Recent weeks have seen a succession of surveys and indices confirming a noticeable jump in the number of properties for sale.
Both online property portal Rightmove and estate agent Countrywide have suggested that in the last month or so the number of available properties has jumped by a frankly astonishing 35%.
This was then followed by the latest survey from the Royal Institution of Chartered Surveyors, which revealed that the balance of surveyors reporting new instructions jumped from 11% in April to 21% in May. What’s more, the trade body argues this trend is likely to continue in the short term.
What’s sparked all these new property sellers? And how can those hoping to buy take advantage?
The first reason more people are looking to sell at the moment is the reform of Capital Gains Tax. The tax stood at a flat rate of 18%, though the new Government made it abundantly clear very early on that it would be raised quite sharply. In this week’s Budget it raised the tax to 28% for higher rate taxpayers.
You only pay Capital Gains Tax on a property if, when you sell it, it is not your main residence.
So the expectation of this increase shook up the UK’s landlords and second-home owners, many of whom fancy avoiding the tax by shifting some of their portfolio before the tax change comes in. As a result many have put some or even all of their properties onto the market.
Unfortunately, the tax rise immediately came into play at midnight on the day of the Budget (Monday 21st June) so many sellers will still be caught out by it.
Another spur for sellers returning to the market in droves has been the abolition of the farce that has been home information packs (HIPs).
The packs started out as a way to help speed up the housebuying process by providing the buyer with all the information they could need at the very beginning, in a bid to cut the number of transactions that fall through. It would also get rid of those timewasters who would put their property on the market with no real intention of selling, as the seller would have to stump up for the packs.
Needless to say the packs were a bit of a disaster, and scrapping them was one of the first actions of the new coalition Government.
As a result, those putting their property on the market no longer need to shell out up front for the packs (sometimes hundreds of pounds), which had previously discouraged prospective sellers from testing the market.
Perhaps linked to the first two reasons I’ve suggested, but the election itself played a part in holding back sellers, who wanted to wait to see who got into power, and what they were likely to do, before putting their property onto the market. Now that is out of the way, plenty of prospective sellers feel somewhat more comfortable about putting their home up for sale.
The final reason that more properties are hitting the market is that more people believe that house prices have bottomed.
Perhaps they are a little late, seeing as house prices have risen almost 10% over the past year, but clearly there is sufficient confidence that things are not going to get much worse, and so now represents a good time to get fair value for their property.
So what can we expect to see in the housing market in the coming months as a result of this sharp growth in property sellers?
Most industry experts reckon that this jump in supply will lead to property prices stabilising (and in worst case scenarios even falling slightly).
So potential buyers, so long as they can get their hands on a mortgage, are in a good position. Not only do they now have a wider choice of properties to choose from, but the prices are likely to remain stable, or even fall, making properties a tad more affordable.
However, there is a danger that, with more speculative sellers around, you waste your time negotiating for a property that, in the end, the owner decides not to sell.
So what should buyers be doing to ensure they don’t fall into this trap?
Before you even think about purchasing a property, it’s very important to get the finances in position so you can move quickly once you find that dream home. The mortgage market is still a bit subdued – gross lending rose just 7% in May, having fallen in April – but there are still some decent deals out there for first-time buyers and home movers alike.
Working out how much you are prepared to pay for the property – and whether you reckon you can nab a bargain – can be quite tricky. All sorts of factors, like how long the property has been on the market or whether the seller has already sorted out their next home, can come into play.
Another thing to bear in mind is the risk of being gazumped (unless you are lucky enough to live in Scotland anyway).
Gazumping is where you have already had a bid accepted on a property – but have not yet exchanged contracts – only for the seller to then accept a higher bid from a different prospective buyer. As a result you either have to stump up more money for the property or walk away.
While you may not have exchanged contracts, chances are you may have already paid for surveys and solicitors, so gazumping can see you thousands of pounds out of pocket.
Unfortunately, estate agents are required by law to pass on all bids to the seller. However there are things you can do to reduce the risk of being caught out in this way. Be sure to have a read of Tips to guard against being gazumped if you want to avoid losing out on a small fortune!
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