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How to work out what to pay for a house after prices see surprise jump

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how to work out what to pay for a house after prices see surprise jump

Coronavirus has turned everything into extremes – and Britain’s property market is no exception. Just a short while ago in lockdown, thousands of sales were on hold and doom-laden forecasts of a house price crash were everywhere.

But fast-forward two months, and it’s a very different story. Pent-up demand, combined with Chancellor Rishi Sunak’s stamp duty giveaway, have combined to put a rocket up the housing market.

Just over two months since the property market in England reopened – Scotland and Northern Ireland followed suit a few weeks later, and Wales later still – and estate agents say the market is booming. 

Last week Nationwide Building Society reported UK house prices rose by 1.7 per cent in July, having fallen 1.6 per cent in June. So, with such rapid swings in the supposed health of the property market, how do you work out what to pay for a house now?

Pent-up demand, combined with a stamp duty cut, have put a rocket up the housing market

Pent-up demand, combined with a stamp duty cut, have put a rocket up the housing market

Pent-up demand, combined with a stamp duty cut, have put a rocket up the housing market

SPOT WHICH WAY THE MARKET IS HEADING

Remember, a house’s worth is determined by one simple factor: how much someone is willing to pay for it. And when buyers are flocking to the market with competing offers, prices inevitably start to creep up.

London estate agent and former chairman of the Royal Institution of Chartered Surveyors, Jeremy Leaf, says that’s already started to happen.

‘The market has really picked up over the last few weeks and we’re pinching ourselves because we’re busier than we’d thought,’ he says.

‘There’s a lot of pent-up demand which has been given extra impetus by the stamp duty holiday. Low interest rates and supply not yet matching demand is also helping support prices.’

Nick Morrey, of mortgage brokers John Charcol, says: ‘Currently the market is very strong.

‘After the market opened up, the valuers managed to clear their backlog, estate agents roared back into life, there were reports of significant demand outside cities and so demand has just been rising and rising.’

There are even reports of gazumping – sellers accepting a higher offer even though a deal had already been agreed. So for now at least, there would appear to be upward pressure on prices.

A bounce back saw the average UK house price rise more than £4,500 on Nationwide's index and annual house price inflation return to 1.5%

A bounce back saw the average UK house price rise more than £4,500 on Nationwide's index and annual house price inflation return to 1.5%

A bounce back saw the average UK house price rise more than £4,500 on Nationwide’s index and annual house price inflation return to 1.5%

CHECK THAT ASKING PRICES ARE REALISTIC

This is the key question to answer before you make a bid or accept an offer: is the asking price fair?

Last month, property website Rightmove reported that the asking price of new homes had jumped 2.4 per cent to a new record high of £320,265, up 3.7 per cent year on year. But until ONS sales figures are released later this month, we won’t know whether buyers have actually been paying more on done deals.

Property buying agent Henry Pryor says: ‘I suspect once we start to see the detail of what has been agreed, the reality is that most people who have sold took a bit of a knock, possibly as much as 5 per cent, to get the deal done.’

In reality, whether you should be setting higher prices – or paying them – will depend on the specifics of the property and people in question. For example, sadly, agents are reporting a jump in probate sales due to the spike in Covid-related deaths.

In these instances, the family may be more concerned about getting a sale done and you may find a discount is already factored into the price. 

The same could be true of inner-city flats without gardens, which are less popular with lockdown fresh in the mind.

On the other hand, coronavirus has also prompted a rise in people looking to move to larger properties with outside space.

Canny buyers are checking everything from broadband speeds to mobile phone reception; which home delivery services are available; as well as off-street parking for electric vehicles. They are also looking further afield than previously.

So be aware that asking prices on in-demand homes may already have been bumped up.

David Hollingworth, of broker London & Country Mortgages, says: ‘Lockdown has made us all focus more on where we live and what is essential if many of us are going to be working from home for longer or more often.’

To work out if a price is fair, ask local estate agents and check online for what is on the market in your preferred area, how long it has been on the market and whether the price has changed in the past few months.

For example, was it listed for sale in January, taken off, and relisted at a higher price or a lower one?

Try the Zoopla website, which shows previous prices as well as whether the price has been reduced, and Mouseprice.com.

‘You really shouldn’t be paying as much as you were going to in March 2020, because the world has changed,’ says Henry Pryor. ‘If you know what it was worth pre-lockdown then you should be paying less.’

However, Nick Morrey says you shouldn’t get too greedy about 5 to 10 per cent reductions, given the high levels of demand in some areas – particularly if there are several bidders.

Experts advise entering a ‘no gazumping’ contract. Discuss this with the estate agent to discourage your vendor from accepting a higher offer if you’ve agreed a price.

FACTOR IN £15,000 STAMP DUTY HOLIDAY

Another factor to take into account is Rishi Sunak’s move to scrap duty for buyers in England and Northern Ireland for the first £500,000. That means until the end of March next year, buyers can save up to £15,000, with the average saving likely to be around £4,500.

Rishi Sunak has scrapped stamp duty for buyers in England and Northern Ireland for the first £500,000

Rishi Sunak has scrapped stamp duty for buyers in England and Northern Ireland for the first £500,000

Rishi Sunak has scrapped stamp duty for buyers in England and Northern Ireland for the first £500,000

Hollingworth says the giveaway has added to the number of house-hunters. ‘The stamp duty holiday will draw out the people who were putting their decision to buy a house on hold until next year and who might be tempted back into the market sooner.’

However, Pryor sounds a note of caution and says sellers will be pricing the stamp duty discount into their asking price.

So a property that was £485,000 might be priced closer to £500,000 by sellers who know that the buyer is getting a £15,000 tax break.

‘The savings will be used to compete with other people for a finite resource, so all that will happen is that it’s going to push house prices up,’ Pryor says. ‘So the stamp duty holiday might not provide the advantage as far as buyers are concerned.’

BOOST BROADBAND TO ADD VALUE TO HOMES

So if you are looking to take advantage of this honeymoon period to move house, what are your options? Sellers should ‘move fast’, advises Nick Morrey. ‘Demand is strong and it might be so for the next few months, so don’t dither.

‘Declutter your house and get at least three estate agents to value it. It’s a seller’s market at the moment so you don’t have to take the first offer that comes along. If you have two or three people offering then you can often get the asking price or above for your property.’

Pryor adds: ‘If you want to sell, it appears that there is a bubble that you may be able to take advantage of and sell either close to or at your pre-lockdown March price.

‘But I don’t expect the bubble to last past September.’

Remember that space – always desired – is even more sought after since lockdown, while proximity to a train station for the daily commute is no longer as crucial.

With working from home likely to be a long-term trend, boosting the home office potential is a great selling point.

‘Installing super-fast broadband to a property adds to its value,’ says Morrey. ‘It’s become the fourth essential utility after gas, electricity and drainage.’

While there might currently be a 'mini-boom', many experts still expect house prices to fall later this year

While there might currently be a 'mini-boom', many experts still expect house prices to fall later this year

While there might currently be a ‘mini-boom’, many experts still expect house prices to fall later this year

BUT DON’T BANK ON AN INSTANT PROFIT

While there might currently be a ‘mini-boom’, many experts still expect house prices to fall later this year. The Centre for Economics and Business Research forecasts prices will drop 5 per cent by the end of the year and 10 per cent by next year, with many others from Zoopla to the Office of Budget Responsibility also forecasting falls.

Henry Pryor says: ‘There may be some post-lockdown euphoria, but we will start to see some much less attractive headlines on house prices when the furlough scheme ends and when the real cost of this pandemic starts to become clear.’

Buying in a seller’s market is a tricky business at the best of times but in times of such uncertainty, how should buyers proceed?

‘I’m not expecting a crash, but I am expecting the prices to adjust downward by 5 to 10 per cent,’ Pryor says. ‘If you are buying your own home rather than an investment, then my advice is to pause and wait to see what the data says.’

However, Morrey says: ‘If you delay and the market falls, then supply could dry up. There’s a price to be paid for what’s right for you and your family.’

Northern regions best for buy-to-let 

It had been a case of ‘bye-bye, buy-to-let’ as tax changes in April stopped landlords from claiming full tax relief on mortgage interest payments. That, on top of the 3 per cent surcharge payable on second properties, saw many property investors quit the market.

But Rishi Sunak’s stamp duty holiday has made investing in property far more attractive again, particularly in the North where the rental yields are better.

The axe on stamp duty for the first £500,000 of a property’s purchase price applies on investment properties as well as your primary home. It is available until the end of next March.

Top three highest yielding areas are Hartlepool, Burnley(pictured) and County Durham, according to an estate agent

Top three highest yielding areas are Hartlepool, Burnley(pictured) and County Durham, according to an estate agent

Top three highest yielding areas are Hartlepool, Burnley(pictured) and County Durham, according to an estate agent

Cammy Amaira, of the Tipton & Coseley Building Society, says there is definitely a trend towards investors buying in the North West. ‘Particular interest is coming from British expats who work overseas and are building up their property portfolios in the UK,’ he adds.

North London estate agent Jeremy Leaf says: ‘We’re seeing professional landlords who we haven’t seen for a while taking this chance to add to their portfolios.’

Aneisha Beveridge, head of research at Hamptons International, says: ‘The biggest savings from the stamp duty changes will be available for landlords purchasing in London and the South, while landlords purchasing in the North won’t benefit as much.

‘Yet it’s these Northern regions that offer investors the highest yields – with the top ten highest yielding local authorities all located in the North East and North West.’ 

She says the top three highest yielding areas – Hartlepool, Burnley and County Durham – will see the average investor stamp duty bill fall by just £730, or 16 per cent on average. Yet the average yield there is over 10 per cent.

‘For most landlords, investing in the North looks more appealing, but for those who think capital growth will once again be stronger in the South in the future, the stamp duty changes could be enough to entice them to invest,’ adds Beveridge.

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BUSINESS CLOSE: Britain facing record economic slump BoE warns

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business close britain facing record economic slump boe warns

London markets tumbled today, with the FTSE 100 closing 1.3 per cent lower at 6,026 and the FTSE 250 falling 0.9 per cent to 17,479.

The Bank of England has warned that Britain is facing a record economic slump as a result of Covid-19, but has eased up on its gloomy predictions for this year.

Andrew Bailey and the rest of the Bank’s monetary policy committee think the UK’s economy now looks set to shrink by 9.5 per cent this year. 

While this is an improvement on the 14 per cent drop predicted in May, it would still signal the worst economic performance for 99 years. 

The MPC said its central projection forecasts that GDP will continue to recover in the near-term, but is not expected to exceed its levels from the end of last year until at least the end of 2021.   

As expected, interest rates have been kept on hold at 0.1 per cent, spelling more bad news for hard-pressed savers. 

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JLR develops software so autonomous cars won’t make you travel sick

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jlr develops software so autonomous cars wont make you travel sick

British car maker Jaguar Land Rover has developed new software to train autonomous cars to drive better to prevent passengers from suffering from motion sickness during journeys.

The nation’s biggest vehicle producer has created a rating system for driverless technology – called a ‘wellness score’ – that designers claim can reduce the impact of travel sickness by up to 60 per cent.

If successful, it means the brand’s autonomous technology won’t steer, accelerate or brake erratically – resulting in the inside of vehicles remaining vomit-free. 

Driverless cars won't make you travel sick: Jaguar Land Rover says it has developed software that coaches autonomous vehicles to drive more smoothly

Driverless cars won’t make you travel sick: Jaguar Land Rover says it has developed software that coaches autonomous vehicles to drive more smoothly

JLR bosses said the development of the software will allow the brand to continue to provide customers with ‘the most refined and comfortable ride possible’.

The tech has been created at the British firm’s specialist software engineering hub in Shannon, Ireland.

It has been developed by collating 20,000 real-world and virtually-simulated test miles to calculate a set of parameters for driving dynamics to be rated against. 

With the use of advanced machine learning, driverless car software can use this data to optimise how vehicles move in a way that doesn’t unsettle passengers.

Motion sickness, which affects more than 70 per cent of people, according to research, is often caused when the eyes observe information different from that sensed by the inner ear, skin or body. 

This is why it is commonly triggered by reading on journeys in a vehicle. 

Using the new system, acceleration, braking and lane positioning – all contributory factors to motion sickness – can be optimised to avoid inducing nausea in passengers.

A rating system, which JLR calls a 'wellness score', coaches autonomous technology about good and bad driving behaviour for motion sickness. In this case, the software will tell the driverless vehicle that the green curve is better for passengers than the red one

A rating system, which JLR calls a ‘wellness score’, coaches autonomous technology about good and bad driving behaviour for motion sickness. In this case, the software will tell the driverless vehicle that the green curve is better for passengers than the red one

The rating system looks at everything from braking to cornering and - in this case - acceleration. The smoother the driving characteristic, the better the score

The rating system looks at everything from braking to cornering and – in this case – acceleration. The smoother the driving characteristic, the better the score

With the use of advanced machine learning, autonomous cars will be able to drive as smoothly as a human

With the use of advanced machine learning, autonomous cars will be able to drive as smoothly as a human

The software can already be used in current JLR models to coach adaptive cruise control and lane monitoring systems

The software can already be used in current JLR models to coach adaptive cruise control and lane monitoring systems

And the software developed by JLR is going to be fed into its range of cars well ahead of fully autonomous vehicles hitting our roads. 

Engineers can use the software to develop more refined advanced driver-assistance systems (ADAS) features on future Jaguar and Land Rover models, such as adaptive cruise control and lane monitoring systems.

In the long term, the British car maker says the technology will partly help it to achieve its Destination Zero target for the future – the aim to have zero emissions, zero accidents and zero congestion.

Jaguar Land Rover has been at the forefront of the UK's drive to go autonomous, testing driverless features on the road since 2018

Jaguar Land Rover has been at the forefront of the UK’s drive to go autonomous, testing driverless features on the road since 2018

The new software will be able to adjust the driving settings to the vehicle, meaning a luxury SUV can be smooth while a performance saloon will be marginally more aggressive on acceleration and cornering

The new software will be able to adjust the driving settings to the vehicle, meaning a luxury SUV can be smooth while a performance saloon will be marginally more aggressive on acceleration and cornering

JLR says the technology will partly help it to achieve its Destination Zero target for the future - the aim to have zero emissions, zero accidents and zero congestion

JLR says the technology will partly help it to achieve its Destination Zero target for the future – the aim to have zero emissions, zero accidents and zero congestion

Dr Steve Iley, JLR’s chief medical officer, said: ‘Mobility is rapidly changing, and we will need to harness the power of self-driving vehicles to achieve our goal of zero accidents and zero congestion. 

‘Solving the problem of motion sickness in driverless cars is the key to unlocking the huge potential of this technology for passengers, who will be able to use the travelling time for reading, working or relaxing.’  

The software can be tweaked to match the individual characteristics of different models in the vehicle maker’s range.

For instance, a powerful Jaguar saloon can be adjusted to feel sportier, while Land Rover models can be fine tuned to feel smooth and refined.  

The technology not only adjust how an autonomous vehicle drives but how it can adjust the cabin settings to also reduce the impact of travel sickness – including adjusting the temperature settings and – if the model has it – massage function. 

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Birmingham and London top list of 10 cities that residents want to leave post-lockdown

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birmingham and london top list of 10 cities that residents want to leave post lockdown

The coronavirus lockdown that restricted people to their homes for long periods of time has led to a feeling of being ‘locked-in’ – particularly among those living in the UK’s big cities.

And as lockdown relaxes, it is the residents of the countries biggest cities that are looking for new homes in places with more green space and tranquility, like England’s South West and rural Wales. Or even just somewhere where they can afford a decent-sized garden.

Research from Barclays Mortgages suggests that nearly a third of those currently living in Birmingham and London – at 32 per cent and 30 per cent respectively – feel the biggest urge to move. 

Almost a third of those currently living in Birmingham and London want to move, according to a new report by Barclays Mortgages

Almost a third of those currently living in Birmingham and London want to move, according to a new report by Barclays Mortgages

Next on the list after the UK’s biggest two cities, is not the third largest however: Manchester is down the list at 20 per cent with Leeds taking third place at 28 per cent.

As for the reasons behind fleeing urban environments, the prime motivation is to obtain a property with outdoor space: 39 per cent said they would like to move to a home with a large garden. As any urban homebuyer will know, such properties come at a big premium in cities.

Other reasons to move after lockdown include living closer to essential services at 29 per cent, living in an area where they can exercise easily at 24 per cent, being near to relatives at 23 per cent and living somewhere with a stronger local community feel at 23 per cent.

The research claimed that the South West and Wales tick most of the ‘must-have’ boxes for those currently living in Birmingham, Nottingham, London and Manchester.

The desire to move reflects a craving to escape urban living and embrace a quieter life.

AREAS THAT CITY DWELLERS WANT TO MOVE TO
Top ten cities homeowners wish to leave post lockdown Top location(s) residents wish to move to
Birmingham (32 per cent) South-West (24 per cent) or Wales (22 per cent)
London (30 per cent) South-West (20 per cent)
Leeds (28 per cent) Scotland and South-East (19 per cent each)
Norwich (27 per cent) Wales (20 per cent)
Nottingham (25 per cent) South-west (26 per cent)
Sheffield (21 per cent) East Midlands and North East (14 per cent each)
Liverpool (21 per cent) Scotland (25 per cent)
Manchester (20 per cent) North East, South West, Wales and Yorkshire and Humber (15 per cent each)
Glasgow (20 per cent) South East (18 per cent)
Newcastle (19 per cent) Scotland (47 per cent) and Yorkshire and the Humber (33 per cent)
Source: Barclays Mortgages   

A total of 26 per cent stated a preference to be close to the seaside, while 23 per cent said they wished to live in a more rural location.

It is echoed by those living in and around the M25, with two in five homeowners in the area admitting they’d like to move further away for a better quality of life.

While the top five cities are most likely to see residents eyeing up a move, it is not restricted to these areas as 32 per cent of people across the country say they would like to move to the countryside after lockdown.

Popular locations include coastal communities in counties such as  Devon (Pictured: Salcombe)

Popular locations include coastal communities in counties such as  Devon (Pictured: Salcombe)

Only 17 per cent of those surveyed said a move to a city was in their future plans. And the younger generation is leading those bucking the countryside trend, with 34 per cent of those aged under 25 dreaming of a move to a big city. 

Dr Peter Brooks, a behavioural scientist at Barclays said: ‘Spending the last few months in lockdown has been a massive life event felt by the whole nation.

‘All this time at home has given many of us the opportunity to reflect on where we live and why we’ve chosen those areas, as well as time to consider what’s important to us and the things our current living situations lack.

‘This research indicates an aspiration for a big move and complete lifestyle change. More outside space and the benefits of being closer to friends and family are high on the ‘must have’ list for many movers. 

Almost a third of those currently living in Birmingham (pictured) feel the urge to move

Almost a third of those currently living in Birmingham (pictured) feel the urge to move

‘As working from home becomes more commonplace moving cross-country looks to be move achievable for many as there is less of a need to be within a short commute to the office. If the findings of this research are reflected in the housing market, we could well see a trend for people to leave urban areas in favour of more rural locations.’

It comes as a separate report claims that the number of people living in cities who are contacting estate agents about buying a village home rose by 126 per cent during lockdown in June and July.

This is compared to the same period last year and outperforms a 68 per cent uplift in people making enquiries to move to towns, according to property website Rightmove. 

Rightmove’s property expert Miles Shipside said: ‘The most popular village moves are still within the same region the home-hunters are currently in, as it’s likely they’ll keep their current job but may have the flexibility to commute less often and set up their working space at home.’ 

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