Number of UK New Builds Set to Hit Record Low – Where Does The Property Market Go From Here?

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The UK housing crisis is showing no signs of being resolved any time soon, with fewer homes relative to our population than other developed nations and historically low levels of new homes being built. But what does this mean for people looking to buy homes in the UK?

In this article, we explain some of the things UK home buyers may want to be aware of and what they mean for anyone planning to buy a home. We also provide some helpful tips on boosting your chances of a successful home purchase in the current climate.

Need help with buying or selling a home? Please contact Karen Fletcher who will be happy to advise.

Key points for UK home buyers to know

  • Proposed changes to planning laws would cause the supply of new houses in the UK to hit the lowest level since the end of World War 2 – according to research for the Home Builders Federation (HBF)
  • England has just 434 homes per thousand inhabitants, which is significantly lower than other developed countries – as found in additional research for the HBF
  • Average UK house prices are falling, particularly in England, driven mainly by high interest rates on mortgages – based on data from Zoopla
  • Higher mortgage rates mean the buying power of the average home with a mortgage is about 20% less than at the start of 2022 – based on the same data from Zoopla

What this means for UK home buyers

If you are planning to buy a home, the above facts might seem like bad news. However, there are actually reasons to be optimistic for those who are in the position to buy.

The squeeze on average buying power due to higher interest rates and the wider cost of living crisis means there are tending to be fewer potential buyers for each new home coming onto the market. Indeed, the number of first-time buyers in the UK fell by more than a fifth in the first eight months of 2023 compared to the same period in 2022.

Fewer people with the capacity to purchase a home is creating a buyer’s market, giving more power to those who are in the position to buy. Higher interest rates are also likely to be putting a strain on the finances of those reaching the end of a fixed rate mortgage, meaning more properties may end up coming onto the market as a result.

While the reduced buying power of those who need a mortgage could mean that people need to set their sights lower than they might previously have expected, falling prices may go some way to offset this. Anyone who can afford to buy without a mortgage or with only a small mortgage may also significantly benefit from lower house prices.

Longmores’ tips for a successful home purchase during the housing crisis

  • Be realistic about your budget – A lot of transactions ended up falling through in late 2022 as rapidly rising mortgage rates meant that buyers suddenly were no longer able to afford homes they had made offers on. While there’s nothing to suggest mortgage rates will quickly rise again in the same way, giving yourself some leeway when it comes to what level of mortgage you can afford can help protect you against having to pull out if rates do increase.
  • Consider what will happen when the time comes to remortgage – Many people needing to remortgage now have been caught out by interest rates being much higher than when they took out their original mortgage or last remortgaged. While it can be tempting to push yourself to the maximum mortgage you can afford, if rates were to rise again, you do not want to find yourself struggling when you need to remortgage.
  • Find out how much you can afford to borrow early – Getting a mortgage in principle will tell you how much you are likely to be able to afford. However, if mortgage rates change, make sure you get this reassessed.
  • Do not wait to choose a solicitor – You do not need to wait until you have found a property you like before choosing a solicitor. If you do your research and find a good solicitor as soon as you start seriously looking for a new home, this will save time once you have made an offer and help to speed up the home buying process.
  • Be thorough about checking out your new property – As we are experiencing a buyer’s market, purchasers can generally afford to be a bit choosier about what they are buying. Make sure you work with a reputable firm of solicitors who you can rely on to carry out property conveyancing checks and identify any potential issues affecting the property. You should also make sure you have an appropriate property survey. If necessary, you can then negotiate with the seller to make sure any issues that are uncovered are taken into consideration for the sale price.

Get expert support for buying property

Buying property can be a challenging process, with lots of details to get right and serious implications for your finances if things go wrong. Having the right legal support is, therefore, absolutely critical.

At Longmores, our Property team are very experienced in dealing with buying and selling property for a wide range of clients. We can offer clear guidance through every stage of a transaction, keeping things straightforward and minimising your stress, while ensuring your best interests are protected.

To discuss how we can help with buying residential property, please contact Karen Fletcher who will be happy to advise.

Please note the contents of this article are given for information only and must not be relied upon. Legal advice should always be sought in relation to specific circumstances.