The Sunday Times Home (9th December 2007)
Prices are falling, buyers are pulling out and repossessions are rising - could this be a good time to buy? If the doom-mongers are correct and this is just the start of another early 90's style slump, then the answer is definitely no. One person who would definitely back this up is Karen Ward, chief UK economist at HSBC, who says that British houses are overvalued by 30%. However, there is another school of thought that says that this is just a minor correction in the market, similar to that seen at the end of 2005. Back then, the annual house-price growth had been just 2.2%, compared to 12.3% the previous year. This prompted speculation that the boom was over, but by the end of 2006 the market had risen by 9.1% in that year.
Whoever and whatever you chose to believe here are some pointers if you're in the market this winter:
The recent downturn in the property market may mean that you can now afford to buy in an area where it was previously not possible. The reason for this is that it is often the established areas that feel the pinch first. For example; in the downturn at the end of 2005, prices at the top of the market in Kensington, Chelsea and South Gloucestershire fell first. Now might be the time to look again.
With many potential sellers waiting until the spring to put their properties on the market, this it the time of year to look at auctions. This is where the forced sales and repossessions will be, so you could find a bargain. The auctioneer Allsop is currently selling residential property with reserve prices 5-10% less than when the market was at its peak in the middle of 2007. Be advised that many properties sold at auction need work, so seek professional advice before bidding. Also, be prepared to hand over a 10% deposit on the day and be able to settle up within 28 days.
Shop around for a new-build property. This has been the worst performing sector of the housing market in recent years with recorded sales in October 2007 being 23% down on October of 2006. In order to shift stock, British house-builders are offering some remarkable deals. Mortgage subsidies, 5% deposits and generous payouts towards legal fees have become almost routine in some areas of the country. A word of caution though; as stated earlier, this is currently the worst performing part of the market (particularly new-build flats), so tread carefully.
One Example of a New-build Incentive Scheme