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  1. Blog
  2. Is now a good time to buy a house?
Property news
22 June 2021

Is now a good time to buy a house?

Rosie Hamilton
Writer & Researcher

Knowing whether now is a good time to buy a house isn't an exact art. However, there are some ways you can get a general impression of whether the market is likely to be in your favour.

In this article we look at what makes a 'good' market for a buyer, and examine how the housing market is doing currently. We'll also make some tentative predictions about how the housing market will change in the coming months, to help you decide whether to buy now, or wait for more favourable conditions.

How do you know if it's a good or bad time to buy a house?

If you're in the early stages of your home buying journey, there are a few things you can check out to see whether the market is currently in your favour. Being armed with this information will help you decide whether to take the leap, or to wait until you can get a better deal.

We'd recommend starting with the following questions:

  • Can you find homes you like on the market?

When you look on online portals, do you see the sort of property you're looking for regularly, or do they only come up every so often?

Asking estate agents is another good way to gauge how often you'll find properties that fit your criteria come up on the market.

Of course there are some houses that are always in short supply - like detached homes in central London, or studio flats in Colne - but checking out what's available is a good way to see whether you'll actually be able to find what you're looking for when you're ready to put in an offer.

Buying and selling at the same time? Read more about how to juggle the process here.

  • Are house prices going up or down?

If house prices are going up its generally a sign that the market is currently working in favour of sellers rather than buyers. House prices tend to go up when there's not enough homes to meet demand and competition between buyers drives up the price.

Remember there's usually a fair amount of local variation when it comes to property prices. Big cities like London and Edinburgh are often among the most expensive for those looking to buy a home. Whereas smaller, rural communities tend to have lower property prices. Each area will experience house price fluctuations depending on what's going on nearby, for example: a large infrastructure project, or investment into local employment.

Curious about how much your home is worth right now? Check out our free, online valuation tool here.

  • How's the mortgage market?

The mortgage market and housing market are intimately intertwined. When interest rates are low buyers are more likely to be active, because borrowing money is more affordable. On the other hand, when there are few mortgage products available - or interest rates increase - it becomes more expensive for people to borrow money, so fewer people look to buy.

Affordable mortgage rates can be a double-edged sword. They can make it easier to buy a home, but can also cause greater competition because other buyers also want to take advantage of the favourable rates.

So, how are things looking for buyers, right now?

Housing supply

One of the biggest issues facing property buyers in the UK at the moment is a lack of houses actually available to buy. According to property portal Zoopla, housing supply is currently 20.8% lower than last year. This is in line with comments from Rightmove that stock levels on the site were at an 'all time low'.

However this issue of supply is worse for particular types of homes. Many buyers are looking for family homes, or properties with gardens. For example, Rightmove found 14% fewer new listings put on the market between January and March this year, however there were around 30% fewer new listings of 3- or 4- bedroom detached properties - the current most popular property type for UK buyers.

However, those looking to buy a property in a city centre are likely to have more choice. Central London, for example, is one of the areas witnessing lower than average levels of buyer demand. Many speculate that this is the result of a shift in buyer priorities. Whereas previously, home buyers were keen to find a property close to their workplace, many people are now looking for properties that offer more space for the price, even if they are slightly further away from the office.

Why are fewer sellers putting their property on the market right now?

Zoopla predicts that the number of home sales this year will hit 1.5 million by December 2021 - 45% higher than the year before. This suggests that the lack of supply is caused in large part due to extra buyer demand, not a lack of sellers coming to market. However, there has been a slow down in the number of new properties entering the market, suggesting some reluctance amongst sellers.

There are a number of reasons why people are slightly more reluctant to sell their properties right now. These include:

  • The pandemic

The home selling process involves a lot of contact with potential buyers coming for viewings. Many home owners have been reluctant to start marketing their property because of the potential risk of transmission. However, with the easing of restrictions, and significant proportions of the population being vaccinated, it's likely more people will be happy to have potential buyers over for viewings again soon.

  • Stamp duty holiday deadline

While many buyers are keen to take advantage of the stamp duty holiday, some sellers are cautious about marketing their property too close to the deadline. Some sales will not complete in time to take advantage in the savings, and this could lead to transaction fall throughs if a buyer can't pay the upfront stamp duty cost.

  • Financial uncertainty

The economic impact of the coronavirus pandemic has not yet been felt in full. Some people don't want to make large financial decisions, such as taking on a mortgage, until they completely understand how secure their financial position is for the future.

  • Buyer competition

Many people who put their homes up for sale are also looking to buy. Some people are holding off selling until there are more properties on the market to choose from.

However, sellers that are putting their homes on the market right now, are finding that they sell incredibly quickly, and generally for much higher prices than they anticipated.

Will this change soon?

Several estate agents and property commentators have predicted that the end of lockdown restrictions will encourage sellers to feel more confident about putting their property on the market, and having people over for viewings.

Additionally, it's likely that the tapering off of the stamp duty holiday will contribute to a lessening of buyer demand. Many home buyers moved forward their purchases in order to take advantage of the savings. This means it's likely that once the holiday has ended, we may see a period where fewer people than normal come to the market - reducing the imbalance between demand and supply.

There are signs that the situation for people buying a home is already improving - albeit slowly. The Royal Institute of Chartered Surveyors (RICS) State of the Market Survey asks estate agents and surveyors for their views on the property market both nationally and in their local area. The latest survey saw that on balance respondents thought that 'appraisals were up on the same period last year'. This is a good indicator that more homeowners are interested in selling, and hopefully this will translate into a wave of new properties coming onto the market in the next few months.

Competition from other buyers

Despite there being fewer properties on the market than normal, there are more people looking to buy.

Estate agent Hamptons reports that the number of prospective buyers increased by 17% in the first 3 months of this year. This means that for every new property put on the market there were more than 9 people registering their interest, on average, between January and March this year.

According to NAEA PropertyMark, 1 in 6 properties sold for more than the asking price in March, suggesting that this buyer competition is working to drive up prices.

A number of estate agents commented on current levels of buyer demand as part of the RICS Market Survey. Sentiments such as 'demand for houses at all levels is unprecedented', and 'very much a sellers market with insufficient stock to meet demand' were common responses from agencies across the country.

Why is home buyer demand so high?

Buyer demand has been encouraged throughout the pandemic by a range of things, including:

  • Government incentives

In order to support the housing market during the periods of lockdown, the Government has introduced a range of incentives to encourage people to move home. The most important of these is the stamp duty holiday, which means buyers won't have to pay any stamp duty land tax on residential property purchases up to £500,000. This gives buyers have the opportunity to save up to £15,000 upfront if they buy before the deadline. Although the stamp duty holiday is beginning to taper off, even the reduced rate coming into force at the end of June, will provide upfront savings to those buying properties costing less than £250,000 until October.

  • Lockdown

Lockdown has meant we've all spent more time at home. This has encouraged many to think seriously about what they need from the place they live, and to explore buying a home further away from the office.

  • Low interest rates

Interest rates in the UK are currently very low, this makes borrowing money to buy a house much more affordable.

  • House prices

Due to the high levels of demand from buyers, and the low numbers of properties on the market, house prices have grown massively over the past year.

According to the latest Land Registry House Price Index the average property price in England is £268,000. This is 8.9% higher than a year ago - an increase of just under £25,000.

The situation is, however, different in different parts of the country. For example, where house prices in the North West has increased 11.8% since last year, areas of inner London have witnessed very slow rates of house price growth. House prices in the City of London for example, have actually decreased 13.6% since last year.

The mortgage market

Right now, the mortgage market is pretty favourable for those looking to move house. Interest rates are low, which makes it more affordable to borrow. Moneyfacts.co.uk, who follow the mortgage market closely, have found rates starting at as low as 0.95% for home movers who are able to put forward a 40% deposit.

The mortgage market is, on the whole, less favourable for first time buyers. This is because first time buyers present a greater risk to lenders and tend to have smaller deposit. First time buyer mortgage products are gradually returning to the market, supported by the government's new mortgage guarantee scheme, but they retain a strict affordability criteria.

So, is now a good time to buy a house?

Currently the property market is a seller's market. Which means conditions aren't that great if you're thinking about buying a house. House prices are high, and there's lots of competition for the best homes. It will be hard for many buyers to find the right house, or get the best deal.

However, that doesn't mean there isn't scope for buyers to take advantage of the situation too. Many home sellers are keen to move quickly to ensure they meet the stamp duty holiday deadline. And, there are some areas - such as city centres - where fewer buyers are looking, and house price growth is slower than normal.

Make sure you're up to date with local and national trends. Head here to see the best places in the UK to buy and sell property right now, along with a range of other useful statistics about the market.

If you're looking to buy a property now, we'd recommend getting independent financial advice before committing to a property or mortgage deal - particularly if you intend to move again in the next few years. They will be able to provide advice tailored to your financial situation, and explain the risks should inflation cause interest rates to increase.

Other things to consider

Figuring out what's best for your personal circumstances is often just as important as understanding the property market when it comes to deciding whether now is a good time to buy a house or not.

Make sure to assess your circumstances from both an emotional and financial perspective. Two good places to start include:

  • Can you afford the mortgage?

This isn't as simple as knowing you have the deposit available. You should also consider how you would manage the repayments if you lose your job or are furloughed in the future. Consider what other life events might impact your income - for example taking time off work for maternity leave.

  • What's driving you to move?

If the reason you're buying a house is: a new job, an expanding family, or to release equity, then what's going on in the wider market is likely to be less important than finding the right new property to suit your needs.

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