For some of us there may be certain points in our lives when we consider timing the housing market. Whether we are buying our first home, upsizing, downsizing, or selling a property without buying another, if we believe there is scope for a rapid change in house prices in the near future, it may affect our decision.
This is becoming more relevant in the current climate, with uncertainty looming due to the upcoming EU exit, many people are predicting house price falls. Does this mean we should put off buying a first home or upsizing in case this happens and we lose out?
Rather than asking if prices may fall, you need to ask yourself, could you cope with a price increase? If for example you put off buying your first home and prices rise, what do you do then? Will you wait again and hope they come back down to where they are at present? And then what if they go up again? Could you miss the boat that will never return?
People who are looking to invest can maybe afford to try and time the market, but when it comes to your personal life it is a very dangerous game to play. I think that very few people can afford to take the risks that come with trying to time the housing market in this way and it should usually be avoided.
There are lots of people that are saying prices will drop, it is easy to say that after the EU vote. Confidence drops therefore house prices drop. This is far too simple of an equation however. There are a million and one factors at play at any one time, and nobody knows how they will all interact with each other. Trying to look on the flip side, maybe a weak pound, low interest rates and the new national living wage could be much more influential factors and actually cause rapid house price growth. I’m not saying it will, but I don’t know, nobody knows. The point is, it is very easy to provide a rationale for either argument, which in isolation makes total sense, but does not in any way prove for certain what will happen.
Many people have been successful by timing the housing market, and many people have lost out. One reason why it can seem easy to predict, is that the people who have been successful in the past are much louder than those who have not. Another reason is that in general, over long periods prices do move upwards, and there are millions of stories out there about how people have made lots of money from house price increases, and it can be when we hear them stories that it makes us want to emulate them.
Jason Hinde FPFS, Cert SMP – Chartered Financial Planner
26th September 2016