The Daily Telegraph - Property - - Cover Story -

Nei­ther fear nor greed are par­tic­u­larly at­trac­tive emo­tions. But, like it or not, they are the volatile cock­tail that fu­els al­most ev­ery kind of fi­nan­cial mar­ket – par­tic­u­larly hous­ing.

When prices have been ris­ing for some time, greed tends to get the bet­ter of peo­ple, and of­ten all that buy­ers can see be­fore them is the po­ten­tial profit a hous­ing trans­ac­tion could make them, so they are will­ing to pay more. When it slowly dawns on them that prices have been ris­ing too far and too fast to be re­al­is­tic, fear takes over, mak­ing peo­ple par­tic­u­larly con­cerned about their fi­nances.

With the mar­ket now mov­ing from a state of greed to a state of fear, there are likely to be plenty of op­por­tu­ni­ties out there for canny buy­ers.

The past year was de­fined by prop­er­ties sell­ing for well above the ask­ing price and by a spate of sealed bids, which helped push prices up higher still. This kind of greedy be­hav­iour is on its way out – to be re­placed by a buy­ers’ mar­ket.

Houses are al­ready be­ing sold at well be­low their ask­ing prices, ac­cord­ing to re­cent ev­i­dence. I have also heard plenty of tales of buy­ers man­ag­ing to knock down the price even af­ter an of­fer has been ac­cepted.

Bear­ing all this in mind, here are some key pieces of ad­vice for sur­viv­ing the down­turn:

Buy­ers should al­ways bar­gain hard. Re­mem­ber that it is in the ven­dor’s in­ter­ests to sell as soon as pos­si­ble, and that they will be just as aware as you that the mar­ket is no longer boom­ing.

Sell­ers may have to be pre­pared to al­low the prop­erty to go for lower than the ad­ver­tised price. Th­ese days, a closed bid process is just as likely to reach a lower price as a higher one.

Don’t as­sume that a fixed rate mort­gage will be best for you. Fixed rate deals have be­come in­cred­i­bly pop­u­lar in the past few years, with a phe­nom­e­nal 80 per cent of re­cent buy­ers get­ting at least a two-year fix. While there are still some de­cent fixed-rate deals out there, the best ones have al­ready gone, hav­ing been with­drawn by the mort­gage lenders or sold out. Rather than sim­ply go­ing for a twoyear fix, think about where in­ter­est rates are likely to go dur­ing that pe­riod. Right now, it looks more likely that the next move for bor­row­ing costs will be down at some point early next year. While a float­ing rate mort­gage leaves you more ex­posed to the ups and downs, it is of­ten a bet­ter deal – so don’t rule it out.

Think hard about re­mort­gag­ing. In pre­vi­ous years, re­mort­gag­ing was of­ten a good plan. Rates were low and, if you de­cided to use the ex­tra cash to spruce up your home, you could well have helped boost your house price. Given that the mar­ket is less prof­itable now, the same logic may well not ap­ply.

Don’t ex­pect your house price to in­crease much over the next cou­ple of years – if at all. It would be highly fool­ish to in­cor­po­rate a ma­jor in­crease in your home value into your bar­gain­ing. It may well have risen faster than your wage in re­cent years, but this can­not go on for­ever.

Mind over mud­dle: Bank of Eng­land Gov­er­nor Mervyn King has his work cut out

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