f Making the Most of the Downturn

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Making the Most of the Downturn


You may be excused for feeling a bit blue at the moment, with every newspaper you pick up and every news bulletin you catch talking about the housing market downturn and all money talk seems to be about a coming recession. What you need to remember that with every slump in the market there are always winners as well as losers. Many smart purchases were made in the housing recession of the early 1990s by people who have been reaping the rewards in the last few years. So here are some tips on making the best of the current market.
  1. If you've just sold your house, then consider renting for a while. According to Nationwide, the price of the average home in England and Wales has fallen by £13,500 (7.3%) since the market peaked in the autumn of 2007.  No one is expecting this situation to pick up any time shortly so it may be a smart move to rent for a while until the market bottoms out.  That way you'll be in the perfect position (no house to sell) to snap up a bargain.  Be aware that rents are going up by around 5% a year though.
  2. Although it may not seem that way, during a downturn in the market trading up is a perfectly rational thing to do.  For example, if you owned that average house valued at nearly £185,000 last year and you sold it today for £13,500 less than that, then you may feel somewhat aggrieved.  However, if the house that you covet was worth £250,000 at the peak of the market, it will now have gone through a larger fall in value of around £18,250.  What has effectively happened here is that the rungs of the property ladder have got closer together, making your next step easier to make.
  3. Be aware of differentials. What this refers to is price variations from one area to another and from one type of property to another.  For example in some areas the housing market has fallen faster than in others, so you could benefit by a move from an area that has dropped by 2% (Scotland) to an area that has dropped by 6% (East Anglia).  They type of property is very significant here also; if you fancy downsizing to a flat or maisonette, for example, these types of property have fallen in value by 11% - opposed to a detached house which has fallen by only 6%.
  4. Even though most homeowners are staying put, the three Ds (death, debt and divorce) will always ensure a steady flow of homes onto the market.  This sort of sales often mean that houses go for less than they are worth, particularly with repossessions.  Keep in touch with your local estate agents to be kept abreast of any bargains coming up you will find them particularly helpful at the moment.  Most of these sales will be at auction so be aware that you will have to pay a 10% deposit on the day and typically have only 20 working days to come up with the remainder.
  5. Now is the time to put the squeeze on the developers.  Even the major ones are having problems at the moment and if you're in a position to buy you could get a good deal on a new-build.  Look for a developer in financial trouble and chose your development carefully because there are a lot lame ducks around. Development finance is released in tranches, with the next tranche only being released when a certain number of properties are under offer; this is where the buyer can capitalize in the current market conditions.
  6. If you are cash rich then now would be a good time to consider buying into property.  Property chains are collapsing at a frightening rate thanks to stringent new measures on finance and altering personal circumstances.  If you are a cash buyer you are in an incredibly good position to aggressively negotiate a good price on almost any property on the market.  It is important to have a good solicitor behind though, one who can get things moving quickly.  To quote Phil Spencer from Channel 4s Location, Location, Location: "As with all investments, remember the golden rule it's the price you buy in at that makes the difference."


House Price Falls from October 2007 to June 2008



House Price Fall (%)

Northern Ireland
Yorkshire & Humberside
West Midlands
East Midlands
East Anglia
UK Average


Price Change by Type of House


Flats & Maisonette
All Property


Price Change by Age of Home


Under Construction

(All figures courtesy of Knight Frank)