Mortgages for Professionals

As the global credit crunch sends financial and housing market commentators into a furor of media sensationalism, it is fast becoming increasingly difficult for consumers to ascertain whether a property purchase is a good idea in the current climate.

But despite reports heavily weighted towards the negative, there are plenty of reasons why a property purchase in 2008 would be a good move for those that can afford it.

First-time buyers

A major concern for anybody buying a property in 2008 is likely to be the potential for a drop in value.

But while those who already own a home must factor into their buy-now-buy-later decision both their current and future property losses, the situation for first-time buyers is slightly different.

Many credit experts are predicting a “soft” year of housing market activity, as mortgage approvals continue to fall for a fifth successive month from 88,000 to 83,000 in December according to Bank of England figures, it looks increasingly likely that the situation is improving for first time buyers.

Add to this the predictions of the Royal Institution of Chartered Surveyors (Rics) that repossessions will reach around 123 homes per day in 2008, then it looks as if homes will get cheaper as the year goes on.

RICS chief economist, Simon Rubinsohn, said: “Should house prices drop in the early part of the year, many will be ready to pounce, especially if more repossessions filter through into the market.”

Add to this the Firstrung estimate of a deposit to the tune of 25 per cent of the property’s value and it might be wise for first time buyers to wait and see how the market develops in 2008.

Buy now?

But where does this leave our homeowners? Unsurprisingly, responses are mixed.

According to Paul homes, CEO of Firstrung “we’ll see a 35 per cent correction in house prices” over the next three years.

By contrast, others such as Hamptons International, are estimating Bank of England cuts will drive down mortgage rates once again and result in a modest house price increase of three to four per cent across the UK.

One view, expressed by Carilyn Walsh of homebuilder Miller homes, is that property prices make no difference anyway, because the price of your own home also applies to the one that you buy.

But with house prices being a long-term investment for most people, what difference does all this speculation actually make?

According to the housing market forecast from Oxford Economics, short term demand will be short-lived and the overall demand for housing will win through, pushing house prices up rapidly through to 2010.

Coupled with at least two interest rate cuts predicted for this year alone, the long-term outlook for a purchase now looks unlikely to lose consumers money as long as mortgage payments are met.

Not when to buy but where to buy?

Finally, there is evidence from HBOS to suggest that the commanding factor may be location rather than timing.

In this regard, it seems to be the south of England that is triumphing, with the south-east seeing a net gain of 384,000 in domestic migration and the south-west recording a massive 440,000 over the same 1996 to 2006 period. This has led to the latter seeing a 206 per cent average house price increase.

London has also seen a population rise of over half a million over the last decade suggesting to those in the south-east that concern for a loss of property value is really not a long-term worry.

However, even things in the north look positive.

Although net population has fallen, house prices have increased in certain areas quite significantly throughout 2007 as those in the south seek out cheaper pastures, notably Yorkshire and Humberside.

So the past and future performance across all regions actually looks more positive than one would immediately assume from the deluge of negative reports.

With this rosier tint then, it would seem as if the outlook for a purchase in 2008 is unlikely to lose anyone money that can afford to invest for the long term.