Despite the tumultuous last year, London remains one of the world’s most buoyant property markets. The Stamp Duty holiday has seen demand for property in London skyrocket, buyers keen to make the most of the potential Stamp Duty savings have inadvertently pushed up prices. The pandemic has also redefined what a dream property looks like for many people. Demand for larger homes with gardens and capacity for home offices has increased, which also aligns with the reduced need to be in central locations with the rise of work from home culture.
In this inflated market, buyers feel pressured to complete purchases. Estate agents are encouraging buyers to close this month, as they look to make their end of year targets and with the stamp duty deadline drawing closer, buyers think they need to move quickly. While streamlining some aspects is advised, cutting corners in the final leg of the house buying process can prove devastating. Not only for this purchase but for your long term financial security. Here we will look at three mistakes to avoid when buying a house in London.
Avoid a bidding war
Due to the heightened demand, gazumping in London is at an all time high. At the last minute, new buyers are sweeping in with offers well over the asking price in order to secure the deal, which sellers find hard to refuse even when well into proceedings with a previous buyer. While there is a temptation for buyers to match new bids, going into negative equity to secure a purchase is effectively betting on your future circumstances, which is never a good move but particularly not when the economic outlook is so uncertain.
Prospective London buyers should avoid getting their heart set on one location. Doing so could lead you into a bidding war scenario with another buyer. You could find yourself going well over the asking price for the sake of securing what you think is your dream property. Always remember that the market moves very quickly in London and there is a huge supply of a wide range of housing rotating on to the market, so another property that’s right for you will become available soon.
Market value – identify the bubble
With the market so inflated, many people aren’t factoring in the higher prices when accounting for their stamp duty savings. In certain scenarios, they are in fact paying more in this inflated market than they would a year ago, even with the savings accounted for.
Where possible, seek out an independent current market valuation of the property and a backdated valuation from last year. That way you will be able to have a better view of just how much the prices have risen and the real cost of rushing into a purchase.
Skimping on the survey is the biggest mistake you can make
With the pressure on to complete, there is an increased temptation for the buyer to not carry out an appropriate survey in order to save time and money. This is one of the biggest mistakes buyers can make. The lender surveys required by the mortgage providers are only there to protect the lender’s investment by confirming the property’s value. As a minimum, buyers should seek out a RICS certified, independent surveyor to carry out a Home Buyers Report. This report will act as a medical for your property, highlighting any issues that need to be repaired.
Armed with this information, you can budget for the cost of any repairs that will be required before you move in. These should be factored into your overall purchasing budget, which will determine if you can actually afford the property. In light of these additional costs, you can ask the vendor to either carry out the repairs themself at the original asking price, or to lower the price to account for them. Keep in mind that other buyer’s surveyors will find the same issues, so don’t feel pressured by the vendor if they threaten to pull out of the deal.
With the London market as competitive as ever, buyers should still ensure they are not being rushed into purchases. Rather than buckling to pressure from the Stamp Duty holiday, sellers or estate agents, they should undertake their own research into the type of survey and mortgage products that are best for them, allowing them to make an informed purchasing decision that they won’t regret in years to come.