are still no guarantees it will bear fruit. 

When you are weighing up whether or not to join the property ladder for the first time, or take the next rung up, there are other things to consider before you know if it is the right time to move. 

For instance, you need to think about the associated costs of buying a house. In 2021, the average cost of moving home is around £8,885 according to Barclays when you factor in legal fees, estate agent costs, removals and surveyors. Not to mention stamp duty tax now rates have returned to normal. 

As a prospective homebuyer, you should also always do your homework when it comes to the cost of properties in your preferred area(s) too, particularly if you have found a specific property which could be the one. 

Take advantage of the wealth of information online such as Rightmove and Zoopla’s comprehensive house price listings and details of housing market trends and indexes compiled by the likes of Halifax and Nationwide. A free online valuation tool can also give you an indication of whether or not a property has been priced correctly too, and how to price your own property if you have one to sell. 

Since there are currently 4.4 million households currently renting property in the UK and there are some impressive rental yields (particularly in more affordable cities such as Newcastle, Glasgow, Manchester, Liverpool and Birmingham) buy-to-let investments can seem like a good opportunity to make your money work for you. However, in the 2020-21 tax year, changes have been made to taxation arrangements when it comes to mortgage interest tax relief and capital gains tax which can make buy-to-let investments less appealing to Landlords. As such, always make sure you have factored in these additional fees before you commit to going down this route, particularly given the outlay of a hefty 25%+ deposit.