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18th June 2008

Nab a Property Bargain While You Can

Interest rates are increasing, property values are dropping and the credit crunch reduced the likelihood of securing a mortgage deal, but for some, there's a positive side. We've seen the emergence of a buyers' market, although this is dependent on buyers securing the funds to buy an investment or a new home. Agents are advising vendors to reduce their asking prices, and often it isn't as if the owner has any choice. Property prices have been unrealistically high for too long but values are now falling towards a more realistic level. Additionally, there is little confidence in the banks and this is causing people to reduce their spending. It seems that there are fewer buyers currently willing to invest their money in property. There are fewer viewings and fewer purchases and this is increasing both the desperation and the competitive urges among vendors.

Preparation is important. Research whether your target's area is fighting the property downturn or falling victim to it. For example, a housing estate near a newly developed business park could become popular once the office space at that park is busy with new employees that are keen to reduce their commuting times. Previous prices that properties have gone for and some current estimates can be found or calculated at www.zoopla.co.uk and browsing through your local estate agents' websites can provide plenty of useful information. Also, use www.propertysnake.co.uk as it provides lists of properties whose values have dropped in value and the length of time that they have been up for sale. If a property has been available for 4 months, the vendor might be especially eager to sell.

Save up a reasonable deposit and this could help reduce the mortgage repayments, shorten the repayment period and help dodge any negative equity that might occur. Avoid over committing yourself to a property beyond your genuine financial ability. If a building society offers you 150,000 based on your income, maybe play it safe by viewing homes for 130,000 or less (and then negotiate the price down by up to 10%). Much of this will be irrelevant to first-time buyers, for whom even an inexpensive property is beyond their means. The Council of Mortgage Lenders has quoted that in June 2008, banks loaned 36% less than in June 2007. They also stated that the average deposit placed by buyers was at a 3 year high of 13%.

Even if the cost of a new home seems to be unaffected by the slump, developers are frequently offering incentive packages to draw in buyers. These can include cashback, paying the deposit for the buyer, paying the stamp duty (if applicable), monthly payment guarantees for a period or/and some free extras (white goods for example) within the house itself.

Timing is of the essence. The present values might represent be the nadir of the slump, or they might fall even further. It's similar to placing a bet on a horse. Are the odds at their highest now or will your chosen horse's odds improve further? Deciding what to do can be tricky, but wait too long and we might climb out of the slump and see prices rise again before taking the plunge.

The cynical will complain that buyers looking to find a bargain during a downward turn in the market are profiteering, but buyers could counter that when house prices were stratospheric, owners and vendors were more than happy to have their homes overvalued and benefit from high prices when the tables were turned. It's a case of swings and roundabouts in the property playground.

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