It’s an old English saying that something is as Safe as Houses, usually used when referring to taking a speculative financial decsion.
However of late UK property itself has begun to slide backwards in value, blamed for the most part on the Credit Crunch that began last year in the USA caused by mortgage defaults in the sub-prime market.
The media are telling us that economists beleive that the UK will now experience a housing slump and economic recession although there seem to be differences of opinion as to how long it will last. What’s the longer term view?
Now I may be over simplifying here, but we’ve said before on MoneyTalks that house prices in England were too high and that a reduction was likely, the Credit Crunch has merely brought forward something that was inevitable. We’ve not been alone in that view.
However ask me whether longterm I think investing in property is a good idea and I’ll for sure say that it is and that you should, even now! Why? Because if you take a loan for example to buy a flat for £100,000 even if this year it becomes worth £90,000. Take a moment to think what it is likely to be worth twenty years from now. Not convinced, well take a look at what your 100K flat was worth 20 years ago. Since then we’ve the 1980’s housing boom, followed by the 90’s slump but since 1997 tremendous growth. If you’d bought your 100K flat 20 years ago you’d have paid less than half that for it, probably more like 30K infact. Your home loan would perhaps have been 25K, who wouldn’t like a 25K mortgage today. Plus 20 years later chances are you would have finished paying for it now and be sitting on a nice chunk of equity. There aren’t too many other ways to turn 30K into 100K plus and have the use and benefit of the property.
So in our opinion if you can secure a mortgage offer, there’s a good chance you’ll be able to pick up a property in the coming months at a more realistic price and that long term it’ll be a decision you’ll be glad you made.
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