Treacherous times for home buyers
Martin Shankleman says that the financial crisis means it is a difficult time to know whether to buy or not
July 11, 2012
Anyone offering to buy a home is taking a bet on the future. Will they still be in work, and if so how much will they be earning? Will they be able to pay the mortgage, and what will happen to interest rates? Will house prices rise or fall?
Even in normal times it is difficult to know the answers to these questions. But in the present economic state answering them has become virtually impossible. The uncertainties are immense. We do not know how much longer the UK will stay in recession, but it seems clear that even we return to growth the recovery will be patchy because government spending cuts will continue and are likely to squeeze pay in the public sector for many years. But the even bigger issue is the threat posed by the breakup of the euro currency zone, which could trigger more bank failures and government bail-outs on the continent. The economic fall-out from such events will be immense, and it’s difficult to see how the UK will be sheltered.
I don’t see how anyone can even pretend to know what will happen in the coming months and years, and that means no-one can be sure about the future direction of interest rates, pay levels, and the outlook for jobs. But you will have to consider these points if you are contemplating a house purchase or putting in an offer. It seems clear there are abundant reasons to be very cautious. The continuing turbulence in the economy can only spell further uncertainty in the housing market. So with the outlook as uncertain as it is, anyone contemplating a purchase would be right to be an extremely sober view of the future , and if nothing else try to drive a hard bargain.