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Is now a good time to buy a house?
Property news
19 April 2021

Is now a good time to buy a house?

Rosie Hamilton
Writer & Researcher

Knowing whether it's a good or bad 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 the way the housing market will go in the future 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.

Our house prices page compiles data from various trusted sources to give you an accurate view of what property prices are doing at a national, and a local level. Check it out here.

How's the mortgage market?

The mortgage market and property 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.

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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 properties on the market. According to property portal Rightmove, 2 in every 3 properties currently 'on the market' have been sold subject to contract. They also found that in the first three months of 2021, there were 14% fewer new properties put on the market than during the same period last year. This suggests that a significant group of would-be homesellers are reluctant to start the process currently.

However this issue of supply is worse for particular types of properties. Many buyers are looking for family homes, or properties with gardens. But, where Rightmove found 14% fewer new listings in general, there were around 30% fewer new listings of 3- or 4- bedroom detached properties - the current most popular property type for UK buyers.

Rural and suburban areas are also the focus of buyer demand. Newquay in Cornwall for example is a particular hotspot: more than 8 in every 10 houses put up for sale this year are already 'Sold Subject to Contract'.

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 few areas where more properties are being put on the market than normal. Many speculate that this is a result of more people moving out of the City to areas where houses are generally cheaper and larger.

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

There are a number of reasons why people are a bit 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 coronavirus has not yet been felt in full. Some people don't want to make large financial decisions until they completely understand their position.

  • Buyer competition

Many people who put their homes up for sale are also looking to buy. Some people are holding off selling until there's 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.

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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.

There are signs that the situation for people buying a home is already improving - albeit slowly. In the first week of March, Rightmove reported that new listings were only 5% lower than last year. This is a significant improvement from February, where the number of new homes put on the portal was 20% lower than in February 2020.

The Royal Institute of Chartered Surveyors (RICS) State of the Market Survey showed similar results. The RICS survey asks estate agents and surveyors for their views on the property market both nationally and in their local area. They found that 29% more respondents thought that 'appraisals were up on the same period last year'. This is huge leap from a net decrease of -19% the month before. It suggests that more homeowners are interested in selling, so we should see 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 meant 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 RICS State of the Market survey, 42% of estate agents have seen an increase in new buyer enquiries during March. This is the highest recorded on the survey since September last year.

Many estate agents also included comments about current levels of buyer demand. Sentiments such as 'Demand for houses at all levels is unprecedented', and 'Lack of choice for buyers... is the main problem at the moment' 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 upfront property 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.

  • 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 Land Registry House Price Index the average property price in January 2021 hit £249,309. This is 7.5% higher than January 2020 - an increase of just under £20,000.

Nationwide, one of the UK's largest mortgage lenders, commented in their latest house price report that support from the Government in the form of policy (like Stamp Duty, and the new Mortgage Guarantee Scheme) would likely continue to boost house prices, and the market generally, over the next six months.

They were however, cautious in their longer term outlook. Some believe that once the market begins to stabilise, and the true economic impact of the pandemic is felt (for example when furlough comes to an end) house prices will fall.

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 1.06% for homemovers who are able to put forward a 40% deposit. Reports also suggest that rates below 1% might be available from the end of April - if you can 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 UK housing market is much better for property sellers than for property buyers. House prices are high, and there's lots of competition for the best homes. This means 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 properties are regularly coming to the market and buyer demand is lower than usual.

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 whether there's a risk of ending up in negative equity, should house prices fall.

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 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 looking to buy 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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