The number of people looking to buy a house/flat/land has halved since last year with prices in south west London down 12%. The ratio between the three is probably very different. One expects that drop in Flats are much higher than Houses and Land even less.
The IMF recently suggested UK house prices are overvalued by 50%. For example, they point to the fact house prices have risen faster than incomes and rent. However, this doesn’t mean house prices will collapse by 50%. Part of the reason for the rise in house prices is the fundamental shortage in supply compared to demand.
Market has been rising continually for many years, like a rises of 20% in 2006 and about 15% in 2007. If prices had carried on climbing at that rate over the next five years, a one-bedroom flat for £200,000 would cost £500,000 or more by 2014, which is not practical and therefore a correction was inevitable.
Although, some Estate Agents are trying to tell you this is a good time to buy, but we are not so sure about that. We think the bottom for this round of depressed market is realized in January-March 2009. However, if the bad news is to continue to flow at the rate it has been in the last few months and further job losses in the city, then the drop in property prices will continue then we are not likely to see the bottom any time before summer 2009.
Normally it is best time to buy is in the early days of a bottom in price index where there is still a little uncertainty in the market, so to force the sellers to agree to low prices on offer.
Our advice is if you want to buy a house rather than renting, As long as you can afford a mortgage and you are not over-stretching yourself it makes sense to buy a house rather than renting. So start the purchase in January 09.
However, if you are planning to get a 90-100% Mortgage/Credit Card in the hope house prices will rise, enabling you to remortgage I would be very cautious, try waiting and saving a deposit instead.
If you are buying a house as an investment, I feel the best buying opportunities have passed. Nevertheless in the long term, it is possible the housing market will continue to be a good investment. I don’t see the government addressing the fundamental shortage in supply in the near future, which is the main reason why house prices are so expensive.
Generally it is bleak as it can get for anyone wanting to sell right now and the sentiment will continue for the rest of this year. So if you can let that is your best option right now.