Help to Buy – What needs to happen
Help to Buy, in its pure form, was designed to stimulate the housing market and specifically the building industry. In theory, enabling people to buy new build property would kick start and invigorate the industry – and that’s a good thing.
In fact what has happened to help to buy scheme is two-fold:
- Residential buyers are feeling more confident – a good thing. But nothing has really changed – lending is not noticeably easier despite Nat West’s ‘Nat YES’ campaign – the general public is not earning more, and jobs are not secure. However people are now starting to buy emotionally – without thought to consequences.
- As the market heats up some estate agents – driven by the thought of commission – have smelt blood and some less scrupulous companies are encouraging gazumping and closed bidding wars – which is not necessary. In my experience of two recent cases (in the last two months) this has resulted in over-priced offers.
What needs to happen to help to buy:
- Place a limit on the purchase price of around £300,000 to £400,000 – this will focus on first time buyers and smaller houses. As people move into those properties – either new build or existing – the market can start to move and the entire chain will be stimulated, as owners of existing properties sell to first time buyers and move up the chain.
- Homeowners need to prepare to buy with sensible heads on – this is not an auction room and you must not get caught up in bidding wars. This might be your future home and therefore a very emotional purchase, but you will only keep it if you can afford it. Do the maths; can you afford the mortgage when interest rates rise? What if you mortgage was 8% or even 10% could you still pay? If this is your home you want to keep it and not suffer negative equity and repossession like so many in the last five years – so beware of overpaying or over stretching yourself.
- As residential buyer be prepared, just like a professional investor; have your solicitor details, proof of ID, proof of funds and proof of lending agreement with you before you start looking, then estate agents will know you are serious and can afford to buy. The vendor will know you can afford to buy and the sale will move more smoothly
Comment from Vicki Wusche, professional property investor and author of three books on property investing.
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