Is now a good time to buy a home in Dorset?
Dorset Property Market Update
By Grant Brooks – MD Edwards Estate Agents
With the recent increases in the cost of living and the gloomy predictions from elements of the mainstream media about both the economy and the UK property market, I’m increasingly asked if now is a good time to buy a property in and around the Dorset area.
To put this into context, the question is most frequently from homeowners asking whether now is a good time to buy a new home, but also from buyers questioning if there is an argument to rent given the current uncertainty.
The UK property market has seen significant increases in recent years, with the local property market in and around the Dorset area having seen annual increases of almost double digits over the past two years or so.
Although, as with previous strong property markets over the years, they are always going to slow at some point, if for no other reason than people’s ability to service the mortgages required to buy property at increasingly higher prices becomes unaffordable.
This time around, the external influences of the Ukrainian conflict pushing up gas prices, which has inevitably led to higher inflation and the equally inevitable reaction from the Bank of England to increase interest rates in an attempt to control this… Ultimately pushing the cost of borrowing up.
So, is now the time to buy, or is it better to sit tight and see what happens? There are some important influences and one of the most relevant, to would-be buyers, is what’s happening to house prices.
What’s happening to House Prices
At a local level, it’s not always easy to see the subtle market trends, my experience of house prices at the moment is that little has changed, as whilst it’s certainly not the frenzied market we’ve seen earlier in the year, there remains a good amount buyer demand which has, by and large, kept asking prices steady. The limited supply of new properties coming to the market has helped maintain prices, there are still too few properties on the market compared to the number of buyers.
Where things have changed, is that we are now seeing property owners being much more realistic and offers are being very carefully considered.
At a national level, where a far greater cross-section of market data is available, market commentators report that prices have slowed. The property portal Rightmove confirms that ‘Average house prices reached £371,158 in October, an increase of 0.9% from September. That’s up 7.8% from October 2021’.
This represents a drop of 1.1% this month, which despite the weight of financial uncertainty is in line with the average 1.1% drop recorded in November during the pre-pandemic years of 2015-2019.
What prices will do next year is also an influencer, this is a much tougher question. I am not in the business of making predictions, although there are a good many that give it a try… Rightmove for example, initially predicted house price growth to slow to 5% for the whole of 2022. It then revised this by increasing its growth prediction to 7%. This projection comes because housing stock is at a record low and is struggling to meet buyer demand.
Is now a good time to buy?
Of the buyers I talk to on a daily basis, there is little consensus, some, particularly first-time buyers, hope house prices will fall to make house purchases more affordable. But there is no guarantee that will happen.
There are homeowners that are holding off selling due to a lack of available property to buy, which only adds to the problem. The limited supply of new homes coming to the market means buyers often end up competing with other buyers to secure a property.
The cost of borrowing has also become more expensive and it could become more so if the Bank of England raises interest rates again. Although we have been lulled into a false sense of security thinking that borrowing would remain ultra-low. In 1979 interest rates were 17%, in 1989 they were almost 15% and in 2008 they were 5%, it was only after the 2008/09 financial crash that we have seen these ultra-low interest rates.
There is of course uncertainty, although the property market over time has been and remains resilient, the kind of house price increases we’ve seen in recent times was unsustainable, but the desire we Brits have for owning our own little castle is not going to stop anytime soon.
So the answer to the question is, if the time is right and you can afford it, then it’s probably better to bite the bullet now. Certainly, if this is a long-term plan, and you intend to live in the property for several years.
There is little point in waiting for house prices to drop, which may not happen, and even if house prices take a hit due to rising mortgage rates, it will mean that borrowing to buy property is more expensive. This means waiting for lower house prices might come at the expense of affordable mortgages.
It is also important to remember that you are buying a home and are likely to live there happily for many years, so think about it as a long-term investment. Historically, property values have increased over time, so whilst you may not make a profit in the short term, you will almost certainly make a profit investing in property over the longer term.
Would it be cheaper to rent in the short term?
In previous times, the buying cycle has often started with people renting first in order to save for a deposit. In more recent times, rising rental prices have made this a much more costly option.
Currently, the average monthly rent in the UK was £1,171, according to the Homelet Rental Index. That’s an increase of 10.6% over a year. The latest data from the ONS, shows that private rental prices have increased at their greatest annual rate for more than five years, as demand continues to heavily outweigh supply.
Mortgages however, are still relatively cheap and repayments can often be lower than the cost of monthly rent.
The issue for many many tenants is that they struggle to save enough for a deposit to buy a property, because their rents are so high, leaving them stuck in rental properties until they can set enough money aside.
If the time is right, if you can afford it, and this is a long-term purchase, now is still a time to seriously consider buying a home.
Considering a move?
If you would like some help or advice, please feel free to give me a call at our Ferndown Office anytime.
Until next month, happy house hunting.
Thanks for reading
Grant Brooks – Edwards Estate Agents
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