Guild Blog: Is Brexit Keeping First Time Buyers Out of the Property Market?

Brexit and First Time Buyers

While the government has put several things in place to boost the first-time buyer’s market, the uncertainty surrounding Brexit and its full impact on the housing market, deposit requirements and property prices have left many would-be homeowners waiting on the sidelines for now.

 

Brexit

According to Chris Sawyer, Managing Director at Sawyer & Co, operating in Brighton and Hove, the area is showing evidence that Brexit is having a significant impact with first-time buyers. “We are seeing first-time buyers showing fragile confidence in the market, which is understandable given the gloomy picture that is painted,” he says. “Many have adopted a wait-and-see-what-happens approach. With an average house price of £400,000, even a small change to value can have an impact on the buying power.”

Brighton and Hove aren’t the only areas to be affected. Nick Manson, Managing Director at Manson Property Consultants in Newcastle noticed that the uncertainty of Brexit is making the buyers in his area take a pause. He adds that warnings from Mark Carney from the Bank of England that a disruptive no deal Brexit could cause a 35% drop in house prices are also impacting buyer’s decisions.

It is no secret that London’s property market has also taken a knock. Conran Estates in Greenwich have pointed out that first-time buyers are very apprehensive, much like the rest of the market in the financial hub. Again, uncertainty regarding Brexit was pinpointed as the primary issue, with buyers concerned they could end up with negative equity having no assets behind them, even though they have decent deposits. First-time buyers who are taking the leap are generally giving offers below the asking prices.

 

Deposits and high property prices

First-time buyer activity has slowed to a trickle in the Midlands, according to Bill Tandy in Lichfield. However, he says that Brexit is not the main antagonist but rather deposit requirements and the high value of the second-hand market.  He adds that low stock and good availability are the main fundamentals at play, aspects that will not change when the dust of Brexit has settled.

 

Not all doom and gloom

For some, it is business as usual in terms of the first-time buyer market. According to Simon Miller, Managing Director at Holroyd Miller in Wakefield, being predominantly a leave area, first-time buyers are not worried in the slightest by Brexit, as employment levels are stable. Brexit has not had a great impact on the area overall and first-time buyers are carrying on as they always have, with no hesitation.

Craig Reynolds, Owner of Urban & Rural in Bedfordshire and Buckinghamshire, agrees. “First-time buyers are generally not holding back but if they are, it is due to other factors – not Brexit. These include elements such as mortgage availability and lending restrictions. House prices have fallen slightly, which has helped first-time buyers. With Brexit having been a saga for two years now, people are just getting bored with it and are carrying on undeterred,” he adds.

In Wales, Melfyn Williams, Managing Director at Williams & Goodwin The Property People Ltd, says Brexit has not impacted his area at all. “First-time buyers seem to be ignoring the press which is the most harmful thing surrounding Brexit. The attitude seems to be that everyone is still going to need a home or to move home at some point.”

Webbers, with offices in North Devon and Somerset, say their area of operation generally has a low number of first-time buyers, but Brexit is not affecting the attitudes of the ones who do. Overall, they say they have seen little impact to their local market. Borrowing is still very cheap and interest rates are low. First-time buyers are not worried.

 

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Guild Blog: How Stamp Duty Changes will Impact the Market?

In his third Budget as chancellor, Phillip Hammond announced that he will extend the cancellation of stamp duty for first-time homebuyers on properties up to £300,000 to first-time buyers of shared ownership properties valued up to £500,000.  He also stated that the measure would be retrospective so that any first-buyer who has bought a home since the last Budget will benefit.

 

The government has done much to enable first-time buyers the opportunity to get into the market and removing stamp duty on all shared equity purchases up to £500,000 is another great initiative for those purchasing their first home. Since the abolishment of the stamp duty for first-time buyers, many more people have been able to get their foot on the property ladder despite the soaring average deposit amount required. In fact, during the first half of 2018, the number of first-time buyers hit a 12-year high at 175,500.

How will stamp duty changes affect the market in 2019?

“Our view is that the first-time buyer market will be one of the larger buyer groups in 2019,” says Michael Delaney, Director at Lane & Bennetts, “and provided they are well funded for deposits through savings or the ‘Bank of Mum and Dad’, the changes will end up being a kick starter for the sub £300,000 sales market currently being vacated by the buy to let landlords who have been inhibited by the tougher tax regimes.”

Other than focusing on stamp duty, could more be done?

While some believe the changes will continue to boost the numbers of first-time buyers in the market, others believe that more could be done, and certain factors could nullify the impact. Patrick Stappleton, Managing Director of Redwell Estates Ltd, says that anything to help first-time buyers get into the market is a good thing, but like all schemes, they aren’t going far enough. “They should be focussing on getting single occupancy of larger properties moving to release more housing into the mainstream and allow more people to move up the housing chain,” he adds.

 

Brexit remains a factor

Jack Reid, Managing Director of Orlando Reid, says: “There will be an increasing number of motivated buyers out there looking for their first home. It will have a bigger effect on the market outside of London as the stamp duty exception is up to £300,000. It won’t benefit London if a buyer were to purchase a whole property as opposed to shared ownership because of the higher prices compared to the rest of the UK. However, it will increase the number of shared ownership purchases for first-time buyers in the capital. I personally don’t feel it will have a huge positive impact on the market as right now the bigger problem is the uncertainty caused by Brexit and the lack of a deal with the EU.”

Director of Hunter French, Jacob Heatley-Adams, says: “Although the change could have a positive boost on the housing market which would, in turn, feed up through the market to create fluidity, the effect that Brexit is having has nullified any positivity that this decision would have created. It seems that first time buyers are sitting on their hands waiting to see what the outcome of Brexit is. Let’s face it, if you were a first-time buyer and had heard Mike Carney spouting that house prices could drop by a third if a no deal Brexit happened then you would no doubt be waiting to see what happened.”

 

What about stamp duty charges in the second-hand market?

While the much focus has been placed on first-time buyers, not much has been done to boost other sectors of the market. According to Heatley-Adams, there has been a rapid slowdown in the market over the last couple of months despite having plenty of sellers wanting to move, it seems that they cannot move as the market is not flowing.

Sue Dyer, Partner at Atwell Martin, says that the main problem many agents are coming across is the 3% stamp duty on second homes. “The current stamp duty on second homes has prevented a lot of potential purchasers from buying holiday homes or a pad for Monday to Friday working or parents looking to invest in property for children entering University. Should this be lifted then the marketplace would become a lot freer flowing again.”

Jared Thomas, Director of Emsleys Estate Agents Ltd, agrees. “I don’t believe the change in stamp duty for first-time buyers will have much of a positive impact on the market. In all honesty, they need to remove the second property stamp duty charge to have any positive impact whatsoever,” says Thomas.

 

Jobs and deposit requirements still a factor

According to David Corben of Corbens in Swanage, the south coast market has seen no effect whatsoever with the changes in stamp duty. “We are primarily a holiday and retirement town which, because of the lack of jobs in the area means that most young first-time buyers have to move out to Poole or Bournemouth to secure a job.  For those who stay, unless they are fortunate to be blessed with the ‘Bank of Mum and Dad’ most will be unable to afford to save for the initial deposit to buy their first home so will end up renting, and it is the rental market which has been hit more by the changes with the two-tier stamp duty levy.  What we have seen over the last two years is buy-to-let investors have been put off purchasing because of the increase in the second home duty,” he adds.

 

While the full impact of the stamp duty changes remains to be seen, it seems the general sentiment among agents is that more still needs to be done to encourage transactional volumes and price growth in all sectors.

To find out the stamp duty payable on your home purchase use our stamp duty calculator.

Should you buy, sell or trade up before Brexit?

There is no doubt that Brexit has already had an impact on the property market with many adopting a wait-and-see approach until the final deal has been made. As March 2019 and a final decision edges closer, many people are wondering whether they should take advantage of the current situation and buy or trade up, while house prices have subsided. On the other hand, some people are conscious that a hard Brexit could see the housing market slow down and are trying to decide whether now is a good time to sell. 

 

We asked Members of The Guild to give their advice about what they think homeowners should do. Here’s what they said:

It remains a case of supply and demand

Andy Goundry of Goundrys said: “Interestingly, where we are in Mid Cornwall, it appears that people have taken two different views. We have had potential buyers saying they will wait until the uncertainty is over as they feel prices may well reduce and so they will wait. Conversely, we have had some sellers place their property on the market in the hope if they sell now, they may obtain a better price than if they wait until next year. In our area, as always, it remains a case of supply and demand. We have seen a decrease in the number of buyers. However, the dearth of available property still means that a realistically priced property is agreeing a sale within a matter of days.”

Andy adds that if people are trading up or down, then it remains a matter of relative price differential and makes little difference whether that is in a falling or rising market. “Certainly, if the property isn’t on the market, then I guarantee it won’t sell!”

 

Good stock is being secured quickly

Director of Maguire Jackson in Birmingham, Philip Jackson, says that the Brexit question has undoubtedly injected some caution in recent weeks into the local market, taking some of the projected growth out of the market. “However, it hasn’t completely stopped the annual growth we have witnessed over the past three years. There are indications this autumn that some vendors are making the decision now to sell, in the anticipation that the sales market going forward into 2019 might become more difficult.  For purchasers, it means there is more stock coming into the market and positively slightly more choice, however, good stock is still being secured quickly, helped by continuing anticipated overall price growth.”

 

We will begin to prosper again

According to Ben Dreher of Mansbridge Balment, the current uncertainty in the market has caused a drop in sales volumes and an increase in available property. “For the first time in many years, buyers now have the upper hand and as such, there is more scope for negotiation – so yes, they should buy now if they can. Once Brexit is agreed and as a country, we begin to prosper, house prices will undoubtedly start to increase again, so buying now could prove to be a very wise move.”

 

The ideal time to trade up

Residential Sales Manager of Rickman Properties, Stuart Mills, says that when the market is sluggish, and prices are proving more flexible, this is the ideal time to trade up. “The gap between higher and lower priced properties narrows considerably, for instance, if selling at £500,000 and buying at £1,000,000 the difference is £500,000. However, if the market were to come down 10%, the figures look different you are now selling at £450,000 and buying at £900,000, the difference is now £450,000. It’s the same properties, but you are saving £50,000. Looking forward, when the market goes back up 10% your old property is worth £495,000 and your new property is worth £990,000, so you have gained £45,000, making a total saving and gain of £95,000.”

He adds that more than ever this is a great opportunity to trade up, for those who hesitate, and wait until the market is back and moving forward they will see the gap between the more expensive properties and their own grow, and perhaps become unaffordable.

“Another factor to bear in mind is that if you buy a property now, the value becomes unimportant, it only becomes a factor when you sell. Most properties these days are owned for 10-12 years and longer. A property should be a home and enjoyed as such, if you like it and can afford it, and it’s what you want, buy it.”

 

The markets and economy will take time to adjust

Avin Jay, Director at Mansell McTaggart, agrees that now is a great time to sell and trade up if you are playing the percentage game. “Whatever the outcome, the markets and economy will take time to adjust. Very much the same when interest rates rise,” he explains. “I think there are two types of buyers out there, the ones who want to make a profit and the ones who make that emotional purchase. The real problem in the market is overvaluing and Stamp Duty, the additional 3 per cent required when purchasing a second home has got to go.”

 

Property prices in the UK will always increase

Fine & Country’s Adam Tahir, says that very few people truly understand Brexit and what will or won’t happen across all public and private sectors. “Having worked through two prior recessions, there has always been one clear outcome, property prices in the UK will always increase. This comes down to the lack of supply and the ever-increasing demand of homes available. Over the next few years, uncertainty is the key feature here, however, with interest rates lower than they have ever been before, pre-Brexit remains to be a good time to sell, buy or upgrade,” he says.

“Some buyers have lost the meaning of buying a property now. Too many people buy a property for one price because it will be worth a higher price in six months. Over the next five years, we need to go back to buying properties as homes and stop focusing on the appreciation value. Brexit will be another blip, another reason for prices to come down or ‘balance’ so to speak, but eventually prices will increase again and when they do another situation or scenario will arise and the entire cycle will start again.”

 

Brexit, No Brexit, Hard Brexit…people still need a roof over their head

According to Steve Wayne of Benjamin Stevens in Edgware, the property market is largely influenced by interest rates and salaries.

“Brexit, No Brexit, Hard Brexit…in the whole scheme of things, it will be another footnote to history in a decade. We have survived the Oil Crisis, 20%+ Hyperinflation in the 1970’s, Mass Unemployment in the 1980s, Interest Rates of 15% in 1990s, the Global Financial Crash in 2009, whatever happens, happens. People still need houses and a roof over their head. If property values drop, it is only a paper drop in value because you lose when you sell. Long term, we aren’t building enough homes, and so, property is a long game no matter what happens – the property market will always come good,” he concludes.

 

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