With concerns over falling house prices many people are worried about whether they should delay buying a house.
In 2007, The IMF recently suggested UK house prices are overvalued by 50%. For example, they point to the fact house prices have risen faster than incomes and rent. However, this doesn’t mean house prices will collapse by 50%. Part of the reason for the rise in house prices is the fundamental shortage in supply compared to demand.
Howeverm despite a shortage of supply prices are being pushed lower by
- Lack of mortgage finance
- Collapse in confidence
- No one wants to buy when prices are falling
Generally, when house prices are falling, it is best to wait. I would wait until prices have recovered and start to rise for at least 2 consecutive months.
Other Points to Bear in Mind
- If house prices do fall, it is not the end of the world. (Whatever headlines in the Daily Mail may say)
- A fall in house prices are not necessarily a problem for homeowners. If you buy a house to live in, a fall in house prices doesn’t effect the cost of mortgage repayments. In fact a fall in house prices will probably enable interest rates to fall and make mortgage payments cheaper.
- If house prices fall and you need to move, don’t forget over house prices will be cheaper to buy.
If you are buying a house as a property investment, it is of course a different matter. A stagnating or falling housing market is not a good time to buy a second house.It would be better to wait until the market has changed direction. At the moment it is difficult to get sufficient rentable income to pay 130% of the mortgage repayments.
My advice is if you want to buy a house rather than renting, don’t necessarily let a potential fall in house prices put you off. As long as you can afford a mortgage and you are not over-stretching yourself it makes sense to buy a house rather than renting. However, if you can wait until end of 2009, you will probably save yourself a lot of money.
Is 2009 A Good Time To buy A House
There seems no end in sight for the credit crunch. Therefore, with deteriorating conditions in the mortgage sector, it is best to wait before conditions regain normalcy. Furthermore, the housing market is being depressed by the rise in unemployment and deteriorating economic conditions.
If you are buying a house as an investment, I feel the best buying opportunities have passed. Nevertheless in the long term, it is possible the housing market will continue to be a good investment. I don’t see the government addressing the fundamental shortage in supply in the near future. This is the main reason why house prices are so expensive.
8 comments ↓
Prices will not drop significantly until employment starts to fall like it did in Japan and the UK in around 1990. Or, if lenders stop lending in the long term. In a normal world, as it becomes more and more difficult to buy, lenders will come up with more and more products to offset the difficulty of affording property. As that happens, prices will continue to climb. Making a mortgage term longer is a good example of a new product that can be extended to accommodate for the needs of an inflating property market.
Additionally, there is also the average household income to mortgage cost ratio rather than against house price to consider. This is not nearly as dramatic as the ration of income vs prices because mortgage costs are so much more affordable these days as interest rates are lower and the available mortgage terms are longer.
Discuss…
as a first time buyer, is it worth to have a mortgage this time with a 6.67% interest rate for five years (ending 2013) from abbey, some are saying that houses are falling down but we don’t see the effect of that in having a mortgage this time and what if this economy crisis will be resolve within 3 years does it mean that interest rate will come down?, thanks
[...] Is it good time to buy a house? [...]
I am thinking of buying a house, does anybody have advise on when to buy one and what the best deposit is???
I am also purchasing a house. I have 20k deposit but my parents have advised that i should save at least 30k.
Well let me give you my thoughts as an experienced property investor for the last 10 years.
Bottom line: People will always need housing!
Its simple case of supply and demand! At the moment, there is a lot of demand but poor supply – both the supply of credit, and thus the supply of housing stock – partly caused by the lack of credit (ie people cant sell, because they cant get the finance to move elsewhere!).
So, once the credit flow restores itself, which it will – you will see the transactions between buyer and seller increase. The recent falls are the symptoms of the dired up demand caused by lack of finance. So, prices naturally would fall, as this demand falls.
Also, UK is an island – there is nowhere left to build!!.. and there is an increasing population! Hence the demand, whilst halted due to lack of finance, is very much there!! And the govt has a massive shortage in offering housing to that ever increasing population!
So.. my advice? Sit it out.
Once the liquidity returns to the market, and prices have now dropped to what is arguably the ‘right’ levels (ie 2005-06 prices), with demand remaining high (and likely to increase with more single person households!), the demand-supply equilibrium will re-align, and stabilise, with a most likely increase in prices – albeit at a more moderate pace then recent years!
Otherwise… retire to Brazil… and visit me on the beach!
Max
It is nice to read a positive approach to the current market conditions.
In a word “YES” it is a good time to buy, we are seeing property sell for 20 – 30% below what they were last year and we all know from past events that they will be back to normal in the next year or so.
Fortune favours the brave, and I think anyone who invests in the market in this current climate will not go far wrong.
source – Peterborough estate agent – Grays
not best time to buy wait till june next year best time to buy
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