Should first-timers rush to buy now the door is half-open?

As prices run out of steam, Laura Howard asks if you should make your move or wait for further falls
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The Independent Online

At long, long last the runaway UK housing market seems to have come to a juddering halt. Surveys from the Nationwide building society and the Halifax have shown prices falling in the final quarter of 2007, and both mortgage lenders are forecasting flat growth in 2008. Others are even more bearish, with Lombard Street Research predicting that house prices will have fallen around 4 per cent by the year's end.

All this may provide comfort for would-be first-time buyers who may have thought, with the cost of the average UK home having soared to £195,000, that they were priced out. If prices fall, perhaps they have a chance to get on the ladder. But how long should they wait? Is this a brief respite before prices move north again, or an enduring shift in the market?

Helen Adams, managing director at the FirstRungNow.com website, reports that more young people are reading the economic runes and biding their time. "Many visitors to the site say they are happy to wait until next year as there is less pressure to take that leap of faith now house prices are stabilising. In their heart of hearts, though, they want to get on the ladder as soon as possible."

But first-timers willing to resist temptation will be handsomely rewarded, according to Jonathan Davis a chartered financial planner at Armstrong Davis and a contributor to the website Housepricecrash.co.uk. He predicts that prices will tumble by around 35 per cent over the next five years, kicking off with falls of between 5 and 10 per cent during 2008. "My advice to those thinking about getting on the ladder is simple: don't touch property with a barge pole. A £250,000 home now will be worth £150,000 in as little as four years' time."

But Louise Cuming, head of mortgages at comparison site Moneysupermarket.com, has an altogether different view: "Putting the plan on hold and renting because prices 'may fall' means you are taking a gamble with economic probability rather than reaching for what you want. At the same time, you are lining the pocket of a landlord with money that could be going into your own home."

The more common view of the property market is that there will be a "soft landing", meaning prices won't change that much. "First-time buyers should not be banking on a blanket reduction either this year or in the foreseeable future," says Dean Sanderson, managing director of Sanderson James estate agents. "After all, there is still a shortage of property in this country and if vendors are upsizing, they need every penny they can get for their next home."

However, he adds that this should be viewed in the context of a weaker property market, so first-timers should negotiate hard on the asking price. "It's really worth buyers doing their homework. Find out about ageing boilers, broken drains and windows that aren't energy efficient – and use these as a tool to cut the asking price."

The latest figures from the National Association of Estate Agents (NAEA) suggests that the time is right for such a tactic. Agents had an average of 767 properties on their books in December last year – a large supply compared to the 43 available in November 2003 when the housing market was in the middle of a boom. There are far fewer buyers interested in these properties too – an average of 249 registered with each agent, against 462 four years ago, says the NAEA.

Those first-timers convinced that 2008 is the year to make the leap should at least wait until the summer, says Ray Boulger, senior technical manager at broker John Charcol. "If they negotiate and can move quickly, the soft slowdown we are witnessing will give them around a 10 per cent reduction on current prices by then. And in addition, they will be able to get a cheaper mortgage as the base rate is expected to fall by at least 0.5 per cent."

A six-month reprieve will also allow prospective buyers to save for a larger deposit – a valuable asset in light of the credit crunch, says Mr Boulger. "We have already witnessed some lenders coming out of the market for advancing large percentages of a home's value. If the crunch does not improve, more could follow." He adds that while large loans will still be available from some lenders, they may be charged at higher rates of interest.

Above all, first-timers should not forget that owning a home is a life choice. "Put in simple terms, borrowing is only a risk if you can't afford to pay it back or regard a home as a short-term investment," says Ms Cuming at Moneysupermarket. "While no one has a crystal ball, parents of most first-time buyers will agree that they also felt really stretched when they bought their first house – yet are glad they did."

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