Mortgage calculator: is it better to rent or buy?

It might appear that gloom has pervaded the market as the economy falters, but some people determinedly view it as a window of opportunity. Geoff Lockett, an agent with Strutt & Parker, believes that in the rush to secure the ultimate bargain, would-be buyers risk missing out altogether. So much so that he is looking to buy himself — at the earliest opportunity.

“There are deals with every house, now there is no competition between bidders. As soon as things pick up, the window will be slammed shut almost overnight,” the Glasgow agent says. “People are waiting for things to plateau but that is a mistake. By that time, the opportunity will be lost.”

Strutt & Parker claims it had more homes under offer in November than in the previous three months. The market dropped by its smallest amount than at any time in the previous six months, suggesting recovery may be in the air.

Lockett is now pursuing a west end buy-to-let. “A lot of would-be buyers are renting, so rents are improving. I am looking to pay between £150,000 and £200,000 for a two-bed flat that might have cost up to £230,000 last year,” he says.

Sheona Gordon, a professional property finder, says her workload is increasing. Despite the seeming depression in the capital, there is no shortage of well-heeled Edinburgh clients looking to trade up or buy for investment. “At one extreme, people want to be at the peak of fashion with cutting-edge homes. Others are downsizing and some people want more space. From an investment perspective, new flats are a big draw as they are easy to maintain and rent — especially if they have a parking space,” says Gordon.

However, others in the industry believe things will get much worse before they get better.

Last month, the award-winning Macfarlane Homes axed six staff, including four of the seven board directors, and scrapped its growth plans, blaming a drop in business.

In October, the property developer Gregor Shore was forced into administration, putting 120 jobs at risk. The developer Anderson Homes is also in administration.

However, the true impact of the credit crunch is yet to be felt, as it takes up to 18 months for company failures to show in official statistics.

Off the record, insiders are happy to speculate over which housebuilders are struggling to trade. It is feared HBOS, the most notable backer of the construction sector, is particularly exposed ahead of its merger with Lloyds TSB — a bank which sees itself primarily as a low-risk lender, as opposed to a potential equity shareholder.

Others say such industry troubles should not obscure a generally rosy picture for buyers. William Gray Muir, of Sundial Properties, which restores listed buildings, says: “If you are a well-funded owner-occupier, it is time to seriously consider your options. From our point of view, it isn’t all bad, either. For the first time in years we can genuinely compete for any quality site in the capital. On a smaller scale, it is much the same for everyday buyers; competition has evaporated.”

Sandy Burnett, a partner at the property specialists Murray Beith Murray, says individuals might struggle to uncover the extent of what is on offer when negotiating with builders. There is about £1m worth of developments in the region; a 30% reduction may be attainable. “When you know what you want, a good lawyer can earn his fee by uncovering exactly what is on the table,” he says.

It has been suggested that the buy-to-let brigade could be back, demanding up to 50% reductions for multiple purchases in vulnerable developments. However, Andrew Mickel, a director of housebuilder Mactaggart & Mickel, says they’ll be given short shrift. “I hear of colleagues being asked for fanciful reductions on multiple units, but they’ve been back in their cars and speeding away before they’ve drunk half their carry-out coffee,” he says.

Mickel says the realism in the market is based on providing real homes for real people. In his firm’s case, after introducing family-friendly rent-to-buy, part-ownership and assured move schemes, sales returns have been consistent with last year’s figures for November.

Like Lockett, Roy Durie, of the property consultant Ryden, says that hoping to snare the ultimatebargain just as the market hits rock bottom is a thankless task. “I bought a flat in Stockbridge a few weeks ago. I was happy with the price I paid, a 15% reduction, and the plan is to either rent it out or have one of my daughters live in it. It could go up in value or down but the important thing is the longer view. It is in an established area and, whatever happens, it will come back up again. That is what you have to focus on as a buyer.”

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