The Time To Buy A Bigger Property Is Now
If you're thinking about trading up to a home with two or three bedrooms, things are looking good......
I bought my first property about a year and a half ago. I admit it wasn't the wisest time to buy -- in fact, it was quite possibly the worst -- but at least I've made my first step onto the property ladder.
My flat isn't exactly what you would call spacious -- it only has one bedroom for a start -- so I have to confess that I do occasionally dream of moving to a bigger place.
So that's why the latest research from propertyfinder.com has made me smile. According to the research, now is a great time to trade up to a larger property! In fact, it's now easier to make the leap from a one bedroom house to a two bedroom house than at any other time in the past five years!
So if I did decide to trade up to a two bedroom home, I would now only have to find an extra £31,000 compared to the £41,500 I would have needed a year ago.
How come?
Well, it's all to do with the recent lack of mortgage availability which has impacted the lower end of the market in particular. Homeowners at the lower end of the market tend to have smaller amounts of equity in their homes and, following tighter lending restrictions, it's become harder to gain access to finance in order to move.
This means activity at the lower end of the market has become stagnant, fewer people have moved home, and property prices have plunged.
According to propertyfinder.com, the value of two bedroom homes has fallen fastest, with the average price dropping by around 12%* between 2007 and 2008, to £160,596. Meanwhile the average value of a one bedroom home only fell by 8% to £129,874.
The past year has also seen the average price of a three bedroom property drop by around 12%* to £219,032. So if you wanted to trade up from a two bedroom home, you'd only have to find an extra £58,436 compared to the £66,264 you would have needed a year ago.
Further up the ladder
Unfortunately this trading up theory doesn't work all the way up the property ladder. Despite falling house prices, the amount you'd have to pay for a fourth bedroom has actually increased over the past 12 months by £9,502.
This is because the average price of a four bedroom home has held up pretty well over the past year compared to the rest of the market. Compared to the 12% fall seen for three bed homes, the average value of a four bed home has dropped just 5% to £370,276. This is because those homeowners higher up the property ladder generally have larger amounts of equity in their homes and can move more easily.
So this means the price gap between a three bed and a four bed home has significantly widened and it's now more expensive to trade up. You can see this is the chart below.
| Size of property | Average house price 2007 | Average house price 2008 | Percentage fall* |
|---|---|---|---|
| 1 bedroom | £140,852 | £129,874 | 8% |
| 2 bedroom | £182,346 | £160,596 | 12% |
| 3 bedroom | £248,610 | £219,032 | 12% |
| 4 bedroom | £390,343 | £370,267 | 5% |
Source: Propertyfinder.com
| Price of bedroom 2007 | Price of bedroom 2008 | |
|---|---|---|
| 2nd bedroom | £41,494 | £30,722 |
| 3rd bedroom | £66,264 | £58,436 |
| 4th bedroom | £141,733 | £151,235 |
Source: Propertyfinder.com
What this means
For anyone hoping to trade up to a two bedroom or three bedroom property over the coming months, it should now be far easier and cheaper to do so.
That said, if house prices fall even further this year, it could become even cheaper to trade up to a larger property. So you may reap the benefits from holding off a little longer if you can.
Best mortgage deals
If you are looking to move home and need to remortgage, one of the best fixed rate deals around is Bank of Scotland's two year mortgage at 3.79%. It comes with a £799 fee and to qualify, you'll need an equity stake of at least 25%.
Alternatively, if you'd prefer a tracker, First Direct is offering a rate of 3.39%. This comes with a £799 fee, and you'll need a deposit of 20%.
If neither of these tickles your fancy, you can compare other great deals through our mortgage service.
*Percentages are rounded up to nearest whole number. The average price of a two bed home fell slightly more than that for a three bed home (11.92% versus 11.89%).
More: In Search Of The 0% Mortgage | Why House Prices Will Fall This Year
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Comments
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bimber - Over complicating any issue is simply a smug way of trying to baffle the uneducated with male cow poo! Kiss sounds like a good idea as does PPPPPPP. Prior Planning & Preperation Prevents P*** Poor Performance. The elaborate reasoning and tireless analogies that some posts come out with are hilarious. Banks have simply lent too much, to people who listened to vendors & agents to much, who then overinflated their own financial situation too much to enable them to buy property that was well over valued - simple. By KISS and plenty of PPPPPPP people shouldnt get themselves in such a mess. Its listening to the drone of statistics and advise from 'armchair experts in property' that people need to refrain from.
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Ok. To get dow to the practicality of this, I bought my current 2-bed property in 2005 for £155k on 50% shared ownership scheme. My conditions have improved a little bit since then and I'm looking to move with my wife to a bigger £185k house. My property was valued b/w £170-£190k Dec '08. Given the fact that good mortgage deals start at 25% deposit will it be wise selling now so as to move? I haven't got any extra funds to put into the deposit as there are other fees i'm more concerned with. Can anybody advise?
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I am also very disappointed to read many of the posts and comments made by people who sound like they should know better and give out 'tainted' advice and disgruntled personal opinion to those without knowledge who seek it. Some people here are forgetting that the vast majority buy a property as a home, get a mortgage as a means to an end, and can't wait to clear that debt. When the time comes and they have repaid the debt, the value of the property is irrelevant save for insurance valuations etc. Too many 'investors' got caught up in the market due to increased equity in their property and decided 'fairly' sensibily to invest in a second property as a pension. If it worked then fair enough, they should be aware, it IS like any other risk and may succeed or may fail. For those of you who are currently considering buying....... There is NEVER a bad time to buy a home provided you can AFFORD it. Forget if the prices drop straight after you've bought it, this has never bothered those who buy new cars, in fact any cars. As long as you take precautions and don't lie about your finances and delude yourself, even having negative equity isn't such a bad thing as you are lowering the debt every single time you make a payment. There are scenarios where people will have to stay in a one bedroom flat as a couple with two children, but hey, stuff happens. Eventually, as for hundreds of thousands before you, your debt with decrease and the equity will increase and you will be able to move, it just takes time. The golden rules: Always look at things long term, plan your finances carefully, and envisage every set of circumstances. If you are buying for investment always, always keep 30% equity minimum and read the small print, if you can't afford the deposit, you can't afford the risk! (p.s Qualifications:- I have managed property portfolio's worth in excess of £15m, bought and sold properties worth £2m+ at auctions and ran several chains of estate agents, as well as been declared bankrupt. Experienced?????)
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03 February 2009