May 11, 2023 By admin

Property Market Update and the Consequences For Selling Property

Firstly let’s briefly look at what’s happened to the property market. In the summer of 2007 property prices reached their peak and mortgages up to then, had been easily agreed with 100% mortgages readily available. At this time 40% of the money that the banks lent to companies and consumers came from big financial institutions, often overseas and known as wholesale sources. According to BBC’s Robert Peston, the ratio of our borrowings in the UK (including consumer, corporate and public-sector debt) to our annual economic output rose to just over a record-breaking 300% (or over £4000billion) which is similar to the US’s ratio of debt to GDP. In August 2007 the wholesale sources Probate Realtor Oro Valley became aware that much of their money had been invested in the US housing market which had already collapsed and saw that their investments had turned seriously sour. Unsurprisingly, they wanted their money back and didn’t want to lend more. When the banks paid the money back, some banks almost collapsed and were only saved by bails out of billions of pounds of taxpayer’s money. And at the same time, the sources of funds for borrowing dried up. It’s a time of unprecedented change in the global economy.

So now the UK banks have less money to lend to businesses and consumers, in the way of mortgages, and only customers considered risk-free are approved. With far fewer mortgages being made available there are less buyers. With less buyers, the property prices drop and when the price drops buyers who can secure a mortgage want to wait until the prices have bottomed out, and with the property prices still falling banks are not keen to invest in them…. and so the downward spiral continues. A global recession is nearly upon us and more companies are likely to need government bailouts. Unemployment will rise and tax revenues will shrink. It’s a gloomy outlook.

So with this backdrop it is not a good climate to sell a house.

As a seller, do you really need to sell your house now? Check your reasoning – do you need to sell your house or do you want to sell your house or is it a mixture of the two? Sit down and carefully go through the reasons why you are selling. Can you delay selling your house until the economy and property prices have turned around? Although lending will not return to the heyday of the previous years, stability will come, and those buyers currently waiting to buy property will then buy and prices will begin to rise again. In addition, because prices have dropped homes are becoming more affordable with the average house price to earnings ratio being 4.56 in November 2008 compared to 5.84 in July 2007. This will support the housing market when it returns.

But when will it return? According to the pre-budget report credit conditions will stabilise “beyond 2009” so that may mean early 2010 (though predictions vary). The worst time to sell could be in about 6 – 9 months time which will be when house prices have fallen further, sellers will be afraid of how much further they will go and the country is likely to be in the midst of recession. If the market begins to recover from 2010 house prices will then slowly go up from a peak to trough fall of around 20 – 25% (though again, predictions vary widely). How long will it take to recover to 2007 prices? Well, this can’t be answered as it’s simply an unknown but it is likely to be a number of years.

If you have to sell now, be aware that buyers are waiting to snap up a bargain and offers will be low. Be realistic from the outset about what you are prepared to accept and have a time line of when you need to sell by. Neither of these can be guaranteed of course but by thinking through them you will be better prepared to price your property accordingly. This may save you months of waiting and gradually lowering your price. Obviously you don’t want to do this especially is that would mean getting into negative equity. But if you need to sell then you need to consider that you could be better off taking a low offer before the market bottoms out. You need to work out your figures and price accordingly. Speak to your estate agent (and others) and ask what other properties in your area are going for. Gather as much information as you can to make a decision.

Selling and moving house is a very personal decision and many areas of your life are affected. Decisions may include wanting to downsize to lessen the pressure of outgoings, or to emigrate, or start afresh elsewhere. Moving house often signals a new chapter in your life and it’s worth remembering that the reasons for wanting to move may outweigh the reasons for needing to move.



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