Buying and selling a property in good and bad markets

publication date: Feb 13, 2014
 | 
author/source: Kate Faulkner, Property Expert and Author of Which? Property Books

Join Now


Buying and selling a property in good and bad markets

 


The media, pundits, think tanks and property market analysts are very good at frightening people when it comes to property.

The market is either ‘in a bubble’, it’s ‘overheating’ or it's ‘crashing’ around our ears. For me, this is irresponsible. It’s people’s lives the media are affecting. It doesn’t help that the industry knows the more of a ‘horror’ story on property it puts out, the more likely it is to get PR, so it’s not entirely the media’s fault.

What we should all be concentrating on instead, is what to do if the market is overheating, or crashing. What does that actually mean to you the buyer or the seller? How should you behave differently?

Property markets go up and down all the time, depending on how much money is around (cash and lending) and how many buyers are chasing properties for sales. It’s not rocket science! The more money, the more buyers and less properties, mean prices go up. If money is tight – as we saw during the credit crunch – and there are few buyers around and lots of properties for sale, prices come down.

To some extent it’s a ‘perfect market’. But the reality is, it’s your home and it often dictates how well off you feel.

So what do you do if you are buying in a busy market?

The thing I love about property is whatever is happening in the market, there is always good news and bad news!

The good news of buying in a busy market, is prices tend to be on the up, so when you buy, you don’t have the fear of the 15-30% falls buyers who bought between 2006 and 2009 experienced. The bad news though, is when you end up having to compete with others and end up submitting your ‘best price’ in ‘sealed bid’ contests. This, when buying in a busy market, can be dangerous.

So here’s five things to be wary of when buying in a busy market:-

  1. Check whether average prices are growing at their ‘normal’ level or are overheating. For example, in London, average prices grow at 11% per year, so if they were growing at 15%, I’d be cautious, as prices may come down again.
  2. Be prepared. You’ll need to research roads and properties you like beforehand. Make sure you have alerts from agents for these, get your finances in order and ensure you ‘drop everything’ to be the first to view. Have a legal company ready too.
  3. Know how far prices may fall. If you find a property on a street, check what prices fell to from 2007/8 (at the highest) to 2009 (lowest). In the main, it was 15-30%. How quickly have prices recovered? This gives you an idea of what length of time you have to hang onto the property to make sure you don’t lose money.
  4. Make sure you can afford the mortgage on-going. Even if prices fall back, as long as you can afford the mortgage, you will hopefully be able to hold onto the property long enough for prices to recover. This is why buying as a home is very different to investing in property.
  5. Check whether you can rent the property out and if it would cover your costs. If a property loses value and if you can’t afford the mortgage or don’t want to sell because you are in negative equity, renting can help you through difficult times.


You can do other things, for example, go to auctions, leaflet drop properties you like (politely!), speak to family and friends, colleagues at work. BUT make sure you have a good local surveyor on your side who knows property values in the area to help you understand what price you should pay, so you don’t pay too much, or understand the downside if you do! 

For FREE, independent and up to date advice on buying and selling a home, sign up for FREE to
Property Checklists. Join now to access our FREE property checklists, including:-


All our information is brought to you by Kate Faulkner, author of
Which? Property books and one of the UK's top property experts.
This website is Copyright © Designs on Property Ltd and
Propertychecklists.co.uk protected under UK and international law.