To buy or not to buy?

People regularly ask me what the property market is like at the moment. There is much uncertainty about whether to buy now or wait, anticipating a property crash!

Figures from property market analysts can be confusing as they are sometimes contradictory. Take the latest figures for October 2007. Halifax said that house prices fell by 0.5%; according to Hometrack they fell by 0.1 %; and Nationwide reported prices increasing by 1.1%. So who do you believe? Are their figures representing the same properties in the same areas? Probably not.

What is certain is that property market activities are not as buoyant as they used to be. For example, enquiries from new buyers and mortgage approvals (some lenders are tightening their criteria) have fallen compared to the beginning of the year or this time last year. I know of a few property surveyors who are experiencing a considerable drop in clients at the lower end of the market. There are buyers who have withdrawn from searching for property, and are considering whether it is the right time to move or invest.

So are we heading towards a property crash? Nobody can predict the future, but I am convinced this will not happen. Inflation and unemployment remain low and some financial experts are even predicting a potential cut of the Bank of England interest rate (currently 5.75%) by the end of 2008. During the next few years we may not see the property market rise as much as we have experienced over the last few years (up 60% over the last five years), but in the long term property values always increase. As I highlighted in a previous blog “The path to successful property investment”, historically property in the UK has doubled in value every seven to nine years. Furthermore the UK doesn’t have enough properties to satisfy the market demand.

In property market conditions where people expect a collapse there is a tendency to sell and then hold-off buying in the hope of purchasing more cheaply later on. I saw quite a few cases of this in the early “naughties”. The risk comes where the market fall is insignificant, temporary or localised. If you wait too long and the market continues to rise, it effectively prices you lower down the property ladder or in some cases, out of the market. I am a firm believer in never stepping off that property ladder!

Laurent Stadelmann
Managing Director

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