Navigating the Housing Market: A Family’s Journey into Homeownership

In gladiator fashion, my family and I have descended into the seething miasma that is the housing market. With the stakes high and emotions running even higher, we are determined to find our dream home amidst the chaos. In this article, I’ll cover: (1) where we’re buying and why; (2) how we are financing it and the available Islamic options today; and (3) some top tips for getting a great deal on a property.

But first, let’s just address the all-important question: Is now a good time to be buying?

Is Now a Good Time to Be Buying?

The current housing market is a complex landscape. Sellers still cling to the memories of the halcyon days of 2020-21, when bidding wars were the norm and estate agents held closed bid auctions. However, the reality has shifted dramatically. With rising interest rates, the pool of buyers has diminished significantly.

Despite this, house prices have continued to rise on average, having increased by 17% since 2020. Yet, a closer look reveals that the majority of this increase occurred during the peak years of 2020 and 2021. In the last two years, house prices have only seen modest increases of 1.14% and 2.05%, with some areas in the UK experiencing declines of up to 5%.

The rise in interest rates has led to a decrease in buyer purchasing power, resulting in fewer transactions and a tapering off of demand. This has created a more sensible pricing environment in many areas. As we discussed in our recent video, we believe the market is currently taking a pause. However, as interest rates are expected to fall over the next two years, we anticipate a rapid resurgence in the housing market, potentially leading to even more aggressive price increases. Therefore, in our humble opinion, now is an opportune time to buy.

Where Are We Buying?

As we embark on our home-buying journey, we have identified several promising cities outside of London where the housing action has shifted. Cities like Newcastle, Manchester, Leeds, Bristol, Bath, Nottingham, and Liverpool are at the forefront of this movement.

We have particularly set our sights on Manchester, which we believe is on the brink of a significant transformation over the next decade. The city’s growth potential is immense, and we anticipate that its house prices will approach those of London in the coming years. Additionally, Manchester holds personal significance for us, as it is where my in-laws and parents reside, making it a logical choice for our family.

How Are We Financing Our Purchase?

Our financing strategy revolves around an Islamic mortgage, a choice I favor for several reasons. Islamic mortgages are often the most cost-effective option available when considering the entire transaction. They are offered through regulated entities, providing a level of transparency and security that is crucial for such a significant investment.

While I briefly considered alternatives like shared ownership, I ultimately opted against them due to the lack of regulation and potential risks involved. The stability provided by regulated Islamic financing is essential for my peace of mind.

Interestingly, Islamic home financing rates have become more competitive in recent years. With the rise in interest rates and increased competition between providers like Strideup and Gatehouse, rates are now closer to mainstream options than ever before. For instance, Gatehouse is currently offering a rate of 5.39% on a 65% FTV for existing customers, while Barclays offers 4.83% to new customers. This narrowing of the gap is a promising development for those seeking Islamic financing.

As a side note, with Labour coming into power later this month, there is a unique opportunity to address the challenges surrounding Islamic home finance and investments. This could lead to innovative solutions that benefit our community and contribute to alleviating the housing crisis.

Top Tips for Hunting Out a Bargain

Finding the right property at the right price requires strategy and diligence. Here are some top tips to help you secure a great deal:

Understand the Macro Before Zooming In: Research the broader market trends and focus on areas with potential for growth rather than falling in love with a property in a declining neighborhood.

Know the Square Meterage: Familiarize yourself with the average price per square meter in your desired area. This metric is a reliable indicator of value, but remember to consider the condition of the property and any necessary renovations.

Use Rightmove Over Zoopla: Rightmove currently boasts a larger selection of properties, making it a more effective tool for your search.

Install Property Log: This Chrome extension allows you to track historical price changes for properties, helping you identify potential bargains.

Check Auction Websites: Occasionally, properties listed on auction sites like Allsops can offer significant discounts. Keep an eye on these listings.

Ask the Right Questions: During viewings, inquire about the seller’s motivations, any known issues with the property, and the status of their chain. This information can be invaluable in negotiations.

Make Offers in Writing: Documenting your offers can help establish your seriousness as a buyer.

Don’t Be Afraid to Lowball: While it’s essential to justify your offers, don’t hesitate to start lower than the asking price. However, be realistic about the potential for negotiation.

Be Patient: If you’re interested in larger properties with fewer buyers, don’t rush. Waiting can lead to better deals.

Consider Future Resale Value: Think about how easy it will be to sell the property later. If it’s likely to be challenging, factor that into your price considerations.

Maximize Value-Add Opportunities: If you’re willing to invest in renovations, consider how you can increase the property’s value through extensions, conversions, or other improvements.

Get a Survey Done: A thorough survey can save you money in the long run by identifying potential issues before you commit.

Final Thoughts

As we navigate the complexities of the housing market, it’s clear that our community is evolving. While challenges around home financing persist, there are promising developments on the horizon. We are actively working on solutions through our income fund at Cur8, aiming to bring over £100 million of new financing to the market.

As we embark on this journey, we appreciate your support and prayers. We’ll keep you updated on our progress through our mailing list. Together, we can overcome the hurdles of homeownership and build a brighter future for our community.