With the housing market still moving slowly, maybe we need to rethink the reasons why. It is easy to say that people just aren’t buying houses, or that mortgages aren’t as available as they used to be, but maybe there is another factor which is adding to the problem.
One of the main reasons I believe the housing market is moving so slowly is that most home owners overvalue their own property. It can be hard to come to terms with the fact that your property isn’t worth what it used to be, but perhaps we need to realise this so that we can move forward. The only way to sell your house is to find a price that somebody is willing to pay for it now, not how much you want to sell it for. The reality is that property values are determined by how much other people are willing to pay for it today, not how much they would have paid five years ago, or might be willing to pay for it in five years’ time, or how much you believe it is worth.
Everybody is saying that houses aren’t selling, but this isn’t the case. Houses will sell and are selling if they are at the right price. The laws of supply and demand should work for properties in similar ways to everything else. There is no set formula that can work out how much a property is worth. The only thing that determines a property’s value, is what somebody will pay for it. If a retail product was marketed at a price above what people were willing to pay, it wouldn’t sell either. In this case, the retailer would acknowledge this and reduce the price accordingly, yet for some reason we don’t seem to be able to do the same with our homes.
Some estate agents will even tell you that your property is worth a lot more than it is because it is what you want to hear, but in truth it is maybe not what you need to hear. The housing market would work much more efficiently if all of the houses on it were at a price which they would sell for. Having said that, if I was an estate agent, I wouldn’t want to be the first one in town to start putting realistic values on properties, because nobody would want to sell their house with me. If somebody were to tell you your house was worth £100,000 and the other told you it was worth £120,000, you can probably guess which one you are more likely to listen to.
One scenario which often confuses me, is when people are thinking of upsizing, but they want to wait until property prices rise so that they can get what they feel is fair value for their home. If prices were to go up say 10%, then the more expensive house which you are buying would have gone up more than your own in monetary terms and you would end up losing out. Likewise, if you are looking to move into a house which is around the same value, there is no point in waiting, because you are likely to end up around the same anyway. I suppose it is human nature to want to feel like you have got the best deal possible, but if moving home is important to you, then it is probably for the best to ignore that feeling. On the other hand, if you are thinking about downsizing or selling up and renting, then maybe hanging on until things do improve could work out in your favour.
Whatever your needs or circumstances, it is always best to speak with an independent financial advisor so they can give you an impartial view and guide you to the right mortgage for you. Kieron Bassett Financial Services has two Independent Financial Advisers. Contact us on (01524) 832057, via e-mail, info@kieronbassett.com, or visit www.kieronbassett.com.
Jason Hinde DipPFS
16h May 2011
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