“Should we buy now, wait, move in to rented 'til the market bottoms out..?”
Leonora’s answer to this is,
‘It depends on your personal situation!’
There’s no doubt about it, the property market is going through a fragile time.
Not since the early 1990’s has this country seen house prices actually go down across so many areas around the UK!
As always, I would like to state up front that good, expert advice is always an important part of the home selling and home buying process.
If selling, make sure you’re working with the best agent you can find and that they will work hard to provide you with a good and competitive valuation of your home. Or, use a property finder to oversee your sale and purchase thereby saving you time and stress – even money too!
If buying, again take advice. If you can, use a property finder to make sure you see only the best properties for you. They will also provide you with the confidence to purchase by ensuring you are in a good position to offer and offer the fairest price for the property you want.
I always make the point that when our car goes wrong, we go to a mechanic to get it fixed. When we’re ill we go to the doctor and we usually go to a specialist before making financial investments. However, generally when we are buying our next home, we do it ourselves and don’t use a specialist and do not benefit from their experience and expert advice. And, our homes are usually are biggest asset!
However, before we all panic we need to remember:
• House values are only relevant if you are planning to move, let or sell.
Over 11 million of us have mortgages and just around 14.5 million of us own homes. Generally, each year around 1 in 10 of us move. This last year has seen a 50% reduction in mortgages given and only 600,000 house transactions whereas we could normally expect over 1.2 million transactions.
The credit crunch started in August 2007 but has only really hit the property market nationally since around December 2007. Many see it lasting throughout 2009 and into 2010 – but some areas and sectors of the market may see some recovery at some point next year.
• The media tends to portray the property market as if we are all property speculators/developers. We’re not! Our house is our home and we are in it generally for the longer term (at least 5 years +). On average, people stay in their homes for more than 10 years.
Our home should be purchased primarily for us to happily and comfortably live in – not for financial gain.
• Yes, we’re in a property market downturn, but no property expert will say that prices will never go up again. Markets are cyclical, the UK is an island and our population is increasing – so it is likely that prices will turn round and start to rise again.
• As a nation, we generally want to own the home we live in - 7 in 10 of us already do (and 30% of this figure have no mortgage!). This is unlikely to change in the foreseeable future so demand will go up once we don’t ‘feel poor’ anymore due to the recession and confidence returns in the financial sector.
People will continue to need to move home for personal reasons and properties will continue to come to market because of this. There are some good points about the current market situation:
→ It is a buyer’s market and there is a good selection of properties available currently providing potential buyers with a good choice. Properties openly marketed therefore have to be fairly priced if they are to achieve a sale.
→ If you are looking to buy a bigger home (trade up), now is probably a good time. You’ll have choice and a quieter marketplace in which to negotiate – but do make sure that you are able to proceed to exchange quickly as otherwise you will lose your appeal!
→ Prices have gone down, so buyers will definitely be able to purchase the vast majority of properties at less than this time last year.
How much less depends on the property’s location, structure and its own personal history. Not all locations have reduced in value and some properties will always sell well – whatever the market!
→ Vendors know that purchasers (and any offers they put forward) will be few and far between, so if you are a buyer you may be able to negotiate an even better price if you carefully research your argument and are in the position to move quickly to exchange.
If you need a mortgage and have a loan to value ratio of at least 85% mortgage with a 15% deposit, there are products on the market – but do your research carefully and ensure that you are able to afford any continued market changes. Now that the property boom has passed (with all the no deposit and high loan rates to income products disappearing) we are moving in to a much more normal situation where you will need to save first for a deposit before getting your first home or moving up the property ladder.
→ We are slowly beginning to see better value mortgage products becoming available – especially now the interest rates are coming down (even though they are not as yet fully in line with the Libor rate (i.e. the rate at which the lenders purchase their funds). Again, shop around and use an expert as well as shop direct with lenders to ensure you get the best rate.
→Bank of England interest rates are currently at 3% - the lowest they’ve been for over 40 years – and they are likely to come down further. This should help to reduce the decline in property values and kick start the market in time.
If you are looking to purchase a home over say, £750,000, we would suggest you ensure that you have at least a 25% deposit and more the more money you wish to pay for a property.
Not so good points to carefully consider in this market are as follows:
► House prices have decreased, but so has the availability of good mortgages offered at rates that are competitive.
Be wary of fixed rates currently and try to ensure that you have a deal that will reflect the Bank of England rates, where possible. And, do your sums to make sure you can afford to stay in the property if the mortgage rates change.
► Be realistic about what you can afford and do not over extend yourself.
In hard economic times, people generally tend to ‘feel poorer’ and are more worried about their jobs etc. Make sure you can afford to buy a property and don’t always be influenced about cheaper prices. The biggest drops are on properties that are generally harder sells – these are less likely to bounce back really quickly or without refurbishment and extra funds being spent on them, for example.
► If you own your own home and would like to move, but don’t have to, see if you can cope with riding out the storm for the next year or so – especially if you don’t have much equity in your home.
If you do need to sell now, then make the best of it. Show your home at its best; price it realistically and competitively so that it really stands out to the buyers that are out there and looking.
Leonora
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