House price fall entices eager homebuyers

One in ten people (11%) who plan to buy a house have accelerated their house-moving plans, according to a survey by independent personal finance information site Fool.co.uk.

Of the people who intend to buy a house, three in eight (38%) plan to do so this year, and one in three (34%) expect to move in 2009.

The survey, which is part of a wider report entitled Your Finances in 2012, also highlights that there will be more sellers than buyers over the next five years. For every four people who want to buy a house, there will be five sellers.

Meanwhile, one in two people (56%) who plan to buy a home in the next five years say their plans are not affected by predictions of large price drops. Almost eight out of ten people (86%) who hope to sell their homes in the next five years are not changing those plans on the strength of the long-awaited crash prediction.

Since 1952 house prices have grown between 8% and 9% a year . But growth jumped noticeably after the turn of the Millennium. Between 2000 and 2007 house prices climbed 13% a year - a typical house that was valued at £85,005 in 2000 soared to £198,898 in 2007.

However, linear regression analysis of house-price data suggests that house prices could radically correct in 2008. It is estimated that the value of a typical home could fall a fifth (20%) to £157,290 in 2008. That said, house-price growth should revert to the long-term rate of between 8% and 9% after that.

David Kuo, Head of Personal Finance at Fool.co.uk, says: “The long-overdue correction in the property market will allow many people who have been waiting to move house to finally realize their dream.

“Quite often people will ask how much they can borrow when they want to buy a property. But that is altogether the wrong question. Instead, they should ask themselves how much they can afford to repay.

“It is also worth remembering that no one ever rings a bell at the top or the bottom of the property market. So, home buyers should not be unduly concerned about getting the timing right.

“Instead it is more important to get the correct mortgage and to ensure that you can afford to maintain payments if interest rates rise. Only then can you be sure that your home-owning dream does not turn into a wealth-destroying nightmare.”