Q. We are potential first time buyers, with money to put down, but with the market the way it is, friends are telling us not to be in too much of a hurry, as prices may still have further to fall. Is this right?
ASK THE EXPERT
A. No-one can predict with 100% certainty what prices are going to do, otherwise we’d all be very rich indeed. So, yes, it is possible that prices in some areas may still have further to fall. However, deliberately holding back in the hope of buying at the absolute bottom of the market is a strategy more or less doomed to failure, since no-one knows for sure when the bottom has been reached – until afterwards! Besides, all the signs are that the worst may well be over. Indeed, many agents around the country are already reporting that prices are starting to edge upwards again.
But in any case, whatever happens to prices over the next few months, there is one overriding reason why you should buy sooner, rather than later - and it can be summed up in two words: Stamp Duty.
Last autumn – almost exactly a year ago, in fact - the Government temporarily raised the entry level for Stamp Duty from £125,000 to £175,000. By taking around half of all transactions out of the net altogether, this measure was designed to breathe some much-needed life into the crucially important bottom end of the market.
How successful it has been is impossible to say. What is important, however, is that this temporary measure is due to lapse at the end of December.
What does that mean? Well, if you’re looking to buy a property for, say, £150,000, it means you won’t pay a penny in Stamp Duty – as long as you complete before December 31st. Any later, (since Stamp Duty, unlike Income Tax for example, is levied on the whole amount), and you’ll be liable to pay the Government a whopping £1,500.
With sales currently taking an average of 3 months to complete, that means you haven’t got a moment to lose. In fact, you ought to be out there looking to buy right now.
Of course, it might not happen. The Government might decide to extend the concession. But, considering how cash-strapped they are, I wouldn’t bank on it.