High Prices Keep Prices High

High Prices Keep Prices High

You will no doubt have been party to the recurring conversation among homeowners about "Will there be a property price crash?"

Despite much media speculation, which is highly effective at selling newspapers in such a property-driven society as our own, a crash has not occurred and in our view is very unlikely to happen.

One of the little-reported reasons for this is because it is simply too expensive to move. Prices are ultimately only forced up or down by an imbalance of supply and demand. When the market is strong and people feel bullish they move - upwards. But when the market is "normal" and/or they feel more careful, they do not. If things are bad they would theoretically trade down in order to save money.

However, many people simply could not afford to trade down because the cost of moving has become so high, particularly in respect of SDLT (Stamp Duty). For example, someone wanting to trade down from a £300,000 property to a £270,000 property would be virtually no better off than if had they stayed put, due to the costs and typical improvements people make when they move.

So if people choose to remain where they are, fewer properties than the market requires become available, potentially fuelling further price rises or at least keeping the market in check.

The key of course is to avoid over-extending yourself initially. That way, you can sit back and not worry about house prices at all. It doesn't matter what your property is worth if you don't need to sell it!

But if you do, you know who to call!