The property market has come to life over the past year with prices rising sharply in some parts of the country especially in London and the south east. A rising market with plentiful finance deals available presents opportunities and challenges so who are the winners and losers.
- First Time Buyers: First time buyers have been given a huge boost with the launch of the help to buy scheme and plentiful credit provided by the funding for lending scheme. Many who have been struggling to save a 10% deposit can now enter the market early with 5% as long as they are able to afford the mortgage payments. The bank of mum and dad is also an important source of deposit finance.
- Home Owners: There are homeowners who have been trapped by negative equity who bought their property at the height of the market or who took advantage of 125% mortgages when these were available. As prices rise and lenders offer more deals to help people trade up these owners can take advantage. This will release properties on to the market as some are finally able to move up the ladder and others cash out.
- The Landlords: Experienced landlords who have held properties long term are enjoying strong capital growth on top of steady rent increases over the years. The return on the price they bought properties for a few years ago will now be excellent. They could contemplate releasing some equity to add to their portfolio although the prospect of rising interest rates should be taken into account.
- Home Developers: Developers are also enjoying rising prices as they can increase their profit further due to price rises as well as improving houses before selling them on. A house typical 3 bed house requiring modernisation can be worth 50 thousand extra after improvements and costs are taken into account. This is a strategy for experienced property investors with good contacts with builders and tradesmen.
- Buy To Let Starters: With more buyers entering the market to get their foot on the first rung of the ladder it is those looking to move into the buy to let market that have lost out. Competition for starter properties is more intense and prices have increased resulting in higher deposits and lower returns for prospective landlords.
- Renters Needing New Home: With average prices in London hitting record highs, even a 5% deposit is a huge amount for many on average incomes who are unable to escape renting. The predictions are for further rises next year so for this group the prospect of home ownership is still far off. As only a fraction of homes are being built to meet demand for housing, it is unlikely that prices will come down soon.