According to the Halifax House Price Index, prices across the UK continue to march forward, signalling continued optimism in housing for Brits of all ages. Nobody’s calling this a housing bubble just yet, but things are certainly moving up in a rapid and consistent fashion, which raises some important questions. Is it a good time to buy? Are there particular risks in this housing market worth considering? How long will it continue? We take a look at some of these topics below:
- Housing data in detail – During the recent summer reporting period, housing continued to rise over both the prior three-month period as well as the year-over-year reporting period. This is a good signal of a continued trend upwards. Activity is higher as well. This is because homes sales for the first half of 2013 were 6 percent higher than for the same period in 2012. This means it’s not just a select few buyers (or foreign investors) driving home prices up, but instead many people are partaking in the housing recovery. Housing prices were up nationally, but rose in especially strong fashion in London. This is not uncommon, as higher activity and salaries tend to congregate around larger cities.
- Affordability – Fortunately for many first-time homebuyers, prices are just starting to recover from the prior housing collapse and many properties remain within reach. At the same time, interest rates remain at generational lows, so for many, there’s never been a better time to buy and lock in low rates for years. Additionally, the government is constantly looking at more “buyer-friendly” strategies and incentives to continue to boost the housing market. These include lower down payments and more favourable loan terms. As long as this environment continues, new homeowners may continue to flood into the market.
- The truth about home ownership – I don’t like to view a home purchase as a purely financial transaction. First off, I never consider primary housing as an investment. You have to live somewhere after all, and you can’t easily liquidate a property when in need of money. Next, there are very high “transaction costs.” Moving isn’t cheap — there are taxes, and you may incur fees for selling assistance and more. It also takes quite a bit of time, which has its own value. I like to focus on the employment picture and consider how likely it is that one could remain in a single location for many years without having to relocate. If one has a very reliable job or many competing firms are within commuting distance, then it often makes sense to buy rather than rent. But for people who may need to move within the next few years anyway, buying is often not a prudent use of time and funds.
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