With constant demand and supply pressure impacting property prices, how do people get on the property ladder nowadays?
I’m sure it’s the same as it has always been i.e. cash or mortgage but what I mean is, just how many people now rely on a mortgage to buy property and what proportion of property purchases are bought outright for cash?
On a local level, 8,023 of 23,142 property transactions over the last seven years in York were made without a mortgage (34.67%). This statistic is interesting when compared to Great Britain as a whole (of which 32.42% were cash purchases). Bearing in mind this data, includes my old stomping ground, Prime London (which will skew the national statistic), property prices in York are still arguably less affordable than the rest of Great Britain.
What’s interesting about the data above, is that it remains relatively unchanged over the years with the exception of a slight jump in cash purchases in 2017. We can deduce from this that the York Property Market remains strong (averaging around 3,500 transactions per year) even with all manner of economic and government intervention over the years e.g. Brexit, a General Election, Tax changes impacting the buy to let market which one would expect to cool the market. At the end of the day, we all need a roof over our heads.
I digress… For most York people, a mortgage is the only option to get on the property ladder but this is one of the most fundamental reasons which makes property such a powerful asset class, and that reason is, leverage. In short, you can’t take out a £25k bank loan to buy £100,000 worth of stocks and shares!
Property allows you to use a lower deposit to maximise earning potential and as property prices continue to rise, the level of debt is literally eroded away by inflation allowing landlords and home owners, should they wish, to refinance and build their portfolio over time.
As a York landlord, one can rely on certain tax advantages, one of which being to offset the mortgage interest against the rental income to reduce your profit margin and effectively reduce your tax. However, as mentioned earlier, the government have proposed changes over they last 3-4 years so it’s so important, if you are a landlord, that you seek specialist advice and review your portfolio now if you’ve not done so already.
As ever, if you need any impartial advice, you know where I am.