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Is it a Good Time to Buy a Property?

I've been asked many times over the past 20 years whether it’s a good time to buy a property and my answer has always been the same… Ask your parents how much they paid for their first property.

Overall property prices have increased by an average of 6.9% a year since 1980. If you had bought a property in 1980 for the average price at the time, it would have

cost £22,677. That house today would cost £212,694.

Not a bad return but the trend hasn’t always been upwards. There have been 7 years since 1980 that have shown negative growth in the housing market, but as with most investments, if you’re in it for the longer term, your patience will pay off.

There are two main reasons for this continued increase throughout the years. Firstly, supply and demand. There are just not enough houses being built and this has been the case since the 1950’s.

Throughout the 1950s and the 1960s, Britain went through a period of economic prosperity which was characterised by full employment and the doubling of real incomes. Low house prices and relatively low interest rates encouraged more people to think about taking out a mortgage.

The other reason for the continued house price increase is the availability of mortgages. Beginning in the 1980s – and up to the early 1990s – the deregulation of the financial sector allowed the development of different types of mortgage, for example, endowment, interest only or repayment to name a few.

This change was dominated by the banks, who saw an opportunity to increase their lending on less risky homeowner mortgages. This resulted in an increased market share from traditional building societies which went from 3% in 1977 to 36% in 1987.

Unfortunately, the demand for property beginning in the 1980s led to successive increases in house prices. Since 1993, these prices have risen faster than both inflation and real wages, making it difficult for some people to find affordable housing. Increase in demand was also affected by the easy availability of Buy-to-Let mortgages starting in 1996.

By far the largest house price decrease came in the autumn of 2008 going into spring 2009. A 7.6% fall in overall house prices was a big shock to property-owners who had assumed that house price growth would continue. This decrease was caused by the economic downturn of 2008 and led to mortgages becoming less easily available and mortgage providers imposing stricter controls, most notably a decrease in the loan to value and removal of self certification.

No one can see into the future but if past performance is anything to go by, even with the occasional bump in the road, the answer to the question is.

It’s always a good time to buy.

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