House prices: Why you should buy a house Now to ‘make real returns’

Posted 06th May 2022 by ctatax-admin

Read the article on The Express

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“THE property market has been a seller’s dream recently, with prices reaching an all-time high and continuing to push the limit, even in the face of the worst cost of living crisis in a generation. But one expert explains why now, despite the price hike, could actually be a great time to buy your dream home.

Buying a house now will cost you an average of £28,000 more now than it would have this time last year – but one expert has outlined how higher prices may not actually be a bad thing for prospective buyers. Many of those who were in the market for a new home have opted to park their plans in anticipation of lower purchasing prices later in the year or the next – but there are still thousands determined to bag a house even when the prices are higher than ever.

David Hannah, Group Chairman at Cornerstone Tax, said that despite the huge jump in prices, now isn’t actually a terrible time to secure a new home.

He said: “If we look at what has been going on – house price growth, retail inflation, energy costs surging, that’s going to put pressure on employers to raise wages. I believe wages will rise, meaning real spending power will not actually decrease.

“If you borrow a hundred thousand pounds today, the fixed figure of one hundred thousand pounds doesn’t rise in line with inflation.”

Of course this is all down to affordability – but those who can stretch their home buying budgets could be on to a winner if they still decide to buy now.

Mr Hannah explains: “So, in five years’ time that debt is probably worth half what it is today.

“In high inflationary times with relatively low interest rates, it makes sense to borrow. The debt is being eroded by inflation, whereas the value of the asset (the house) is actually going up in line or ahead of inflation. It’s a way to make real returns.”

But buyers should be aware that the external factors currently dictating the booming market can easily become a detriment to your investment.

A shortage of new homes being built due to global supply chain issues is massively increasing home values, and is not predicted to end in the near future.

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Mr Hannah said: “The problem we do have is the rate of demand and supply. If builders are building and they’re oversupplying, it will soften the increase and the appreciation in asset value. But, if the number of people wanting to buy houses continues to exceed the supply, then those prices are going to rise.

“We have an open market in the UK which means not only are domestic purchasers and investors looking to buy but we have inbound investors. We also have quite a number of people relocating to the UK.

“Overall, I expect demand for UK housing to continue to outstrip supply – pushing price increases ahead of inflation and provided wages are increased, the affordability of housing will stay in lockstep.”

If you’re still waiting for property prices to drop before you make a purchase, next year could provide you with a bit of luck.

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You can call us on 01858 894349 or email us at newbusiness@ctatax.uk.com