Saturday, December 13, 2008

Why buy a home now?

This week I heard about yet another professional suggesting to clients that buying a property now was a daft decision. He's entitled to his opinion but what worries me is that the only way any of us are able to look at the market is through the 'rear view mirror'. We can now accurately pinpoint the start of the current market problems as October of 2007 and the previous market 'blip' as August 1988. What we can't do is accurately forecast the bottom of the market and the beginning of the recovery – until we've already passed by it.

My belief is that we are nearer the bottom of things than a lot of so-called experts predict. The 'media' is reporting prices falling back about 15% from the peak of the market. Any truthful agent will confirm that property is being sold at 25 -30% less now, which is about the level that prices have fallen by in previous market downturns (1988-1993). So, when prices start to go the other way they will do so rapidly. It is more dangerous to buy just after the turn than just before the bottom

Why do we buy a property? Are we all over focused on property as an investment rather than a home? In a previous Blog post I mentioned the BBC advising people to think hard about buying as they had spoken to experts who thought there was around 20% more to come off prices. Assuming they are correct, If you bought a house today for £500,000 then experienced a fall of this magnitude your home (not your investment) will be worth £400,000 – but then so will all the other houses around you. If this is the 'bottom' and you then stay in the house for 20 years the cost of this fall will be about £14 a day. If you rent a home rather than buying you are at the mercy of the landlord who may decide to sell up, who won't let you decorate to your taste, may not pay his mortgage and get repossessed thus forcing you out. Even if the 20% scenario was true would you not be happy to pay £14 a day just to be secure and have the freedom to live as you want to?

This is my last blog post of 2008 and I look forward to writing even more positive posts as early as possible in 2009!

Thursday, December 4, 2008

Please shut up!


 

Extracted from the BBC web site reporting on today's reduction in Base Rate to 2%


 

'I am dead keen to buy a flat or house. This is all good news, surely?

The interest rate on your prospective mortgage will probably be lower.

But, frankly, paying your monthly repayments will not be your big problem, so long as you keep your job.

The main way in which mortgages are being rationed is by lenders demanding large deposits.

Most mortgage deals now require 15%, 20% or even 25% as a down payment. And the best deals require deposits of 40%.

There is a good reason for this, by the way.

House prices are still falling fast and some experts think they could fall another 20% this coming year.

How happy will you be if our home has lost a fifth of its value in 12 months' time?

Think before you buy. '


 

What I'd really like to know is who are the 'experts' and how do they calculate the 20%? Quoting it virtually makes it a self-fulfilling prophecy.

Well this 'expert' says prices will start to recover in early 2009. They will initially stop falling – even the Nationwide says that the rate of fall has slowed – then begin to bottom out. We have already had 14 months of falling house prices and difficult market conditions. Come on BBC, don't make it worse!