Most financial experts are now all but certain of economic strife ahead, with estimates of severity ranging from a flat line economy – in the best and maybe most unrealistic case – right through to serious worries of a severe global recession of the like not seen for a generation. In fact, many now assert that we’re dealing with a recession right now, but the official figures simply haven’t caught up yet.
Of course, few of us will relish the thought of recession with all the hardship that it will wreak, both for businesses and also in personal lives, but not everyone stands to lose out should the economy take a serious turn for the worse. Certainly debt counselors, insolvency practitioners and the like are expecting to see a boom in business over the coming months, but a much more common class of people could also benefit, namely first time property buyers.
The first and most obvious effect of economic turmoil on the property market has already been seen in the slashing of interest rates by central banks. In theory, this should feed through into cheaper mortgages, making it easier for people buying their first home to afford the purchase. Whether or not the cash-strapped banks actually pass on these rate reductions to borrowers remains to be seen – indeed, some lenders have actually reacted to rate cuts by raising their mortgage rates.
What’s more certain to happen though is an across the board reduction in the price of property. House prices have been rising to the stratosphere over the last decade, and are generally considered to be way above the level that the market can support. Add to this the uncertainty caused by recession, whereby established homeowners are less likely to invest in a bigger property, and we can see that demand for property is going to fall, and so therefore will the average prices. Bad news for indebted homeowners, but great news for those trying to get onto the property ladder.
Another way in which first time buyers can benefit is perhaps less palatable to think about, relying as it does on the misfortune of others. We’re talking here about property auctions.
When a mortgage payer falls drastically behind in their payments, the mortgage lender will as a last resort seize the property in order to pay off the debt. When the housing market is good, there is usually little difficulty for the mortgage company in reselling the property on the open market, but during a housing slump, this may be much harder to achieve.
Instead, they often turn to property auctions, where as the name implies, a house is put up for auction and sold to the highest bidder. Most of the time, properties sold at auction will realize much less than the market value of the home, and because of this property auctions are extremely popular among property investors and speculators.
There is, however, no reason at all why an ordinary first time buyer shouldn’t take advantage of the bargains on offer, providing they can arrange finance in advance. After all, if high budget wheeler dealers can take advantage of a housing market slump why can’t a first time buyer?
