Property bulls are few and far between. Hardly surprising given that UK asking prices and rents are now falling in tandem (see below). But that isn’t holding back property pundits Kirstie Allsop and Phil Spencer who burst back onto the scene this week with a Location, Location, Location credit-crunch special. Even before the show, the pair grabbed a slot on Radio 1’s breakfast show advising listeners on how to buy. In one choke-on-your-cornflakes moment, they encouraged a 20-year-old to get into buy-to-let. Phil often sports a wry smile on TV. But this sort of advice invites outright laughter.
So what should you really be doing?
First-time buyers, such as the perplexed chap Kirstie and Phil spoke to, are best off out of the market for now. And are lucky to be so as house prices become more and more affordable – by about £100 a day on average, says the Daily Mail. In any case, with many lenders asking for deposits of 25% or more, concentrating on saving one up makes sense. And with rents now falling as frustrated sellers flood the rental market, it’s a great time to rent and save.
Meanwhile, existing owner-occupiers ideally shouldn’t move while sales volumes are at record lows. If personal circumstances leave you with no choice, it makes sense to cut your asking price now to achieve a sale and then rent a house until price falls show some sign of slowing. That way you should bag your new home at a good price.
Owner-occupiers who don’t need to sell can safely concentrate on reducing debt. If you have savings, use them to pay off your mortgage as deposit rates are falling. But don’t forget to keep around six months of your income in an easy-access account as an emergency fund.
Anyone now struggling with mortgage payments – whether as an owner-occupier or buy-to-let investor – should talk to their bank. The Bank of England base rate may have fallen to just 3% but, alas, most mortgage rates have not kept pace. However, your lender may be able to offer a payment holiday, or even a temporary switch from full monthly repayments to interest-only ones.
Buy-to-let investors also need to think about how to hold onto good tenants as rents fall. If you have some already, cling on to them because they now have plenty of options, thanks to the recent flood of new properties noted by the Royal Institution of Chartered Surveyors. So get repairs or maintenance issues resolved quickly. Happy tenants will stay longer and are more likely to pay the rent you want and, should they leave, a tip top property should bring new ones in fast.
A week in the property market
• Rents have fallen for the first time in five years as homeowners flood the market with properties they can’t sell. Among lettings agents, 12% said that rents fell rather than rose between August and October, according to the Royal Institution of Chartered Surveyors. It is the first time rents have dropped since 2003 and the majority of agents believe rents will continue to fall in the coming months. London was the worst-hit area, with 53% of agents saying rents fell in the three months to October.
• Things are so bad that even ‘For Sale’ signs aren’t selling. Kremer Signs, which makes ‘For Sale’ boards for some of the country’s largest estate agents, is having to make redundancies due to business drying up. Monthly production has dropped by 5,000 boards in the past year, with estate agents reducing their orders from 150 to 30 at a time.
• House prices have dropped 2.9% in November, according to Rightmove, which measures movements in asking prices. This fall means prices are down 7.1% in a year, leaving the average house price at £222,979.
• Up to 40% of buy-to-let landlords will be in negative equity by the middle of 2009, according to credit-rating agency Standard & Poor’s.
There are almost one million empty properties across Britain, says the Empty Homes Agency, and 85% belong to landlords. Of these, over 762,000 residential properties are empty in England alone, with around 650,000 owned by private landlords. So much for the myth that there is a housing shortage.