Surprising as it may seem – no! Prices rose phenomenally in 2006 and the first half of 2007 in some cases by as much as 80%, it is reported. The reductions since August 2007 have been well chronicled and as the headlines state, by as much as 30%. But simple mathematics show property is still in a positive position for most owner occupiers.
However, some semblance of reason and rationalization has to be brought to the current situation.
Firstly, not all sectors of the market have dropped by the headline rate. Regrettably the first time buyer saw the greatest increases, due in no small measure to investor involvement, and therefore they suffer most in the downturn and this has distorted the overall view.
Secondly, if you have equity in your home (ie, your property is still worth more than you paid for it) and you wish to move home, for the many and continuing reasons which have stimulated the housing market over the years, the new home you buy will have lowered in price as well. It is the net difference that is the all important figure and if you are moving up market in price terms, you may have to borrow less than would have been the case last year and you may also pay less in relevant fees incurred, including stamp duty.
It may be some years before we return to the heady prices of 2007, but isn’t that a good thing?
Remember, on average, we are still paying 3% less than the national average house price, to live in what is still one of the least crowded areas of the UK with a quality of life second to none.
One last point must be made; if you are presently looking for a new home, do not assume you can deduct 30% from the current asking price. Finding out when the property came to the market is important. Most reputable and professional estate agents have been aware of the current downturn for some time and have been valuing and advising current vendors accordingly. The statistics now creating headlines are in many ways old news and calculated from what has already occurred, as is the case with all results.
Let’s all be sensible, accept the situation for what it is and if everyone does so, we can return to the normal prices of 2005, when, in my memory, we were all more than happy to acccept single figure growth.
My last word on the matter, as you would expect from an estate agent, is that few so-called economic experts predicted the dramatic upturn beginning in 2006, nor did they forecast the dramatic reversal starting in 2007. People still need to move house, be it for geographical, family, health reasons, etc. First time buyers still need to buy their independence. Don’t leave it too long to make that move, things have a habit of changing very quickly; you may miss the boat as confidence returns.
John Todd of Templeton Robinson