There has long been an opinion amongst those with money to invest that property buying is often the best bet in the short term and definitely the route to follow for good long term returns. Recent years have done nothing to dispel the belief, and those who followed that route have been well rewarded for their speculation. Now the ‘credit crunch’ has arrived and suddenly investment in property has become unthinkable, with house prices falling on a weekly basis; surely no one would consider buying on a falling market, especially a market which is falling so spectacularly? Well, it appears that some investors would, and the paucity of funds available for this purpose does not appear to have deterred them.
The Building Societies Association (BSA) has issued a report on the current state of the housing market, and it makes interesting reading. Not surprisingly a majority (51 percent) of respondents had serious doubts about the state of the housing market – in fact it is probably the greatest surprise that this percentage was not higher. Much more astonishing are the 27 percent of respondents who claim that property purchase at this time would be quite acceptable to them, this view being totally opposite to the established thinking of the financial experts who generally can only forecast a terrible fate for any who venture into property at this time.
Of the majority who would shy away from purchase commitments, the main reason given was their doubts about their ability to meet new mortgage payments, whilst 47 percent had serious doubts about raising a deposit. 49 percent of respondents doubted whether they would be able to obtain a suitably sized mortgage loan, although it is not known whether these had considered a low rate secured loan which, if they were eager to move could act as a launch pad into the market. Strange to relate, only 12 percent of respondents felt that their job security was a factor which would act as a deterrent to a move into property purchase. Fears of negative equity due to continuing falls in prices were cited by 59 percent as the major factor which was discouraging them from taking any action.
Despite this rather negative tendency, the director general of the BSA, Adrian Coles, has said that there is a well supported belief that this is a good time for property purchase although the lack of liquidity affecting many households is acting as a brake, along with the uncertainty over the direction of mortgage
rates. This uncertainty is echoed in the Bank of England statistic which reports a 12th consecutive month (last April) of a fall in the number of house purchase loans approved, down to £7.3 billion for the period. Looking at this statistic from another angle however, it shows that house sales are continuing, albeit at a very low rate. Whilst some of these sales have undoubtedly been a matter of unavoidable necessity, many will no doubt have been instituted by the individuals outlined in the BSA report, who are prepared to take what they see as a suitable opportunity to upgrade at a low cost. Time will tell whether the decision was wise.
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