Behind the headline: a slower market just means you have to start sooner

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    Updated: September 22, 2022 at 8:07 pm
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      With the doom and gloom in the press, now might feel like a bad time to purchase a commercial property. You could be missing out, says Staurt Pawelczyk, Head of Commercial Mortgages at Swoop.

      Is buying a property the right thing to be doing just now? With interest rates (not to mention other costs) rising, going against the grain may feel particularly uncomfortable right now. But could you be missing out on a great opportunity? 

      As any investor will feel at any time, making a big purchase in a slowing market is not always easy. You will need to balance your long-term goal of acquiring an asset with the short-term excitement of the process itself to avoid spending more than you need to.

      There is always a trade-off between speed and price; with the sums involved in commercial mortgages, the numbers can be considerable.

      Some points that you need to think about:

      Cashflow

      For all businesses, utility costs (gas and electric in particular) are rising without control. It is vital to review these costs to ensure that there is capacity to take on mortgage payments as well. 

      Fortunately, paying the mortgage is almost always cheaper than paying the rent. As this article shows, there is a pathway to saving on your rent by buying a property, even if you need to borrow to raise a deposit. 

      If you already have a mortgage, refinancing may be an option to control these costs. At Swoop, we can look at ways to reduce the interest rate charged or implement a strategy to bring down monthly repayments.

      Buying a property – even in a slowing market – is a smart investment for your future

      Property is a relatively safe long term investment, and you’ll likely see the value of your property increase over time. If housing prices decrease, however, the value of your property will be less than it was when you purchased it. 

      For example, if you bought an average-priced house in the UK in 2000, it would have cost £91,100. In 2008, that same house would have been worth just £87,800—a difference of 1.6 percent. 

      If that has put you off, perhaps it shouldn’t: 2008 saw a massive crash, so selling at that point would’ve been a bad idea. Holding onto the property as a long-term investment would be a wiser path to tread. That same house is worth £345,000 today!

      While it’s not completely risk free, there are ways to manage risk when buying property. One of the most important principles is that you buy and sell when you want to, not when you have too. As the example above shows, selling in a slump will lose your money. But it is a great time to buy.

      Interest rates

      We mentioned interest rates before, but their impact is a double whammy, so we are mentioning them again. The pound in your business account is buying less while prices go up.

      Naturally the thought of spiking Interest rates is giving buyers some pause. But these do not affect the good reasons to buy now:

      • If you’re currently renting, you’re losing thousands of pounds every year that could be going towards paying down a commercial mortgage
      • With prices still stagnant in many markets, now is a great time to find a great deal on a property

      When looking for a loan, however, you’ll have to consider the higher costs associated with an increased rate environment. The good news is that there are ways to manage the impact on your bank balance, such as by taking a longer term or opting for interest-only repayments.

      Are prices volatile?

      This is the big question for many prospective buyers. 

      The answer is that in the short term, prices may dip, but property remains a good bet long-term. Remember the example above – from £91,100 to  £345,000 in 14 years is a great return. Again it comes down to selling when you want to, not when you have to. Choose your moment to avoid losing out. The sooner you get on the property ladder, the sooner you can start benefiting from that uplift in value.

      Conclusion

      While it may seem like a good idea to wait until the market slows down to buy property, there are actually several reasons why it’s better to start your property search as soon as you can. 

      The first is that you want to be able to act quickly and decisively when you find the right place, so starting your search early will mean that you can be in the right place at the right time. 

      The second reason is that people who begin their searches in the summer will find that the lenders, solicitors and everyone else involved in the process will have a “back to school” mentality and be keen to wrap things up before the end of the year. 

      If you’re thinking of buying property in Q1 2023, then the search needs to start now! That’s because many of the properties available at that time will be sold before they ever make it onto the market, due largely to “Seller’s Market Tactics.” These tactics include things like giving an exclusive offer or contract for sale on a property to one buyer before making it available to anyone else. They also include things like putting an asking price on a property that is higher than what anyone else thinks it’s worth, causing people who are price sensitive to move on.

      As with anything else in life, buying property requires nerve, timing and funding. Which is where Swoop’s expert team steps in.

       

      To begin a conversation about your commercial mortgage, make an appointment with a dedicated Funding Manager here.

      Like what you see? Share with a friend.

      Don’t waste time, there’s plenty of funding and saving solutions to help your business grow

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