Buying a property can be a stressful process, from finding your dream home, to dealing with solicitors, conveyancers, mortgage advisors and finally completing. Along the way, there seems to be mounds of paperwork to be filled out at every step, and it can be a lengthy process from start to finish, especially if you find yourself in a pretty long chain.
During 2021, the property market had one of the busiest years ever. It could be due to people having the opportunity to save a bit of money during lockdown, with travel and socialising cancelled. Working from home probably also had an impact, with couples and families needing to utilise more space to create an environment appropriate for working and homeschooling.
Due to this, property prices were pushed to record highs. Great news if you’re looking to sell, but not such great news when looking to buy.
Property experts have expected the UK housing market to stabilise during 2022, but when is the best time to buy a house?
The Best Time to Buy a House
If you are thinking of buying a new home this year, either for yourself or as a Buy To Let, it is worth considering that different times of the year are busier than others. The time of year impacts your choice of property as well as the price you might pay.
The best time to buy is when there is plenty of stock and fewer buyers, which in the post-covid world is hard to come by. If few houses are available, you could end up in a bidding war which can make the process even longer and more stressful than it needs to be. Figuring out a good time to buy can help you bag a bargain and find your perfect property.
There are a few things to be aware of, and between now and June is a good time to start looking for your new investment.
Seasonal Factors
Spring is a really good time to buy a new home as there are so many properties on the market. You’ll have more choice, there will be less chance of getting into a bidding war, and the sales will go through quicker as everyone is eager to complete and get into their new house for the summer.
August tends to be pretty quiet, as it is the peak of the school holidays and many families take the opportunity to head off on holiday. After Spring, September is the second most popular time for sellers to list their property, with kids going back to school, parents back to work and the day-to-day life getting back to normal.
The property market is generally pretty slow in the run up to Christmas, from mid November to the beginning of January, as typically no one wants to be hosting viewings or moving house over the festive period.
However, as January hits and people set out new goals and milestones for the coming year, buyer activity shoots back up. New Year’s Resolutions often call for people to sell or vendors to look for a lifestyle change.
School Holidays
During Easter, Summer, Christmas and the half terms in between, families are often on holiday, busy with different activities or juggling childcare, so putting the house on the market just doesn’t seem feasible. This means the market for larger, family homes is often more active during term time.
However, families with young children will often start looking to move house in the Spring prior to the September intake, to try and buy within the catchment area of their chosen primary school. Families with school-age children will also start house-hunting in the Spring, so they can time their move with the summer holidays.
The Covid-19 Impact
It was forecast that the pandemic would put a halt on home moves, but the property market is thriving. Last year, the savings in stamp duty saw a surge in demand, and by 2022 people are accepting that flexible working is here to stay. After two years in a temporary spot on the dining room table, more and more people are looking to move to a property with room for a home office.
The Economy and Interest Rates
The state of the economy is a big factor when buying a house, as the market is heavily influenced by the economy, interest rates and inflation. In December 2021, interest rates increased to 0.25% in response to rising inflation which dampened house price rises. The official Bank of England base rate has increased again this year to 0.5% in February and then 0.75% in March.
Getting the best deal
If you’re on a budget or looking for a good deal on a buy-to-let or a property flip, bagging a bargain usually depends more on the seller’s situation. If they’re looking for a quick sale due to personal issues, you may hit the jackpot.
November and December can also be a good time to bargain hunt. If a seller is under no pressure to move, they’ll often take the listing down over Christmas, ready to re-list in the New Year. Those who keep the property up for sale tend to be more keen to sell, and therefore potentially will accept a lower price.
Spring is a busy time in the property market for buyers and sellers, and although a great time to sell, you may end up in a bidding war if you’re looking to buy. Buyers in July and August can find they snap up a bargain on a house that failed to sell in spring.
So, when is best to buy?
It depends on what you’re buying for!
If you’re looking for a home for yourself, at a time when there is plenty of choice and you’re willing to pay for your dream house, the answer is now. April to June is when you will find the most options as a buyer. But beware, the more homes on the market means more buyers, which means a lot more competition.
However, if you’re looking to buy additional property, a buy-to-let, a property flip or you’re in no hurry to move, you may be better off hanging on into the summer months and over Christmas to get a good bargain.
Buying a Buy-To-Let Property
Buying property to let can be a stressful, time consuming process. However, if it is done right, you can enjoy reaping the benefits.
Here are our top tips for Buy-To-Let Landlords:
1) Be wary of what you’re getting into
Being a landlord isn’t always an easy job and it can be pricey. You need to ensure that you have the funds for a larger deposit, agency fees and emergencies, such as a new boiler or a flooded bathroom.
You also need to be aware that if you let your home through an agency, there is a risk that you’ll end up with nightmare tenants, and repairs are not cheap.
2) Be aware of the tax rules
Back in 2016, the government imposed a 3% stamp duty surcharge on second homes and buy-to-let properties in England, Wales and Northern Ireland.
Landlords still have to pay the 3% surcharge on the whole property. If you buy a rental flat worth £400,000, the 3% stamp duty surcharge works out as an extra £12,000.
The surcharge is on top of the usual stamp duty rates.
In Scotland, second homeowners and buy-to-let landlords have to pay an extra 4% in stamp duty.
On top of that, private landlords used to be able to deduct mortgage interest payments from their rental income when calculating their tax liability – known as mortgage interest tax relief. This changed in April 2020.
Buy-to-let landlords now have to pay income tax on the entire rental income, regardless of mortgage interest.
Landlords can take advantage of a new 20% tax credit on the interest, which makes the change neutral for most in the basic tax bracket. However, landlords who pay income tax at 40% or 45% will be paying far more than before.
3) Calculate your buy-to-let tax
Calculating buy-to-let tax can be confusing, so having an accountant to manage the financial minefield is a good idea. For example, if the monthly rental income is £1000, and the mortgage interest payments are £400:
Annual rental income = £12,000
Annual interest paid = £4,800
Tax on annual rental income:
If you pay tax at 20% = £2,400
If you pay tax at 40% = £4,800
Tax credit on interest (20% of £4,800) = £960
The tax bill you’ll have to pay:
Basic-rate taxpayer: £2,400 – £960 = £1,440
Higher-rate taxpayer: £4,800 – £960 = £3,840
These figures would need to be declared on a tax return.
4) Think about setting up a limited company
If you’re wanting to save some costs on tax for your rental income, it could be an idea to purchase a buy-to-let property through a limited company.
It is worth getting expert advice before doing this though as it’s not the best option for everyone.
If the property is owned by a company, all costs, including mortgage interest payments, can be deducted as business expenses. The company pays corporation tax on profits.
As a landlord, you can draw income in the form of dividends.
In the 2022-23 tax year, the first £2,000 of dividends is tax-free. But you pay tax on further withdrawals at:
8.75% as a basic-rate taxpayer
33.75% if you fall into the higher-rate bracket
39.35% for additional-rate taxpayers
5) Make sure you have a good accountant
Gorilla Accounting is an expert in landlord accounting for rental property owners.
Whether you’re about to take the first step into property investment, or you already have a portfolio of properties, Gorilla Accounting can help you to successfully manage your buy-to-let finances.
As buy-to-let accountants, we often work with individuals who own between 10 to 15 residential properties, but this doesn’t mean we can’t help if your portfolio is smaller or bigger than this.
Our property accountants have combined our straightforward approach to accounting with a simple, transparent pricing structure to ensure that landlords can easily overcome the common financial hurdles of tax management and company incorporation within this sector.
We ensure your stay compliant with legislation that affects you, such as Making Tax Digital and Capital Gains Tax. We offer unlimited advice without the fear of additional fees as part of the service.
Included in our pricing is:
- 24/7 Access to Our Online Bookkeeping Tool; Our FreeAgent accounting software is secure, user-friendly and can be accessed from any device.
- Preparation & Submission of Financial Statements
- Preparation & Submission of Corporation Tax Return
- Preparation of one Self-Assessment Tax Return
- Assistance with HMRC Records Checks
- Dividend and Board Minute Documentation
- Same-Day Response Service Under Our Client Service Guarantee
- And much more!
You can read more about landlord insurance here.
If you’re looking for a dedicated accountant to help with buy-to-let property, Gorilla can help. Get started today!
