With the daily media news about property prices falling and financial markets in turmoil, what should YOU do?

publication date: Oct 14, 2008
author/source: Kate Faulkner

For everyone looking to carry out a property project, be it buying or property improvement, it is not really worth doing so unless you are planning and can afford to hold onto a property for at least five years. If you want to invest in buy to let, then you will need longer, say ten years to be sure of a positive return and if you are thinking of renting, look out for properties that are oversupplied such as city centre apartments for great living at a good price.

First Time Buyers
Now and over the next six months could be a great time for you to buy your first home, providing you can raise a good deposit and afford the finances - even taking into account a rise in interest rates.

However, this is only the case if you are not planning to sell for the next five years as no-one can predict confidently that prices wont' fall further for another few months.

If you are planning on buying a brand new home and can afford the 30% deposit you are likely to need - or get the developer to pay it for you - then now might be the best time to catch a deal. Most developers year end finishes in December, February or March. After that time they are unlikely to offer the amazing property discounts as well as deals which include paying your deposit, stamp duty, fees and some even your mortgage for a year!

Trading Up
You are probably in the best position of any buyer/seller in the market, providing you price your property competitively and negotiate hard on the one that you are buying. If you drop your property's value by 10% (so to £90,000 if it's worth £100,000) and buy for 10% less (so pay £135,000 for a property worth £150,000 in 2007), in our example you actually end up £5,000 better off than in 2007.

Trading Down
This is a tough time for you and if you can hang on selling until prices at least stagnate, then that might be worth considering. If you must sell, look to price your property competitively and consider buying a new build and selling yours via part exchange. Consider renting your property out and buying or renting a smaller version if that helps you move quicker, it will help to make sure you move to the right property later on when the property market has settled down a bit.

Property Investor
The type of property investment you are looking at will determine the property investments to steer clear of and those to seriously think about. Currently property investments for the long term are worth considering such as buy to let; investing overseas in countries predicted to have higher growth than the UK; small scale, demand driven, property development.

Ones to steer clear of if you are new to property investment are renovation projects and buying off plan.  

Self Builders
Now couldn't be a better time to buy and build! If you can raise the specialist finance required, which currently gives a 95% loan on the land and the build costs, then labour is easier to get hold of and building costs are way down due to the drop in business from the larger developers.

Depending on the area and type of property you are looking for, rental prices are either rising rapidly or you will have a pick of many at knock down prices. The latter, courtesy of far too many new build city centre flats. As a result if you do find a property at a good rate, although they may restrict you to a six month tenancy agreement see what you can do to guarantee the rental price for 12 months. If you can afford to pay in advance, consider doing so - but negotiate hard to make it worthwhile.

Property Improvers 
Now is a good time to improve your home - providing you plan to stay in it until property prices start rising again. New planning laws have made it easier to extend your home without having to apply for planning. Labour is cheap and available, although it's wise to fix the price of the work you require and check the building costs yourself to make sure you get the best deal. Don't forget the required building certificates to show future buyers your work was done to the required standards.  

If you are trading down, have a property in an undesirable location such as near a busy main road, pylon or overlooking factories etc then you are likely to lose out. Trading down, you are likely to have to drop your property more than you will save on the next one. However most people trading down bought years ago, and as prices have gone up by approximately 20% in the last 10 years, it just means you've made 190% tax free income, rather than lose 10%.

Should you Worry?
You are only affected by falling prices if you are trying to sell a property or release your equity. And this should olny be an issue if you have less than 10% equity in your property. If you are in financial trouble seek advice from Citizens Advice Bureau.

If you are looking at buying/upgrading your home and worried about prices falling further, then either hold off your property project or if you are going to stay in the property for at least the next five to ten years don't worry too much as prices typically recover over a ten year period.

For more helpful, practical and down to earth property tips, visit www.designsonproperty.co.uk

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