Oct 08
9
Time To Start Buying Again?
When markets fall people get nervous, sit on the sidelines and wait for things to bottom out.
Calling the low point of a market is, however, very tricky, which is why most experts will tell you that the best possible scenario is to buy close to the bottom – better to make a small short-term loss than to be on the wrong side of the upswing.
Yesterday’s announcements on interest rates and mortgage funding are good news for the housing market, but are they enough to convince people that the worst is over?
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As much as i would like the market to pick up and get stable again - i believe we are just at the beginning of it all - and i sincerely belive these recent events, Credit Crunch, Fuel prices, and bank crisis did not just happen - it was coming to us for a long time - and i really do think it is all done purposely in order to break this false richness we all had hoipe to have and governments are putting us back to reality - back to square one so it don;t happen again - unfortunately who are the losers - WE ARE - not the ones messing it all up. they seem to get richer even after We the taxpayers bail them out! where is the Justice in that - and who is goign to pay for the bail out for the next 10 years! WE are = so my negativity will need convincing for me to change my attitude - I really do wish i am wrong - but how can each UK residence sustain a bail out of £20,000 per person!!! pfffff
Yet i am curious to see what kind of bonuses will come out at Xmas for all those bankers that messed up.. fee 100ks maybe?
Still going to fall by up to 30%
Until average prices come down to affordable and mortgageable levels then we will not be anywhere near the bottom of the market. Valuations of 6+ multiple of average local income are clearly out of line. Once prices come down to about 3 times multiples of annual income then property will be more attractive. Coupled with a stream on new builds nearing completion (if it isn’t mothballed first) and recent immigrants returning to their homelands then there will be less of a supply/demand imbalance. I’ve been monitoring auction prices recently and what little is selling is still overpriced.
When I bought-to-let in 1991/2 the yield was 20%. When I sold those properties in 2006 the yield was just over 4%. When I bought the cost was just 2.5 times average income and when I sold it was over 8 times income.
I’m certain that we have a very long way to go in this downturn (both property and economically) and unemployment will be the deciding factor. Once people start losing jobs in big numbers then that will be the begining of the end of this terrible cycle.
The right price for a reasonable 1 bed flat in greater (not central London) is about £80-90K in my opinion.
Happy days!
“Time to start buying?” depends where. In the UK, property prices are ridiculously high, forced up by the methods of buying/selling so ‘gazumping’ can happen and people can use their property to make a fast buck. I wouldn’t buy a garden shed there at the moment - not until it is at rock-bottom. In most of Europe however (as in France where I live) there are methods used to control the rise in housing prices (for example, taxing the profits made on the sale of a second home if resold within 15 years.) Not only is this good for communities (I lived in Padstow, in Cornwall, so I know what happens when greedy people ‘invest’ in such areas) but it also keeps prices within realistic limits. It makes property a sound investment, bringing in a regular moderate income - and a hell of a lot safer than hiding your savings in BANK!!!!!
We (as in the developed global population) have been living on easy-to-access, cheap credit for the last nine years. That period has come to a shuddering halt.
The banks / traders / investors are not the only people to blame. People got too comfortable spending beyond their financial means. Credit was easy, relatively cheap with very lenient criteria that had to be met. We as the consumer created an over inflated financial wealth bubble that couldn’t be sustained.
Ultimately I don’t see the housing market even begin to recover for at least 2 or 3 years. The First Time Buyer has all but been excluded from playing their part in the market and sellers further up the chain are not willing to take a £50K + hit on what could well be their greatest asset.
I for one hope that the market doesn’t recover for at least 2 years. In that time I hope to see the price of town and city properties come back into line with the salaries and deposits of most people.
useful articles for the potential buyer