Should you buy a house in 2009?

The housing market and general economy is still falling, yet the National Association of Estate Agents (NAEA) has reported that in December 2008 there was a slight increase in activity with potential buyers and sellers tempted into the market, possibly by successive interest rates.

There was an increase in both those looking to buy a house and the number of new properties that came on the market. First time buyers, having been priced out of the market for so long, bought 10.8 percent of the properties sold. In addition, the average number of sales made per agent held steady in December even though this is traditionally a quiet month. Some agents reported a small rise in house prices which the NAEA suggests may indicate that the rate at which prices are falling has slowed in some areas.

However, in comparison, early in January this year the Financial Times asked the question “Will 2009 be a year to buy property?” and gathered the views of over 50 economists. Over 60 percent believed that 2009 would not be a good year to buy property, while the remaining economists believed that, particularly towards the end of the year, it could be safe to buy property. There was an interesting mix of views.

On the side that believed 2009 will be a year to buy property, the reasons given were that buying real assets such as property would be protection against a decline in currency. Interest rates are expected to remain low throughout the year, and, by the end of 2009, although lending will remain tough, there may be more credit available particularly if the government steps up its intervention. Some economists believe that the market will have bottomed out by the end of 2009, and some buyers will then be enticed back into the market by the combination of low prices and low interest rates.

For those against the idea of buying property in 2009, the key belief is that property prices will remain simply too high in comparison to earnings and credit availability. Some economists expect property prices to continue to fall into 2010 and to bottom out during that year – Capital Economics expects prices to fall a further 20 percent, Global Insight 15 percent and JP Morgan 10 percent.

However, one economist predicts that the housing price declines will continue into 2014. Factors to support the continued fall are ongoing credit restrictions, still stretched affordability, rising unemployment with muted economic growth and the negative expectations that the market will continue to fall. And, of course, with the recession potential buyers may delay buying due to fears of their job security.

As a whole there seems no rush to buy property. The country is in recession; 2009 will see huge increases in unemployment, lending is expected to remain constrained and, as a result, the demand will be low. Of course, some people will have to move due to personal reasons, and the desire for home ownership and the personal benefits that owning your own home can bring always exists. Transactions will, therefore, continue to trickle, but the idea of buying a property as a good investment, i.e. the buy-to-let market, is some way off. However, post recession and in the years following economic recovery, we could see another housing boom due to an undersupply of housing, increasingly affordable property and a new, more secure banking system.

During 2009 property sold at auctions and homes that are in need of repair and renovation will be sold at very low prices and bargains will be easily found. If you buy in 2009, offer low and expect to hold your property for some time.

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