If you’ve always wanted to earn from real estate, buying and selling homes could be a good idea. Leasing property is starting to lose profitability, thanks to millennials and Gen Zs who’d rather jump straight to buying. In 2021, the total rent paid by tenants across Great Britain dropped down to £57.3 billion. It was considerably lower than the peak rent in 2018, which totaled £62.4billion.
Mortgage, on the other hand, is becoming more affordable. The interest rates are another story, though. Following the announcement of Bank England to raise their interest rates from 0.1% to 0.25%, many lenders also increased their rates. Hence, only a handful of lenders today offer mortgages below 1%.
The pandemic is also affecting the housing market. The demand increased more than the supply, prompting home prices to spike. So is it a good idea to start a buy-and-sell business today, or should you wait for the COVID-19 cases to subside?
Below are the factors you should consider before making a decision:
1. Lack of Supply
An imbalance in demand and supply triggers a price increase in goods. This also applies to houses. Since many people are buying but not enough homes are available, the properties in the market are getting more expensive.
Savills, an estate agency, predicts that home prices will increase by 3.5% in 2022. The increase will predictably slacken to 3% in 2023. Zoopla, a property listing platform, had similar forecasts. If this trend continues, it would be a strong seller’s market. A single property could have well over 19 buyers competing over it.
2. Mortgage Rates
If mortgage rates continue to drop, more buyers will pour into the market. But with the recent increase in rates, the supply of buyers may slow down. Of late, only six lenders offer mortgage rates below 1.5%. And some of them aren’t available to first-time buyers and new homes, but for remortgages only.
The deals with small deposits can quickly turn the conditions in your favour, though. The increase in the availability of mortgages with 5% deposits is encouraging millennials and Gen Zs to skip the renting stage. Experienced mortgage brokers can lead young borrowers to such deals, allowing you to sell to a more enthusiastic market.
3. The Season
A peak season exists in the housing market too. In the U.K. and U.S., spring tends to be the busiest season for buyers and sellers. The reason isn’t clear, but it has always been assumed that people aren’t on a summer or Christmas holiday during spring.
Summer has never been the best time to sell. Even if you sell to families, chances are they’re busy caring for a child who has just had their summer holiday. Winter is also a difficult time to sell, not just because of Christmas or Hanukkah, but because the weather itself makes home-shopping uncomfortable. But summer and winter are the buyers’ market because prices decrease when demand is low.
If you can’t sell in spring, wait until autumn. The weather is warmer, and people aren’t as busy with holidays or travels. But the market slows down fast by October, so find a buyer who’s ready to move in immediately.
4. Value Trends
When you price a property, other factors play besides location, the house’s condition, and its appreciation. That’s the value trends in its neighbourhood. If you price your home way higher than the average value of other homes in the area, you may give yourself a disadvantage. Even if your property is luxurious or state-of-the-art, if its value deviates from the trend, buyers may think it’s just overpriced.
Alternatively, if you price your home way lower than the average, buyers may assume it’s plagued with issues. They may inquire about security, repairs, maintenance, and other possible devaluing factors.
5. Health Protocols
Lastly, consider if the health protocols will affect your ability to buy and sell. Since we’re still encouraged to practice social distancing, you may only be able to tour homes virtually. How secure are you with purchasing a house you haven’t visited in person? Are you sure that you’d be getting what you pay for?
But if you’d work with a real estate agent, a virtual home-shopping may not be as risky. Real estate agents are required to disclose everything they observe in a property. They’ll point out maintenance issues and other hidden problems. As such, they can help you negotiate the price with the seller. The seller can then either pay for improvements or lower their selling price. In turn, you can sell the home with improvements or demolish it and sell the land for a higher price.
With these factors considered, you can weigh the pros and cons of starting your home-buying and selling business. Remember the one thing that remains constant: there will always be buyers, no matter the state of the world.
