When property prices rise steadily, first-time buyers might be tempted to ‘buy while they still can,’ but buying property is a serious commitment and it’s quite understandable to ‘fear where you tread’. Here are five reasons why you shouldn’t rush into it.
1. The high probability of a property bubble
In a 2013 poll, 20 out of 29 economists said the prospect of another house price bubble was likely and many believe the bubble will burst. The problem with buying in a property bubble is that if your house devalues you could find yourself in negative equity. However, experts also caution that negative equity is normally only the result of a quick sale – buying property as a long-term investment should still prove a stable investment.
2. Buying property isn’t the same as buying a used car
For starters you’re going to have to pay Stamp Duty, which is cash you’ll never see again. If you sell your house again before it has increased in value, you may again lose equity. It might also become difficult to sell for the price you need to settle the mortgage if the UK hits a property recession.
3. Buying to let or taking on a tenant can be a headache
If you are thinking of buying to let, think carefully. Many tenants are a dream and quietly pay the rent and even add to the value of your home by undertaking minor renovations; however, you can just as easily get a tenant who defaults on the rent and makes unreasonable demands. If you want to buy to let ensure you are ready for all of the associated challenges and are prepared to pay for insurance. Equally, if you can ill-afford the mortgage and are thinking of renting out one of the rooms to cover the shortfall, just remember that sharing the house with a stranger can just as easily turn into your own version of a depressing Sartre play.
4. When you buy a property you are not only investing finances
You are also investing your heart, mind and future hopes. You need to make absolutely certain that in addition to being a decent investment with fair growth, this is a house or apartment that you can build a future in; for example, it shows potential for improvement and is in a good location. Otherwise it could become a heartache and as well as a headache.
5. This isn’t only your investment
Chances are if you’re a first-time buyer you’re doing it with the help of a partner, mum or dad or even the government (Help to Buy or shared ownership), so really it’s not only your future at stake. Ensure you make a sound investment that will keep all parties happy - especially your partner.
As a general rule, rushing into any big decision is a lot like gambling – it can go either way. Aside from marriage and children, buying property is one of the biggest decisions you’ll make. That doesn’t mean you should be too afraid to commit. It means is that you should consider all your options carefully and if you need to take 6 months or a year to find the right property then by all means do so.
Remember that property is a very unique type of investment in which you invest your heart as well as your money, so perhaps you should wait for a house or apartment that gets your heart beating a little faster before you sign the title deed.
Lastly, stop worrying too much about macroeconomic conditions – as long as you’re willing to ride it out, a property’s value will often recover after a recession, especially in London.