Buy a BargainFind a Property Bargain During the Slump
Interest rates have been rising, property values have been plummeting and the credit crunch has led to lenders rejecting mortgage application, but for some buyers, it's an ideal period. A buyers' market has grown, although only for buyers that have or can find the cash to buy a new home or investment. Vendors are reducing their prices, and often the owner has no choice. Property prices have been too high for too long but values are now falling towards a more genuine and acceptable level. Additionally, there is decreased confidence in the financial institutions and this is causing people to reduce their spending. It seems that there are fewer buyers currently willing to invest their money in property, leading to fewer viewings and purchases which in turn increases both the desperation and the competitive instinct among vendors.
Some preparation is necessary. Examine whether the property's neighbourhood has bucked the property downturn or is a prime example of it. For example, a housing development alongside a new business park could become a hot ticket once the office space has become tenanted and the employees are looking to reduce their commuting distances. The amounts that properties have previously sold for and some current estimates can be found or calculated at the useful website www.zoopla.co.uk and taking a look through your local estate agents' websites can glean plenty of useful intelligence. Similarly, use www.propertysnake.co.uk to view lists of properties where the value has dropped and check the length of time that they have been available for. If a property has been on the market for several months, the vendor might be all the more keen to sell.
Save up a substantial deposit and it could help reduce the mortgage repayments, shorten the repayment period or avoid any negative equity that might befall you. Keep within a realistic zone regarding your financial commitments. If a building society offers you a mortgage of £210,000 based on your income, perhaps play it safe by viewing homes for £190,000 or less (and then negotiate the price down by up to 10%). This might be empty advice for first-time buyers, for whom even a relatively affordable property is beyond their reach thanks to the credit crunch. The Council of Mortgage Lenders has published figures showing that in June 2008 banks loaned 36% less than 12 months earlier. They also stated that the average deposit paid by buyers was at a 3 year high of 13%.
Even if the cost of a new home seems to be unaffected by the slump, developers are frequently offering incentive packages to draw in buyers. These can include paying the deposit for the buyer, paying the stamp duty (if valid), cashback, monthly payment guarantees for a period and/or some free extras (white goods for example) within the house itself.
Timing can be crucial. The present values might represent the end of the slump, or they might fall even more. It's a similar situation to placing a bet at the races. Are the odds at their highest now or will your chosen horse's odds improve? Deciding what to do can be hard, but wait too long and we might climb out of the property recession and see house prices rise again.
The cynical will announce that buyers looking to grab a bargain during a downward turn in the market are opportunists, but buyers could counter that when house prices were at their peak, owners and vendors were glad to have their homes overvalued and benefit from the high prices when the tables were turned. It's a case of swings and roundabouts in the property playground.
Useful links
- The Council of Mortgage Lenders - www.cml.org.uk
- Zoopla! - www.zoopla.com
- Property Snake - www.propertysnake.co.uk