Buying a house in normal circumstances can be an exciting yet stressful experience at the best of times. Buying a house during a pandemic throws a variety of other challenges in to the mix. Despite the challenging circumstances we have all found ourselves in over the past year, the property market in Northern Ireland is currently buoyant, especially for First Time Buyers!
House prices in Belfast and across Northern Ireland have soared by 5.9% over the last year to an average of £149,382, according to a report. This was helped no doubt by the Stamp Duty holiday and while the housing market is unlikely to maintain this rate of growth, for many people the pandemic presents an opportunity to get onto the property ladder.
If you are thinking about getting onto the property ladder, here are 5 things you should consider when buying a house in 2021.
1. Stamp Duty Holiday
Stamp Duty is a land tax, paid by the purchaser when buying a property or land over £125,000 in England and Northern Ireland. As a result of the pandemic, the Chancellor announced a Stamp Duty holiday on properties less than £500,000 until 31st March 2021. This meant that if the property you are buying is worth less than £500,000, you would not pay any Stamp Duty. For a lot of first time buyers, their first home is under £125,000 so would not have been subject to stamp duty anyway.
With the stamp duty holiday due to conclude at the end of March, if the house you are trying to purchase is more than £125k and you are not going to complete before this date, it is something that will effect your budget. There are calls for the Stamp Duty holiday to be extended, but it is best not to plan for this as it is a big ‘maybe’.
Top Tip: For those hoping to buy at under £125k, the Stamp Duty Holiday will have no effect on you and therefore neither will the deadline.
2. Bigger Deposits
One of the major impacts on the mortgage market has been the increase in deposit requirements from the banks. Whilst typically a 10% deposit was enough, for a while, many mortgage lenders wouldn’t accept a deposit of less than 15% as they were protecting themselves.
Lenders did this to manage their risk during such an uncertain time. It is all about Loan to Value, or LTV. The lower the LTV, the less you are borrowing from the bank, and the less risk involved on their behalf.
We are now starting to see a return to normal, with a number of big lenders announcing the reintroduction of 10% deposit mortgages again which is great news and a vote of confidence for the market!
Top Tip: The larger the deposit; the more options you will have. But even without a deposit, it is possible to buy a house
3. Higher Home Prices
With people being stuck at home and reassessing their living situations, the demand for home ownership has exploded across Northern Ireland and beyond. This increase in buyer competition has lead to a surge in house prices. Unlike the last recession, the housing market isn’t slowing down during the current recession. According to Nationwide, the hike in housing prices can be attributed to a number of factors, including:
Top Tip: Speak to a mortgage advisor before looking for a house, they will make sure you know your budget.
4. Hidden Costs
You can plan and be as prepared as possible, but when buying a house, there can always be little (or not so little) surprises which can end up costing you more than you budgeted for.
A recent survey from Zoopla found that 39% of buyers in the UK “have been affected by hidden costs when they last moved home”, and “30% stated these costs were more than £1,000”.
To combat this, it’s important that you do extensive research before buying a property. Make sure you are aware of potential costs such as legal fees, land registry fees, moving expenses and buildings insurance, and account for these costs in your budget so as there are no nasty surprises down the line.
Top Tip: It might be worth getting a more comprehensive survey carried out before purchasing to highlight any potential issues you might come across.
5. Your Financial Health
The final piece of the puzzle. Your overall financial health is an important factor if you are committing to buying a home.
If you have outstanding debt, this could be a good time to clear it. Yes, you may have enough for a deposit, but you may be better waiting until competition has died down to take advantage of a cheaper housing market, whilst also clearing debt and being in a better financial position.
Buying a home is a big decision for anyone to take, so it is important to properly consider your overall financial health and whether or not not is the best time for you to buy or whether you should wait.
Top Tip: Your mortgage broker can help look at the big picture. They can advise you on what you can borrow and what kind of deals would suit you, and whether or not now is a good time to buy and how you can get yourself ready to buy when the time is right.
If you have any further questions or would like to book in for an appointment to get professional advice, you can book a consultation on our calendar!
