Is it the right time to buy?
- Thread starter gkd_uk
- Start date
Buy Now...or Later?
My advice would be to hold at the moment and invest your deposit. The property market is stagnating and capital growth has either stopped or reversed.
If you have a deposit available, with sensible investing, you could probably achieve 6-7% a year on this sum and, in some cases, do this tax free.
My advice would be to wait until the market has bottomed out and then buy.
Of course, if you are renting at the moment, rather than still staying with parents etc...then you may wish to get on the market and make the money you are paying out in rent every month count towards paying off the capital in your property.
It's a vastly complicated decision that will be unique to your circumstances and whether you are in the market to own your HOME, or whether you are in it to INVEST.
See an INDEPENDENT mortgage advisor for advice on the market at the moment...but make sure BEFORE you engage them that they are not tied to a suite of products. Don't just take the advice of an Estate Agent...remember that they are interested only in getting slow-moving properties off their books and earning the high levels of commission that they earn for doing so!
Paul Carcone
Carcone Consulting
My advice would be to hold at the moment and invest your deposit. The property market is stagnating and capital growth has either stopped or reversed.
If you have a deposit available, with sensible investing, you could probably achieve 6-7% a year on this sum and, in some cases, do this tax free.
My advice would be to wait until the market has bottomed out and then buy.
Of course, if you are renting at the moment, rather than still staying with parents etc...then you may wish to get on the market and make the money you are paying out in rent every month count towards paying off the capital in your property.
It's a vastly complicated decision that will be unique to your circumstances and whether you are in the market to own your HOME, or whether you are in it to INVEST.
See an INDEPENDENT mortgage advisor for advice on the market at the moment...but make sure BEFORE you engage them that they are not tied to a suite of products. Don't just take the advice of an Estate Agent...remember that they are interested only in getting slow-moving properties off their books and earning the high levels of commission that they earn for doing so!
Paul Carcone
Carcone Consulting
Sit tight
I agree with PC. From what I've been picking up from sources I trust, the fall in values has only just begun. Nobody knows just how far and for how long the decline will go on, but the most sensible thing to do is to follow the same kind of advice that's handed out whenever the UK suffers a severe snowstorm: don't go out - or in this case, in - unless you have to.
Estate agents are the last people to listen to, poor souls. They have a living to make and need to try to convince themselves as well as potential customers that things are not as grim as the media would have us believe. The truth is that the situation is probably far worse than most people realise. Talk to the average homeowner about a potential decline of 50% over the coming years and they will think you are a doom monger. Yet some professional commentators see this as a very real possibility. Such falls from the peaks of an overinflated market are not unprecedented. In fact, add in the UK's current economic outlook, the soaring oil price and food shortages and some might say that 50% is on the low side.
I agree with PC. From what I've been picking up from sources I trust, the fall in values has only just begun. Nobody knows just how far and for how long the decline will go on, but the most sensible thing to do is to follow the same kind of advice that's handed out whenever the UK suffers a severe snowstorm: don't go out - or in this case, in - unless you have to.
Estate agents are the last people to listen to, poor souls. They have a living to make and need to try to convince themselves as well as potential customers that things are not as grim as the media would have us believe. The truth is that the situation is probably far worse than most people realise. Talk to the average homeowner about a potential decline of 50% over the coming years and they will think you are a doom monger. Yet some professional commentators see this as a very real possibility. Such falls from the peaks of an overinflated market are not unprecedented. In fact, add in the UK's current economic outlook, the soaring oil price and food shortages and some might say that 50% is on the low side.
50% is just more scaremongering...a lot of the instability in the market is precipiated by a false-fear agenda pedalled by the media. There is just far too much demand in the UK for this sort of price plummet to materialise. Remember that we live on a small island with a lot of people on it.
Even if the house prices do plummet, the laws of macro-economics will mean that interest rates will go up and/or earnings down to such an extent that the houses will remain unaffordable for many!
10% is a relalistic figure for most segments in the market....50% will only ever happen in the luxury/discretionary segments.
Even if the house prices do plummet, the laws of macro-economics will mean that interest rates will go up and/or earnings down to such an extent that the houses will remain unaffordable for many!
10% is a relalistic figure for most segments in the market....50% will only ever happen in the luxury/discretionary segments.
Wishful thinking
Time will tell, of course. But I have to say that IMO any fear is far from false.
Prices need to fall significantly simply because they became overinflated due to irresponsible lending. A 10% drop is realistic... by the end of 2008. But even then, prices are still way too high and further falls are widely predicted by those who do not have a vested interest in talking up the market.
A little history of house price crashes is perhaps informative here:
UK 1973-1977 down 34%; 1990-1993 down 26%
Japan 1973-1977 down 31%; 1991-2007 down 44%
Switzerland 1972-1975 down 29%; 1990-2001 down 39%
Netherlands 1978-1986 down 50%
Norway 1987-1994 down 40%
There's more... including the current state of the USA property crash, but these are typical and almost every country has had to contend with major corrections in property values.
What these figures show is that not only are house price corrections often far more severe than many commentators expect, the duration of the downturn is far longer.
BTW, the data is from research recently published by Goldman Sachs.
Time will tell, of course. But I have to say that IMO any fear is far from false.
Prices need to fall significantly simply because they became overinflated due to irresponsible lending. A 10% drop is realistic... by the end of 2008. But even then, prices are still way too high and further falls are widely predicted by those who do not have a vested interest in talking up the market.
A little history of house price crashes is perhaps informative here:
UK 1973-1977 down 34%; 1990-1993 down 26%
Japan 1973-1977 down 31%; 1991-2007 down 44%
Switzerland 1972-1975 down 29%; 1990-2001 down 39%
Netherlands 1978-1986 down 50%
Norway 1987-1994 down 40%
There's more... including the current state of the USA property crash, but these are typical and almost every country has had to contend with major corrections in property values.
What these figures show is that not only are house price corrections often far more severe than many commentators expect, the duration of the downturn is far longer.
BTW, the data is from research recently published by Goldman Sachs.
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More reasons to stay out of the market
Interesting to see that this thread was started in May and the question posed at the time even brought a 'Yes' response.
Now, no one would even bother to ask the question, let alone put their name to a suggestion that it was a good idea (though to be fair to James, he does warn that values are unlikely to rise over the next 5 years.)
It just shows how rapidly things can change. In the space of just 2 months all hell has broken loose in the housing market. Yet the signs were there for all to see a year or more ago.
Property prices had been rising inexorably across the globe, not only in the UK. Much of the rise was 'inexplicable' in sound economic terms - ie, excluding interest rates, income growth and demographics. An IMF report examined property price increases from 1997 to 2007 and on pure fundamentals and made adjustments for inflation.
Britain showed a 'gap' above real values of 28%; Ireland 32%. So, arguably until prices fall by this amount, property remains overvalued. This, of course, is aside from the downward pressure likely to be exerted by recessionary factors et al.
As is so often the case, most of us only see what was there all along after the event.
Interesting to see that this thread was started in May and the question posed at the time even brought a 'Yes' response.
Now, no one would even bother to ask the question, let alone put their name to a suggestion that it was a good idea (though to be fair to James, he does warn that values are unlikely to rise over the next 5 years.)
It just shows how rapidly things can change. In the space of just 2 months all hell has broken loose in the housing market. Yet the signs were there for all to see a year or more ago.
Property prices had been rising inexorably across the globe, not only in the UK. Much of the rise was 'inexplicable' in sound economic terms - ie, excluding interest rates, income growth and demographics. An IMF report examined property price increases from 1997 to 2007 and on pure fundamentals and made adjustments for inflation.
Britain showed a 'gap' above real values of 28%; Ireland 32%. So, arguably until prices fall by this amount, property remains overvalued. This, of course, is aside from the downward pressure likely to be exerted by recessionary factors et al.
As is so often the case, most of us only see what was there all along after the event.
It's certainly not the right time to sell anyway - I've been trying to sell my house for months with very little interest. But to play devil's advocate a little bit, couldn't it be argued that it is in fact a good time to buy, if you have a sufficient deposit and are able to stay in the home that you buy for several years, in the event that the market doesn't pick up? When I eventually sell my house, I think I'll be in quite a good position to buy: sellers are likely to accept a far lower price than they would have just a few months ago. Of course, there is still the problem that mortgages are getting more expensive, but aren't there still some affordable deals out there? I'd be interested in people's thoughts.
It might actually be a good time to sell!
Historically all property crashes follow this pattern:
1. Prices fall.
2. Buyers don't buy because they anticipate further price falls.
3. Sellers can't sell because of 2) but also because they still think of their property as being worth what it was before the market peaked. It hurts them to slash the price to something a buyer would pay.
4. Transactions stagnate.
6. Pent-up demand starts to ignite the market - buyers try their chances with low offers, sellers who need to sell drop their prices.
7. Potential sellers who had been waiting for prices to steady or go back up realise they are in for a long wait and rush to the market before prices fall even further.
8. Excess supply gives buyers even more negotiating power...
There is a school of thought that says that if you need to sell in the present climate, bite the bullet and drop your price. The longer you hold on, the more likely it is that you will have to drop it anyway. Remember, you are not the only seller waiting for prices to stop falling. Once it dawns on people that this correction in house prices is here for a good few years yet, everyone will be rushing for the exit at once.
Historically all property crashes follow this pattern:
1. Prices fall.
2. Buyers don't buy because they anticipate further price falls.
3. Sellers can't sell because of 2) but also because they still think of their property as being worth what it was before the market peaked. It hurts them to slash the price to something a buyer would pay.
4. Transactions stagnate.
6. Pent-up demand starts to ignite the market - buyers try their chances with low offers, sellers who need to sell drop their prices.
7. Potential sellers who had been waiting for prices to steady or go back up realise they are in for a long wait and rush to the market before prices fall even further.
8. Excess supply gives buyers even more negotiating power...
There is a school of thought that says that if you need to sell in the present climate, bite the bullet and drop your price. The longer you hold on, the more likely it is that you will have to drop it anyway. Remember, you are not the only seller waiting for prices to stop falling. Once it dawns on people that this correction in house prices is here for a good few years yet, everyone will be rushing for the exit at once.
That's an interesting perspective, and it seems fairly reasonable to me. We have already dropped our price twice, and I'm seeing the same thing happening to a lot of properties in our neighbourhood. I suppose the trick is to drop the price to a point where it will sell, but not drop it so far that we don't have a deposit to buy the next place. Easier said than done perhaps!
I was reading today that mortgage approvals have fallen by 67% compared to June last year and the mortgage lenders are wanting bigger deposits than ever - so don't underestimate how much deposit you need Glasgow Girl - I don't envy you trying to sell a house at the moment.
Tony
Tony
Over-optimistic buyers play a dangerous game
I read somewhere recently how some sellers who are unwilling to lower their prices, but who need to move, are choosing to rent out their homes for 6-12 months in the hope that things will improve in that time.
This is wishful thinking in the extreme. A Merrill Lynch report forecasts that it will be 20 years before the market reaches last year's highs in real terms.
GG - Do you NEED to buy when you move? If you could rethink things so that you are able to invest your deposit and rent instead, you might end up in a very strong buying position in the not too distant future.
I read somewhere recently how some sellers who are unwilling to lower their prices, but who need to move, are choosing to rent out their homes for 6-12 months in the hope that things will improve in that time.
This is wishful thinking in the extreme. A Merrill Lynch report forecasts that it will be 20 years before the market reaches last year's highs in real terms.
GG - Do you NEED to buy when you move? If you could rethink things so that you are able to invest your deposit and rent instead, you might end up in a very strong buying position in the not too distant future.
That's a reasonable point Jeddo, I have been considering the idea of renting for a while to see what the market does. At this point though, questions about what to do once I've sold feel slightly academic, since there is no sign that anyone is ever going to buy the flat!
Difficult decison
GG, you have my sympathy. There is little you can do but wait. The only other option is to drop your price so that someone will snap it up. Painful as that may be, it could save you in the long run. Put yourself in the buyer's shoes and ask yourself what would overcome your resistance to buying at the present time? At least at the present time some people think the fall in prices may only last a year or two more. What will those same people think a year or two from now if prices have fallen a further 10-15%?
I guess you have to take a view on your own situation and your attitude to risk. There is no arguing with the facts that point to a continuing downturn in property prices, but that is not to say that the outcome will follow forecasts or that the editorial opinion that influences one's thinking will turn out to be accurate.
Ultimately it's your decision. But the more research you can do, the better informed you will be. Just don't listen too closely anyone with a vested interest in property as they have no alternative but to try to see a glimmer of hope where there may be none. This may sound like doom-mongering, but IMO the weight of evidence backs up such a view.
GG, you have my sympathy. There is little you can do but wait. The only other option is to drop your price so that someone will snap it up. Painful as that may be, it could save you in the long run. Put yourself in the buyer's shoes and ask yourself what would overcome your resistance to buying at the present time? At least at the present time some people think the fall in prices may only last a year or two more. What will those same people think a year or two from now if prices have fallen a further 10-15%?
I guess you have to take a view on your own situation and your attitude to risk. There is no arguing with the facts that point to a continuing downturn in property prices, but that is not to say that the outcome will follow forecasts or that the editorial opinion that influences one's thinking will turn out to be accurate.
Ultimately it's your decision. But the more research you can do, the better informed you will be. Just don't listen too closely anyone with a vested interest in property as they have no alternative but to try to see a glimmer of hope where there may be none. This may sound like doom-mongering, but IMO the weight of evidence backs up such a view.
We've already dropped the price twice, but we may need to do so again. I am seeing some flats selling in this area so at least the market isn't totally stagnant: the estate agent is sounding increasingly strained though! We've got a new viewer on Monday so fingers crossed that they'll be interested.
Keep an open mind
GG, I wish you the very best of luck for the viewing. The most important thing is to keep an open mind as to what price you would accept. Let's face it, anyone buying now is going to put in an offer well below the asking price to see what happens.
It's always useful to put yourself in the buyer's position - what else is on the market that matches your property in terms of accommodation? What else is on for around the same price? How would you feel if you were looking now and had this same selection of properties to choose from and had seen the market fall?
I'm not expecting you to answer the Qs! Only raising them as a way to help you see things from the other person's viewpoint.
Good luck!
GG, I wish you the very best of luck for the viewing. The most important thing is to keep an open mind as to what price you would accept. Let's face it, anyone buying now is going to put in an offer well below the asking price to see what happens.
It's always useful to put yourself in the buyer's position - what else is on the market that matches your property in terms of accommodation? What else is on for around the same price? How would you feel if you were looking now and had this same selection of properties to choose from and had seen the market fall?
I'm not expecting you to answer the Qs! Only raising them as a way to help you see things from the other person's viewpoint.
Good luck!
There is a big difficulty with the renting market at the moment...it's not cheap! Also, it's really just throwing money away every month and even if you are in negative equity in the meanwhile, you are still owning a greater percentage of your home every single month and some of the money disappearing every month is actually going to benefit you.
If you intend to stay in the housing market for the long term, you just need to remember that the house you move into will also have dropped in value and, as long as you are not earning less, it will cost you lesss in real terms for you to own this house.
You need to be as hard-nosed in your purchasing negotiation as potential buyers are being with you.
If you intend to stay in the housing market for the long term, you just need to remember that the house you move into will also have dropped in value and, as long as you are not earning less, it will cost you lesss in real terms for you to own this house.
You need to be as hard-nosed in your purchasing negotiation as potential buyers are being with you.