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17th June 2008

Buy a Bargain while Prices Are Low

Interest rates are rising, property values are falling and the credit crunch has made it harder to land a mortgage deal, but for some, there's a sunny side. We're currently in a buyers' market, as long as you can easily raise the capital to invest in property or buy your next home. Agents are advising owners to lower their asking prices, and in many cases it isn't as if the vendor has a choice. After years of over-inflated prices and the human factor of homeowner greed, house values are now dropping towards a more realistic level. Add to this the fact that a lack of confidence in the banks is causing people to hoard their cash, and it seems that there are fewer buyers out there willing to risk their money in property. As a result, the competition for properties has weakened and there are fewer viewings and fewer contracts exchanged.

Preparation will be key. Research whether your target neighbourhood is withstanding the property gloom or a victim of it. For example, an estate near a newly developed business park might become popular once the office space at that park is buzzing with new employees that want to cut down their commuting times. Previous prices for sold properties and current estimates can be found or calculated at and a browse across your local estate agents' websites will provide plenty of useful information. Here's another tip: use provides lists of properties whose values have fallen in value and how long they have been on the market. If a property has been available for 6 months, the vendor might be feeling desperate to sell.

Build up a decent deposit and this could reduce the repayments, shorten the repayment period and help avoid any negative equity that might arise. Avoid over committing to a property beyond realistic means. If a building society can offer £200,000 based on your income, perhaps play safe by looking at homes for £170,000 or less. Much of this will be moot for first-time buyers, for whom even a bargain is beyond their reach. The Council of Mortgage Lenders has stated that in June 2008, banks are lending 36% less than a year before. They also quoted that the average deposit placed by buyers was at a 3 year high of 13%.

Even if the cost of a home doesn't appear to be a steal, developers of new homes are often providing incentive packages to tempt buyers. These can include paying the deposit for the buyer, paying stamp duty, cashback, monthly payment guarantees for a period or/and some free extras within the house itself.

Timing is a consideration. The current values might be the bottom of the slump, or they might fall further. It's rather like betting on a horse. Are the odds at their best now or will the money go elsewhere and cause your chosen horse's odds to lengthen further? It's a gamble, but wait too long and you might see prices rise again before you've decided to buy and found a property.

Sceptics will claim that buyers looking to bag a bargain during a downward turn are profiteering during a sticky period, but buyers could argue back that when house prices soared, owners and sellers were happy to have their homes overvalued and sell at high prices when the ball was in their court. It's a case of swings and roundabouts in the property playground.

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