First foot on the ladder
A market slowdown and falling prices in some areas should present
opportunities for first-time buyers. According to the Halifax, the average
first-time buyer property dropped in price by 4.46 per cent in the last six
months of 2007 and further decreases are likely.
However, aspiring owner-occupiers will be constrained by difficulties in
obtaining mortgages. Those who have saved up only a smallish deposit, for
example, just 5 per cent of the purchase price, may find it particularly
hard to get a loan. It is still possible to get a 100 per cent mortgage, but
the rates will be higher than a year ago. But, as Richard Morea, technical
manager of the mortgage broker London & Country, points out, fixed-rate
deals could become less expensive later this year, as the London Interbank
Offered Rate (Libor), which determines the level of fixed-rate loan prices,
starts to decline.
Reduce your outgoings. Think about taking out an interest-only mortgage for
the first couple of years. Or make repayments cheaper by taking out a 30 or
35-year loan. Generational subsidy could be the answer: persuade your
parents to be guarantors for the loan, or ask if they will lend you a
deposit that can be returned to them when you sell.
Learn to negotiate. Hometrack reports that selling prices are on average 6 per
cent below asking prices. But Kevin Shaw, the national operations director
of Spicerhaart estate agents, advises: “You still don't want to upset the
seller by offering too low. People are going in at about £10,000 under the
asking price, then negotiating a sale.”
New-build could be risky. A slowing market is not kind to developers. They
have been left with new-build stock amp;#33;that they failed to sell last
year; many are now offering good incentives or price discounts. But you
should beware the pitfalls outlined below.
Do not overstretch yourself. Remember that you are buying a home rather than
trying to make a killing. Prices are forecast to remain flat this year with
falls in some places. This may also be the trend for next year.amp;#35;
One step up
Are you hoping to move up the ladder into a larger, family-size home? Or a
better area? Are you prepared for the new niggardly attitude of mortgage
lenders, and also for sellers who refuse to budge on price? These are the
strategies that you should consider.
Be realistic. Your one-bedroom apartment in an Edwardian mansion block may
have been valued at £300,000 three months ago, but now is the time to
consider a lower offer. Richard Cotton, of Cluttons, says: “You're buying
and selling in the same market, so it balances out.”
Caution is the best policy. Do not hold out for a higher offer for your home
if you already have a firm offer on the table. Ensure that you know how much
you can borrow before you start shopping for a new home. If you can prove
that your mortgage is already agreed this may impress a seller more than a
vague promise of funds.
Get a move on. You might not want to act until you are certain you can afford
a new place, but steel your nerves. Carl Davenport, of Chesterton, says: “If
you market your home only after you have found the one you want to buy, the
deal may fall through while you're waiting.”
Be optimistic. The better homes you have your eye on might seem overpriced,
but Richard Cotton says: “In a booming market the gap between lower and
higher value properties gets larger. As it slows, this might reverse and
create opportunities. Plus there is a shortage of applicants. You don't have
to do much as a buyer to get VIP treatment from agents.”
Original features rock. New-build flats are among those most vulnerable to
price falls, particularly in city centres where there has been a glut of
construction. Former council properties could also be shaky. In a stagnant
market, buyers are likely to shun lookalike boxes in favour of homes with
character and original features. Building for Life lists criteria for
judging the quality of a property: see www.buildingforlife.org.
The next rung
You might hanker for a home on that nicer road, but be ready for
disappointment. Prime property - priced above £1 million - has outperformed
the rest of the market for more than a year and, despite signs of slowdown,
the party is likely to last some time yet. If you have a substantial home
but want to upgrade, you could face tough competition.
Get your loan organised. Carl Davenport, of Chesterton, says: “Buyers looking
at £1million-plus homes do not mess about.” Cliff Gardiner, of the Buying
Solution, adds: “Unless you are in a cash-rich position, you are not going
anywhere.”
Buy quality. A stagnating market is not one in which to take a punt on an area
being the next hot spot. Jeremy Leaf, of RICS, says: “You don't want to be
stuck with something that ends up being the next worst thing, rather than
the next best thing.” Choose the property carefully. Gardiner says: “You
have got to tick more boxes in this market to ensure that you are protected.”
Improve with care. For many people, extending and converting their property is
cheaper than the double bill of a larger home and stamp duty. And, as
Gardiner reminds us: “These days everyone calculates price by square
footage. The more you have, the more you get.” But get it right. Cotton
cautions: “Improvements can be risky in the current market. You don't want
to be making mistakes on design or specification.”
Never let go. If leaving the UK, keep your foothold in the property world. A
difficult year may lie ahead, but that doesn't mean you will find it
possible to buy a home when you return. As Cotton says: “Always, always,
always let out your property, never sell. It is a golden rule.”
Take a rain check. There are signs that even jetsetters or big-bonus boys are
not immune to house price fears. Davenport says: “Think about delaying
buying until the international buyers have decided the market has reached a
peak and the market has started to wobble.”
One step down
Selling a large family home and buying a smaller property is a difficult
venture. Nicola Oddy, of the buying agent Stacks in Cornwall, says: “There
is huge competition. Whereas it used to be just down-sizers and second-home
buyers, it has spread to first-time buyers and young families, priced out of
other areas and pushing prices up.”
Plan ahead. Don't leave your preparations until you are desperate to move. For
one thing, your current home may take longer to sell than you think. Take
time to consult your family if there are emotional or money issues to
resolve.
Get advice. Find a solicitor and an estate agent you trust. Nicola Oddy says
that many of her clients are divorced or widowed. “Previously they weren't
the one who dealt with the financial side and so this is new to them.”
Check that the move is financially viable. Selling your home may be a way to
release capital but the income from this may not be sufficient for your
needs.
Location is everything. If you have young children, find out if there are good
secondary as well as primary schools in the area. Most older people seek
peace and quiet, with no neighbours. But what if you fall ill and need help?
Keep to your criteria. Ms Oddy says: “Most people are moving from their family
home with a lot of memories and time spent there. Don't be tempted by
something more expensive and larger than you need.”
Think outside the box. Nicola Oddy had clients who rejected an ideal house
that was way under their budget because the garden was too big. Her
solution: hire a gardener with the money saved.
