Dip in August Property Prices More than just a Seasonal Blip
A report from the UK Press Association tells us that mortage advances for the month of August were down by 13%. This supports data from HM Revenue and Customs stating that 83,000 properties were sold in August compared to 87,000 sold in the previous month.
So does this mean that the long awaited market-levelling is not happening yet? Well, not according to the Council of Mortgage Lenders, who believe that the August drop happened because many potential buyers are away on holiday.
Not all financial authorities are agreed on this simplistic explanation, however. In fact, the Ernst Young Item Club, an economic forecasting group, called the price rises seen in months up to August a “false dawn” and predicted that the average value of a UK home will not revisit to its 2007 peak for at least another five years.
They also warned that prices will drop again in 2010 on the back of rising unemployment and restricted access to mortgage finance. An effect gruesomely termed by the stock market the ‘dead cat bounce.’
As ever in the housing market, what is bad news for some is good news for others.
Buying a Repossessed House Still a Good Investment
For almost a decade it has been impossible to gain a rung on the housing ladder, leading not only to an increase in the property rental market but also to the failure of young people to leave their parents’ homes until much later than previously. As repossessed properties sell at, on average, around 36% less than their market value, 2010 could be a good year for young people – and for their long-suffering parents too.
If you harbour any qualms about buying a property for thousands cheaper than its true market value – don’t. It’s a simple fact of life that if you don’t buy it somebody else will. And, as the Ernst Young Item Club predict that prices will begin to pick up slowly through 2013 on the back of a strengthening economy and easier access to mortgages, getting into the market on the back of the recession, could be a very good move indeed. As forecasts suggest that 2007 prices will be regained by 2014, it won’t be too many years before you are in profit.
If you want to make the credit crunch work for you, take a look at our advice for buying a repossessed house.