| In the current climate, one of the questions we are | | | | forced sale situation for whatever reason, and this is |
| often asked is when will be the right time to think | | | | where the bargains are to be found. Currently one of |
| about buying. The answer is right now, if possible, but | | | | the main sources of such properties are those placed |
| let's expand on that a little further. | | | | on the market by mortgage lenders who have |
| One of the main concerns of those looking to buy a | | | | repossessed them, and a significant number are from |
| property is what might happen to house prices. Let's | | | | buy to let landlords who were unable to keep up |
| face it; nobody wants to invest in such an expensive | | | | with their mortgage payments when interest rates |
| asset if it is going to continue to lose value. With the | | | | went up last year. However, as the government |
| media full of reports of double figure falls in values, | | | | becomes ever more strict with lenders concerning |
| and estimates of further significant reductions | | | | residential repossessions, and as rental incomes |
| throughout 2009 it would be very easy to conclude | | | | continue to increase whilst interest rates fall, this |
| that it would be better to wait until values have | | | | source of bargain property is likely to be restricted. |
| reached rock bottom. | | | | The lack of bargain property in the market is |
| However, the media hype and doom-mongers hide | | | | currently balanced by a corresponding lack of those |
| the reality of the situation, as they ignore activity in | | | | who are actually able to buy a property. Whilst |
| their calculations. There is no doubt that the average | | | | mortgage interest rates have fallen substantially, the |
| fall in value of houses sold in the last year has been | | | | best deals are generally available only to those who |
| between 10% and 15%, but because the total | | | | have very substantial deposits or equity, and that is |
| number of sales has only been a tiny fraction of | | | | not something which can be said to be a |
| what can be considered normal market activity, it is | | | | characteristic of a typical first time buyer. Whilst the |
| questionable as to whether this is a true indication of | | | | price of an average house might well have fallen to |
| the fall in property value. There are those who will | | | | £160,000, that still means that the absolute |
| argue that the true value of a property is what any | | | | minimum deposit required will be £16,000, and |
| individual is prepared to pay for it at any given time, | | | | it will currently cost an average rate of 6.5% for the |
| but this is only case if there is a seller prepared to sell | | | | next five years at that level. With a deposit of |
| at that price. Conversely, those who say the value of | | | | £24,000, the typical rate would drop to |
| a house is what the individual owner is prepared to | | | | around 5.2%, but it would take a deposit of |
| sell it for are also mistaken, unless there is a buyer | | | | £40,000 or more to secure the market leading |
| prepared to buy at that price. When buyers and | | | | rates of around 4%. |
| sellers have widely different opinions of the value of | | | | Therefore, if we ignore the vast majority of |
| a property, sales fail, and there is, in fact, no market. | | | | property for sale, which buyers believe to be |
| To a large extent, that is the situation we are faced | | | | over-priced, the market consists of a small number |
| with currently. There are plenty of properties on the | | | | of reasonably priced properties being competed for |
| market, but the majority of sales are limited to those | | | | by a small number of buyers who have large enough |
| who have to sell, whether as a result of | | | | deposits. It is our belief that whilst the current climate |
| repossession, relocation or family upset. Those who | | | | remains bleak, the supply of mortgage finance will |
| are in the position of wanting to sell, as opposed to | | | | increase before the supply of bargain properties |
| having to sell, are still tending to price their properties | | | | does, and if that is the case, it can only lead to |
| at a level where buyers believe them to be | | | | increased competition, and eventually, increased selling |
| expensive. This begs the question as to how long it | | | | prices. On that basis, it must be better to buy now |
| will be before sellers become more realistic, and I | | | | whilst you can pick and choose, and negotiate. |
| would suggest that the most likely answer is that | | | | Of course, the opposing view is that the recession |
| they will not. The majority of sellers continue to be | | | | will deepen into a depression, and the ensuing |
| employed, and in many cases are enjoying interest | | | | availability of thousands of repossessed properties |
| rates which are the lowest they have ever | | | | from those who lose their employment will force |
| experienced. It therefore follows that if they can | | | | down prices even further. Whilst this is a possibility, |
| afford their mortgage, they will simply stay where | | | | we have to ask ourselves whether a government |
| they are rather than sell their property for less than | | | | who has already invested billions of our money in the |
| they believe it to be worth, especially if in doing so | | | | banking system, and has introduced revolutionary |
| they will eat into their equity or even go into | | | | schemes to help those whose homes are at risk, are |
| negative equity. | | | | prepared to let this happen. Our view is that they are |
| Of course, there will always be those that are in a | | | | not. |