Never a day goes by without the press and the news stations continuing to talk about the decline in the residential property market. We hear talk of falling prices, estate agents going out of business, slumping sales, negative equity, and house repossessions.
So let’s jump of the cliff now shall we?
Come on, we have seen falls in house prices before and unless you are looking to try and make a quick profit which is more difficult nowadays, residential property is still a good investment over the longer term. Just look at the last 20 to 30 years as follows:
- 1975 to 2007 nominal house prices increased by 1,672%
- 1994 to 2008 nominal house prices increased by 241%
So what about the future?
In the shorter term the outlook is mixed. The Council of Mortgage Lenders (CML) revised its forecasts just last month and said that prices would now fall by about 7% this year.
Over at mortgage brokers John Charcol, their commentators are quoting more like 9% this year.
Next year is more difficult to forecast and returns will very much depend on whether we see a lowering of interest rates and whether we see mortgage availability improving. Analysts agree that the availability of mortgages and loans will be a key issue in deciding how far and how quickly the house price decline will be.
In my view though, for the majority of homeowners, falling house prices is not the end of the world. If you want to move, falling house prices will not affect you that much as whilst you will get less for your house, the new purchase is likely to be cheaper as well. It is more problematical for perhaps 1st time buyers and perhaps buy to let investors as the question is when do you dip your feet into the market? Now or later? My view is perhaps later (say 12 months) unless you are in it for the long haul.