Money & Daddy is a weekly column about parental finances, published on Wednesday mornings. Got a topic or problem you want me to tackle? Email me: [email protected]
What do you think – is this the worst or best time to be buying a house? I care deeply about this question, having been stung by the housing market after years of being told “you can’t go wrong with property”. Now I’m embarking on a quest to find a forever home for my wife and The Boy, it’s crucial I don’t get it wrong, again.
To be fair, no one could have predicted the Brexit vote and its effect on central London house prices, not to mention a global pandemic that has turned people off pokey flats near bars in favour of detached five-beds in the suburbs.
Anyway, at least we have cash from the sale of our south London flat – sold for £9,000 less than we bought it for in 2016 – and can get stuck into some bargaining. The question is: what’s a good price when values are at record highs but the country is braced for a tidal wave of unemployment when Rishi Sunak’s furlough scheme ends?
Do we sit tight, stay with family and let the rabble of south Londoners clamouring for our dream home fight it out for a few months? Or will the mass unemployment expected when the bailout scheme ends in October make no difference to prices? After all, it is the generally younger workforces of the hospitality and travel sectors most under threat and they’re probably not buying homes on the south coast. Perhaps the blow will fall mainly on first-time buyers, rather than second-steppers like us.
Then there are mortgages to consider. As you’d expect, loans for people with small deposits have shrivelled up in the wake of the pandemic. There are half as many deals on offer today than before the lockdown. But if you can convince a bank to lend to you, the rates are ridiculously low – for now.
This week Moneyfacts, the financial data firm, said “now is the time” to secure a fixed-rate deal as rates slowly increase from record lows. The average two-year fix, across all deposit sizes, is 2.08pc. With a chunky deposit, you can get far lower.
Sitting on our hands seems sensible, but that has a cost, too. We are lucky in that my mother-in-law (MIL) has agreed to let us re-enact lockdown, where we decamped to her Kentish idyll with The Boy getting a chance to draw on her walls and wee on her bed.
Others who choose to wait between selling and buying will have to fork out for rental accommodation, paying far more each month than they would on a mortgage, eating into their deposit. Inevitably, the term of the rental will overlap with the new property purchased, so there’ll be the pain of paying for both for a month or two at least.
We’ve managed to shield ourselves from those expenditures but we haven’t been able to avoid storage costs. The MIL has banned us from adding any more junk to her groaning garage so we must pay Storage King of Aylesford £125 a month for 75 sq ft of air. (Do we really need all these books we read at school? Ah yes, of course, The Boy can use them if Of Mice And Men is still on the syllabus in 2035.)
There’s always the risk that after all this careful planning, all this bided time, prices don’t fall at all but continue to go up as they broadly have for the past decade.
Experts always warn about the folly of trying to time the rise and fall of stock markets. Maybe that advice is true for property, too. I suppose the key difference is that the house we buy doesn’t have to rise in value faster than inflation, it just needs to house a happy family for the next 20 years.
Have a question or comment about parental finances? Email me: [email protected]