What to do in a falling property market

With property prices falling in many countries it is a real dilemma for some people, some people do not realise that they need to take action, whilst others worry unnecessarily. Those most affected are the ones with mortgage costs that they cannot afford, do they sit back and hope rates will drop, or do they take action and try for a quick house sale in a falling market?

Taking the first option of waiting for interest rates to fall is a very high risk strategy, this is because the actual mortgage interest rate is, in most cases, not linked to bank base rates, the rates are in effect what the lenders can afford to lend at. As the credit crunch has hit banks badly then they are unable to lend at low rates, they need to allow for the money market rates, e.g. the interest rate that they pay for the money. As it would be many months (possibly years) before lower rates are realised any one struggling to pay their mortgage needs to take proactive action.

For those who decide to sell then how do you do this in a falling market with few buyers looking around? In short the answer is simple; you have to be decisive, put your property up for sale at a realistic price, possibly reducing it by 20% on prevailing prices. Whilst that may seem a big drop the alternative is to price your property to current market and then keep dropping the price each month as market prices fall. Taking the latter approach you may well eventually end up at 20% below on today’s prices and still not find a buyer!