15 January 2008

Property doom and gloom for 2008 or just media hype?

Last week (9 January 2008), the "Tonight" team broadcast on ITV a program called "Britain’s biggest house price falls", which portrayed a negative picture for the property market this year!
The reporter interviewed people who prefer to rent instead of owning a property since they believe they are better off financially and will wait for the housing market to head downwards. As I highlighted in a previous blog “
To buy or not to buy?” this scenario occurs frequently in property market conditions where people expect a collapse. But this is a very risky and, in my opinion, foolhardy strategy. I am a firm believer in never stepping off that property ownership ladder!

The “Tonight” program also interviewed vendors who have had to reduce the price of their property in order to sell. Of course, there are always properties that are difficult to sell, for a variety of reasons. The program was keen to highlight the significant decreases in price and while these properties had probably genuinely suffered from a slowdown in their local market, I am concerned that other possible factors were not mentioned in the interest of a balanced view. For example, did the properties have any issues that were putting off potential buyers or were there external factors such as noisy roads, polluting factories, flood risk, etc.? The reporter mainly focused on interviewing the vendors but did not ask for the opinion of third parties (i.e. property experts) to give views on why these specific properties were not being snapped up.

It is true that it is taking longer to sell some properties, especially when vendors overvalue them. But the way the press has portrayed the property market negatively over the last few months has also had an influence on buyers’ and sellers' strategies. People are more cautious. For instance buyers spend more time researching and they view many properties to ensure that the one they choose will tick most of their boxes.

The TV program did not discuss alternative reasons why some properties stay longer on the market and it could have expanded on factors influencing buyers’ behaviour, such as the increased cost of borrowing.

During the last few years, regular Bank of England (BoE) interest rate increases (even though interest rates are still low) have not helped people with variable-rate mortgages. And the incredible increase in the upfront arrangement fees charged by lenders has made mortgages more expensive. Banks and building societies hide the ‘true' cost of mortgages by promoting eye-catching rates with huge fees attached. It is not unusual to find four-figure fees attached to very competitive interest rates.

Furthermore, after the Northern Rock fiasco, some lenders withdrew, re-priced and re-launched their tracker mortgages with new higher annual interest rates.

Feeling the pain of increased monthly outgoings (higher interest rates, arrangement fees, household bills, etc.), together with tighter lending criteria, some homeowners have been thinking twice before deciding to purchase another property.

However, on a positive note the BoE has already cut its interest rate from 5.75% to 5.5% in December and many experts are predicting further interest rate cuts this year.
And, in certain areas of the country, if the property market slows down considerably then first-time buyers will be able to benefit from it. David Stubbs, senior economist from the Royal Institute of Chartered Surveyors (RICS), said: “Significantly, the combination of stagnating house prices and lower mortgage rates in 2008 should boost affordability for the first time since 2001.”

So will 2008 be as property doom-laden that we are being led to believe? We have to remember that the media does not always give us the bigger picture. We have to look beyond the news stories rather than taking them at face value. It is not always quite as bad the press is making it to be. The UK media tends to focus on negativity because it attracts attention and sells newspapers and magazines.

Certainly,
Chez-Vous Property Services is seeing that clients continue to be confident in purchasing property. As we always recommend, carry out thorough research to find the right property, in the right location and at the right price. And the same applies to finding the right mortgage – research, get good advice and make sure that you don’t overstretch yourself financially. While the property market may not rise as much in the foreseeable future as it has over the last few years (up 60% over the last five years!), in the long term property values always increase.

Laurent Stadelmann
Managing Director

Chez-Vous HomeSearch
Removing stress from the property process!

Property Finder / Relocation Services / Negotiation Service / Location Reports

laurent@chez-vous.biz
www.chez-vous.biz
Tel: +44 (0) 1189 770215

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