…used to be a builder. Now I’m not so sure. I think that in pole position is the estate agent who recently told me why house prices will “bounce back” later this year.
First, Salisbury’s chronic housing shortage (something I hadn’t noticed), will keep prices up. Secondly, because we’re beyond practical rail-commuting distance to London, our prices are already lower. And finally, as people retiring here are rich cash-buyers who don’t need mortgages they’ll pay higher prices anyway (I think that’s the argument).
One advantage of age is that you see events repeat themselves. So I thought those who don’t remember the last property collapse might like to know what actually happened.
It started with the Chancellor announcing in his 1988 budget that joint mortgage tax-relief for couples would end on August 31. That triggered an astonishing buying-spree, with strangers getting together to share multiple mortgages, and people buying homes off the drawing-board. And prices skyrocketed.
But it all stopped dead on September 1. At first people stopped selling because they thought the good days would return. But they didn’t. And prices fell and kept on falling.
How far? Well, try 50 percent. In 1992 a house in Wilton advertised for £210k was bought for clients by a friend of mine (a London property lawyer) the following week for one hundred thousand. Brand-new executive houses in Harnham marketed at £275k sold for £160,000. And my friend’s own house in Bournemouth – bought for a quarter of a million in 1987 – was repossessed and fetched £120k at auction.
Prices didn’t recover until 1997. Since then we’ve seen a decade of growth, but what happened then could happen again.
So a word of advice to today’s buyers. Before completing, get a “forced-sale valuation” (the absolute rock-bottom sum you’ll get if you have no choice but to sell on immediately). The difference between that and the price you're paying is what you are risking.
And don’t listen to those saying Salisbury is a special case, and that prices won’t fall far. That’s what we thought last time. It isn’t, and they did.
