Property prices are rising but I'm happy to rent for now
Published ¤ 16/09/2009
Even though the "bottom feeders" have been disappointed, the recovery in the housing market looks set to be short-lived.
From TimesOnline, by Yolande Barnes
Early this year, when the housing market was still on its knees, a fellow guest at a Burns Night supper remarked: "Have you seen how house prices are falling? Soon I'll be able to buy a house for what it's actually worth."
This statement poses a number of challenges to any housing market analyst, but particularly to me, as I have been wondering whether to let or sell for the past nine months. The notion of a "correct" price for property is deeply ingrained in most homeowners' (and some economists') psyches. But it is self-evidently flawed: buyers nearly always think the market is about 20 per cent overvalued, while sellers think their home is 20 per cent undervalued.
One fact is clear: enough buyers have entered the market in the past few months to make prices bounce, as reflected in this week's house price indexes. The canny "bottom feeders" who were waiting for distressed stock and repossessions to be flogged, US-style, on the courtroom steps have been disappointed. People like our Burns Night reveller are still renting, confounded to see prices once again climbing. So is now really a good time to buy?
First things first: no matter what the state of the market, there are always good reasons for some to buy. People with new or growing families, or relocating for work or schools, will always form the backbone of demand, just as death, divorce and debt always provide stock.
The three best reasons for buying, taken together, are that first, you love and/or need to live in the property; second, that you can afford it and third, that you will need it as a home for at least the next decade or so. Set against these criteria, no postwar house purchase has been a disaster for the individual involved â€” at least for market reasons. Even those who bought at the height of the 1980s boom in 1989, and those who bought in 2007, will walk away unscathed, provided they keep up their mortgage repayments.
For others the question is not whether house prices are at the right level, but whether they are sustainable. To answer that we must look at what is driving demand.
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