CV-19 house price falls could present opportunity for second-steppers
12 May 2020: Second-steppers who have been forced to consider whether their home still meets their needs during lockdown, could be in a strong position to move up the property ladder when activity levels return to normal, according to reallymoving.
Following weeks of staying at home, the desire for additional living space, an extra bedroom, home office or larger garden will drive many of those still living in their first home to consider a move. With house price falls likely when the market reopens, they could find that a move up the property ladder to a larger, more expensive home has become more affordable, with the discount on the property they wish to buy being greater than the fall in the value of their existing home.
While negative equity is a risk for more those who bought more recently and with small deposits, those who bought their first home more than five years ago would be in a stronger position to withstand possible short-term price falls of 5 -10%.
Reallymoving offers the following advice to those considering their second step on the property ladder when the market reopens:
- Review your wish list. Something that seemed of little importance before lockdown might be a deal breaker now, such as a home office, a large garden, being closer to family or access to green open spaces. If working from home becomes the norm, more affordable locations beyond the commuter belt could be considered. Decide what you can’t do without and where you’re prepared to compromise.
- Speak to a mortgage broker now, even if you already had a mortgage offer in principle pre-lockdown. Some products have been withdrawn from the market, particularly those with higher loan to values (LTVs) and your affordability might have been affected if your employment circumstances have changed. Mortgage rates remain low and if you still have 25% equity or more, you should be able to access very low-cost borrowing.
- House price falls could work in your favour. Most second steppers are upsizing to a more expensive home, so a 5% discount on the property you wish to buy will be greater than a 5% fall in the value of your existing home. This could mean you can now afford a home move which was previously out of reach.
- Beware of negative equity. If you bought your first home recently or with a small deposit, you could find yourself in negative equity if house prices fall. In this case, you will have to wait for house prices to recover whilst saving as much as possible to boost the deposit for your second home.
- Don’t wait to begin conversations with agents. Talk to them on the phone now to let them know what you’re selling and what you’re looking for. From similar conversations with others, agents may have a pretty good idea of the properties that will hit the market when lockdown is over – and have a prospective buyer in mind for your first home.
Rob Houghton, CEO of reallymoving, said:
“The current extended period of lockdown has forced homeowners across the UK to review whether their property still meets their needs and second steppers in particular are likely to be feeling the squeeze in terms of space.
“When the market reopens, we anticipate a surge in activity by second steppers who are desperate for more living space and who may find a fall in house prices pushes their second home within financial reach. This would help free up properties for first time buyers, many of whom will be looking to take advantage of a sudden fall in house prices.”
Kindly shared by reallymoving.com