Nicola says:  I received an interesting email this week from one of our Money Gym members and I was intrigued enough to pass it onto our resident property gurus to get their feedback.  I would welcome comments on the blog on this one too, from you experienced property investors out there….just click the “comments” link at the bottom of this posting.

“Dear Nicola, I was talking recently to a dear friend who has until recently largely ignored property investing although she has always made money in her own home buy buying cheap, doing up beautifully, selling on and doing the process again.   

I have a dilemma, in that, because she is my oldest friend and has seen me through many ups and downs, financially and otherwise, she largely discounts anything I say about money, budgeting, equity release, debt etc., which is both annoying and hilarious!  So, since I joined the Money Gym, I have tried not to get involved in talking about it all with her.

However, she has a new man in her life, who is quite keen on property property investing and so they are obsessed with property now, and they talk about all the time.  They are currently holding cash, tracking specific properties on spreadsheets, and waiting to invest on the South Coast. 

I am thrilled about it all obviously because it will sort out their futures totally!

However, Y keeps talking about the market having dropped 15% in our area, (I agree that prices have slipped back a bit as people are panicking –but 15% ????!!!) and the so-called property crash coming which he feels very strongly will make prices slip another 10-15% in the next six to twelve months.

This will make a total devaluation in our local market of over 30% according to him - £54,000 off a flat originally valued at £180,000 - and I can’t believe that is right because I know from my Money Gym learnings that prices only went down by 3% overall in the UK, even in the worst crash we all remember, in the late 80’s / early 90’s.

Obviously I know that this means some areas rose, some fell but the average over the whole country was 3%.

Y & C keep saying, they don’t want to buy something for £150k which was on the market for £180k three months ago, if it’s going to slip back to £130k in the next few months.  They keep quoting examples like this although they haven’t talked to any vendors that I can tell -  just agents.

By the time they buy a property, a year or two will have gone by, and all my Money Gym training says that this is a mistake – as Andy Shaw says “You don’t wait to buy property, you buy property and wait”  but they are having none of that!!

My thoughts are that the property they are quoting at £180k was overvalued three months ago, and if it’s now being offered for £150k it’s probably a very motivated seller too, and it’s pretty unlikely to go much lower.I also feel that it’s not an indication that all properties at £180k are now selling for £150k and are then likely to go down to £130k.

However, I can’t seem to find the arguments for why they should just get on and BUY ONE!   I tried telling them that, “consistently in this country property rises by 10% per annum, more than 10% in the South East” and “every year you wait to buy a property of £150k you are losing £15k in appreciation by waiting a year….”

It’s been bothering me that I can’t counter their arguments for waiting, even though I feel instinctively there is something awry with this argument, and I wondered what all your thoughts are on the whole topic?”