Falling property prices and buying in a property downturn

Falling property prices and buying in a property downturn, selling a house quickly in a falling market and getting the best price

It is the fact that the banks are panicking and restricting lending that is making property prices fall quicker; although this was always going to happen and now they don't know which way to turn. The words, "rock and a hard place" spring to mind. Do they pour more money in the housing sector to try and get the property market moving again, or do they tighten mortgage controls and try to curb their losses?

Start of article about rising mortgage costs.

Previous page about falling property prices.

Crying for the Bank of England to make more money available is simply asking the Bank to take responsibility for the damned awful mess they have created. If you had an overdraft with a bank that you could not repay, would you ask them to lend you more money that you both new you could not repay? Well you might but you know the answer you would get and it begins and ends with F.

Property prices are going to fall for some time no matter what the "Old Lady of Threadneedle Street" does. Property has risen by 180% over the last ten years and that was always going to be unsustainable. The idiots who thought the merry go round was never going to stop have got their fingers burned and rightly so. We live and work in a market economy don't we? And that is what always happens when prices of anything continue to rise. At some point there is going to be an adjustment and the time has come.

Furthermore, don't listen to the expert estate agents and bankers being interviewed on the television, they will try and talk the market up no matter what. You are going to see property prices drop by as much as 25%-35% before the end of 2008.

FALLING HOUSE PRICES

Those people arguing against this will claim that this is not like the late eighties and early nineties because interest rates aren't nearly as high and there is still a huge demand for property. This is true, but twenty five years ago, the banks weren't lending five times salary and not dishing out 125% mortgages. Back then, people could still afford to buy property based on three times their salary and incomes have not kept up with property prices.

Demand depends on the ability for people to buy property and there are millions of window shoppers out there who cannot afford to buy property unless it falls right back. It is only when property has dropped by at least 30% that we will see any real movement in the housing market.

March 2008 and the Halifax announced that property prices had fallen by 2.5%. Doesn't sound much until you calculate that that is £5,000 on a £200,000 house. Nor is it the true picture by any stretch of the imagination.

This 2.5% fall in prices is based on properties sold during the month of March. There will be properties that weren't reduced by so much and others that had more drastic reductions and these are likely to have been properties where the owner was in a distressed situation and needing a quick sale. The underlying figure is likely to be nearer 4% and if you take this over to the next month, this figure is likely to be reflected in the April housing figures.

Project this graph over the next six to eight months and you are looking at a drop in property prices of between 28%-32%. Of course some pundits are likely to argue that one fall in house prices in a month does not mean they will continue to decline. However, there is nothing happening on the horizon to reverse this trend. In fact, all the evidence points to things getting worse as mortgages become more difficult to obtain.

So what advice should you be taking if you need to sell your property fast.