Who can benefit from property price falls?

Although many media officials would like to deny that the property market resembles nothing of the housing crash of the 1990’s, it would be undeniable to say there aren’t many similarities.

According to the Halifax House Price Index, property prices peaked at £70,247 during May 1989 before being hit month on month by losses and stagnation. Within just 6 years, property prices had fallen by 13.2% to just £60,965.

Now compare these figures to the rate at which property prices have fallen between August 2007 and August 2008 and you’ll agree that our housing crash has been much more dramatic.

In under a year average house prices have fallen from £199,612 to £171,178, a 12.7% drop which is only 0.5% less than what took the last recession 6 years to achieve…

Is there a light at the end of the tunnel?

Yes. Simply bypass the events of the last 2 years, and these property price falls actually represent a golden property investment opportunity which can be beneficial to property investors, homeowners and landlords alike.

Who is most likely to benefit?

• First Time Buyers – average property prices grew by an astounding 187% during 1996 and 2006, making it virtually impossible for many first time buyers to climb onto the property ladder and invest in property. However, with recent property prices falls and property funds such as Mills Group offering funds to help first time buyers get onto the property ladder, conditions have definitely turned in their favour.

• Property Investors – property investor with the spare investment capital or the property investment strategies to negotiate further discounts have currently got the opportunity to make a greater return in the long run should they invest now. For instance, if property prices were able to grow in value by 187% after the last housing crash, imagine what could happen in the next 10 years…

• Upsizers – although it may not seem ideal to upsize in the current property market, smaller properties are usually disproportionately priced compared to larger ones. Meaning should you choose to trade up, the house you are selling will lose less value compared to the larger one you are buying, making you instant profits.

Example: You sell your £150,000 property at a loss of 10% (£15,000). Should you invest in a larger property worth £250,000, this would lose £25,000, giving you a £10,000 profit.

• Property Landlords - research by Paragon Mortgages reported rental income increases of 3.8% during the first quarter of this year. Yet as the UK’s economy continues to remain unpredictable and mortgage deposits too high to obtain, many renters will choose to continue renting rather than try to get onto the property ladder.

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