Falling House Prices Bring Out Potential Buyers

by Ed Bowsher on 16 February 2009  |  32 comments
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Lower house prices have triggered an increase in ‘new buyer enquiries’ for homes. But that doesn’t mean the property market has hit bottom.

Property website, Rightmove, said today that enquiries by potential new home buyers have jumped 108% compared to a year ago. The Royal Institution of Chartered Surveyors (RICS) has announced similar figures showing that new enquiries have risen for the last three months.

These surveys follow Halifax’s claim earlier this month that house prices rose in January.

Recovery?

Regardless of these numbers, I still think that house prices will fall further this year.

For starters, Rightmove says that some estate agents are reporting 40 to 50 viewing per weekend with no resulting offers.

Secondly, the mortgage market remains tight – especially for first-time buyers who only have small deposits. If you can’t get a mortgage, you can’t make that crucial first step onto the property ladder.

And, most importantly, the economy is still getting worse. Only last week Mervyn King, the governor of the Bank of England, said that the UK was in a ‘deep recession.’ He thinks the economy will be contracting at an annual rate of 4% later this year - and it could be worse than that. With that background, further rises in unemployment are inevitable which will impact on house prices.

So what should we do?

If, like me, you’re happy in your current home, it makes sense to batten down the hatches and wait until the storm passes.

If you’re looking to buy your first home, or move upmarket, there’s no harm in scouting the market and getting a feel for what you can get for your buck.

However, I think it makes sense to hold off making an offer just yet. You never can be certain about these things, but I strongly suspect that house prices will be lower in six months’ time.

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