Should first time buyers wait until after Brexit, or rush and buy before 29th March?

bxboards

I doubt it will make any difference whatsoever.

If you need to buy a house, you need to buy a house. That is the only consideration. People bought houses before we joined the EEC back in the 70's and people will continue to do so after (if we actually leave)

Finchy2018

We're buying now if possible. It's just Husband and I, we're not planning on kids and we finally have deposit funds so figure now is as good a time as ever to buy, we're not intending to move again for at least 5 years, 4 times in 5 years will have been more than enough, I just want to be settled.
Not to mention, our mortgage payments would be over £300 less than the rent we pay in a near identical house.

SouthLondonUser

The people who claim it will make no difference must live in a world of its own, or in a part of the country which lives in total autarchy and isolation from the rest of the world.

No one has a crystal ball, but why don't we try to run some numbers?
The fact that at £250k you pay no stamp duty can be a significant driver in making buying cheaper than renting (in some cases, not in all cases, of course) but if you have a small deposit the cost of the mortgage will be higher and this will have the opposite effect (ie it will tend to make renting cheaper).

For reference, stamp duty on an £800k property is £30k, i.e. 3.75% - an amount which can easily be higher than the cost of renting a similar property for a year. That's why it can easily make a lot of sense, for those looking to spend that kind of money, to rent and wait.

I only know you plan on buying a £250k flat between South London and the South Coast so I have made the rest of the numbers up.

Let's say your deposit is 5%, i.e. £12,500.
Barclays has a 3-year fix no-fee at 2.55%, cheaper than many 2-year deals, i.e. £1071 per month.
At the end of the 3 years, your loan balance is £216k.
If property prices are flat after 3 years, and you have spent, I don't know, £5k between legal fees and buying some furniture, this means you will have "invested" £1071*36 +£12,500 (deposit) + £5,000 = £56k and have £34k (=250-216) worth of equity in the house. In fact, you also have to add the cost of managing agent (if any), ground rent (the flat will be a leasehold), etc.

How much would it cost you to rent a comparable property? For a proper comparison, you can think of comparing what the final outcome is if the money you invest is the same in the "renting strategy" and in the "buying strategy"
Let's say rent costs £10k per year, ie £30k. "Invest" £26 more k (including the deposit which is now available to be invested) over the course of the 3 years, let's say in zero-risk saving accounts. Let's say the £26k become £27k.
After 3 years, you will have "invested" the same £56k but end up with £27k vs £34k.

If property prices go up, buying will have been an even better deal; if property prices after 3 years are lower, renting may have been a better option.
For example, if property prices in 3 years are 5% lower than now (not a catastrophic crash scenario), then you'd end up with £21.5k if you buy and £27k if you rent.

Of course these are very simplified calculations (eg I have ignored sale costs); there are many other factors to bear in mind, including non-financial aspects like the fact that if you buy you can redecorate in your own style, you don't have a landlord that can kick you out for no reason, etc. But IMHO this is how an answer should be framed; no one can predict the future but this kind of calculations at least give you a sense.

SouthLondonUser

bxboards wrote: »

If you need to buy a house, you need to buy a house. That is the only consideration.

No one needs to buy a house; we all need a property to live in, but no one needs to buy ; whether renting makes more sense than buying depends on many factors and individual circumstances. Over the very long run, renting tends to be almost always cheaper, but in the short run, not necessarily, as I have tried to explain with my hypothetical calculations.

Finchy2018 wrote: »

Not to mention, our mortgage payments would be over £300 less than the rent we pay in a near identical house.

If I may, looking at this alone is not the right way of thinking about it. You'd need to compare the entire cost of buying vs the entire cost of renting. Buying can have high upfront costs (legal fees, refurbishing, stamp duty, etc.) which can easily offset the advantage of a lower monthly mortgage vs monthly rent.

AntRyan10

SouthLondonUser wrote: »

The people who claim it will make no difference must live in a world of its own, or in a part of the country which lives in total autarchy and isolation from the rest of the world.

No one has a crystal ball, but why don't we try to run some numbers?
The fact that at £250k you pay no stamp duty can be a significant driver in making buying cheaper than renting (in some cases, not in all cases, of course) but if you have a small deposit the cost of the mortgage will be higher and this will have the opposite effect (ie it will tend to make renting cheaper).

For reference, stamp duty on an £800k property is £30k, i.e. 3.75% - an amount which can easily be higher than the cost of renting a similar property for a year. That's why it can easily make a lot of sense, for those looking to spend that kind of money, to rent and wait.

I only know you plan on buying a £250k flat between South London and the South Coast so I have made the rest of the numbers up.

Let's say your deposit is 5%, i.e. £12,500.
Barclays has a 3-year fix no-fee at 2.55%, cheaper than many 2-year deals, i.e. £1071 per month.
At the end of the 3 years, your loan balance is £216k.
If property prices are flat after 3 years, and you have spent, I don't know, £5k between legal fees and buying some furniture, this means you will have "invested" £1071*36 +£12,500 (deposit) + £5,000 = £56k and have £34k (=250-216) worth of equity in the house. In fact, you also have to add the cost of managing agent (if any), ground rent (the flat will be a leasehold), etc.

How much would it cost you to rent a comparable property? For a proper comparison, you can think of comparing what the final outcome is if the money you invest is the same in the "renting strategy" and in the "buying strategy"
Let's say rent costs £10k per year, ie £30k. "Invest" £26 more k (including the deposit which is now available to be invested) over the course of the 3 years, let's say in zero-risk saving accounts. Let's say the £26k become £27k.
After 3 years, you will have "invested" the same £56k but end up with £27k vs £34k.

If property prices go up, buying will have been an even better deal; if property prices after 3 years are lower, renting may have been a better option.
For example, if property prices in 3 years are 5% lower than now (not a catastrophic crash scenario), then you'd end up with £21.5k if you buy and £27k if you rent.

Of course these are very simplified calculations (eg I have ignored sale costs); there are many other factors to bear in mind, including non-financial aspects like the fact that if you buy you can redecorate in your own style, you don't have a landlord that can kick you out for no reason, etc. But IMHO this is how an answer should be framed; no one can predict the future but this kind of calculations at least give you a sense.

This is VERY helpful and a really interesting way to look at it! Thank you for all the detail and numbers, it's very eye opening. I really appreciate your advice

Thanks again!

Crashy_Time

sheepy21 wrote: »

Must say I don’t understand this sheer paranoia surrounding brexit. The world will keep turning, people will keep working and houses will keep selling. It’s mad to run your life around a somewhat abstract fear with brexit. If you want to buy, then buy. We’ve just bought and didn’t give brexit a second thought, it was the right time and the right house, so that was it :j

Transactions have already plummeted though, and that is before Brexit? There is no law that says the churn in the housing market that existed when mortgages were being given out like sweets has to continue. Buy the wrong house at the wrong price now and it could be a millstone for years to come

Trixsie1989

We completed this month as FTB. For us, we felt it was better to get out of rented as the rent was double our mortgage. We have a 2 year fixed term which expires when I finish university, luckily I am training to be a nurse so shouldn't have issues securing a job, my husband is a police officer so pretty secure unless there are huge cuts to his force. We can't predict the future so have just gone for it and what will be will be

robatwork

Much better to ask this question next July/August or so, and ask "What should we have done, bought a flat or waited until now?"

Then you can get some sensible answers.

I can on the other hand absolutely guarantee interest rates and prices will rise, fall or broadly stay the same at that time.

Crashy_Time

Trixsie1989 wrote: »

We completed this month as FTB. For us, we felt it was better to get out of rented as the rent was double our mortgage. We have a 2 year fixed term which expires when I finish university, luckily I am training to be a nurse so shouldn't have issues securing a job, my husband is a police officer so pretty secure unless there are huge cuts to his force. We can't predict the future so have just gone for it and what will be will be

Probably won`t be in future though with interest rate rises and a scaling back/ending of FOM?

Running_Horse

Just to say, that poll result is currently virtually identical to Brexit, with Leave being represented by GO GO GO on 51.52%.