Phil: I’ll give you an opinion, but it comes with the caveat that nobody knows, everybody is speculating, and it’s all guesswork. Hopefully, my guess might be worth a bit more because I work in the market and read practically everything there is to read about the market, but it is, to all intents and purposes, still guesswork. Anyone who claims to be able to predict the future is a liar!
But my best guess is that we’ve had a 15 per cent fall already, and we will see a further 10 to 15 per cent fall, meaning something like a 25 to 30 per cent fall from peak to trough, from 2007 peak to some point next year. I would hope that in 12 months time, so next November, the market will have stabilized. So my best guess is that by November 2009, house prices will have stopped falling.
I don’t believe the confidence will have returned, and while I think liquidity in the mortgage markets will have improved, I think confidence to lend amongst the banks will also have improved, but it won’t be all that is required to bring life back into the property market. So I think that while things may have stabilized in a year, it might be another year until confidence, appetite to move, and ability to borrow money have also come back into play. Once it does come back into play I think we’re going to see an enormous bounce!
Phil: I agree that one man’s difficulty is another man’s opportunity. On the one hand, the current situation provides the best opportunity for first time buyers for quite some time time, but this is the bottom rung of the market and first time buyers can’t borrow the capital they need to buy. The mortgage companies right now are looking at three times salary and 75 per cent loan-to-value, so a first time buyer needs to come up with an awfully big deposit in most cases.
So I think that the opportunities are really only going to be able to be taken up by wealthy people who are sitting on cash that they’ve made over the last few years. I think that those opportunities will be huge, though. The people who’ve made the most money are those who bought in and around the bottom of the slump in 1991. I’m sure that there will be people who look back on 2009 with the same fondness, saying, ‘Lucky I got tucked in when I did’. The problem is that, with the mortgage market the way it is, you need to have the cash available yourself to be able to explore this opportunity.
Everybody is looking for somebody to call the bottom of the market. Once somebody says, ‘We’re recovering now’ I think there’ll be an almighty scramble to get involved again. What I’d really urge is don’t wait for everybody else, if you can find a property that you like, if you can borrow the money you need to buy it, it’s somewhere you can stay in for a long time, it’s a property you can add value to, and it’s somewhere you can adapt to meet your needs as your life changes, and if you can get it for the right price, then I’d say just get on and do it.
Try and get it for as cheap as you possibly can and if it drops by a few more percentage points, but you bought the right house and paid the right price, and you’ll be staying in it for the foreseeable future, I don’t see the problem in getting on with it. At least you’ll be starting to pay off your mortgage instead of somebody else’s.
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