Ajay Ahuja Blog Post on Fear and First-Time Buying

Be scared.  Be very scared.  The wild antics of first time buyers (FTB) will be resuming!  This means:

  • Top money being paid for small BUT well decorated and staged apartments
  • Irrational bidding
  • Longer drawn out purchases as the strange requests come in from the FTB as the transaction nears completion
  • Higher aborted purchases as the FTB changes their mind!

Now I do not have anything against them.  They are new to buying property and buying your first home is a very personal thing so it is important they choose the right home.  It was just nice not having them around if you know what I mean.

However the market is now about to change.  The one thing a FTB has over an investor is:


They can pay whatever the bank will lend to them subject to valuation.  So if someone earns £30k per year and they like a property which you are only prepared to pay £100k they can go to Nationwide and get:

4.25 times salary

which equates to £127,500 plus the deposit so say £140,000.  So when the FTB gets in to a bidding war with another £30k p.a. FTB the price shoots up.  As long as the FTB couple don’t come along with their £50k combined salary and push the bid up to £200k (which was happening in 2006/7!) then one of the FTBs will get the property.

You my friend Investor being the investor do not get a look in!  Your £100k is so last season’s price.

The surveyor is the only person that can stop this foolery.  Will they stop it?  Yes for a while.  However banks will apply pressure to these surveyors subtly (like threatening to take their business elsewhere if they do not value them up!) to put the FTB’s value on the property so they can lend.

The reason why I am saying all this is because HSBC has announced it is going to lend £1.5bn to FTB before the YEAR END on its 90% LTV product!  They have called the bottom of the market.  HSBC think prices have bottomed out.  Considering the cautious of this lender I would listen up and take note.

I am sure the rest of the banks have taken note but they are still licking their wounds.  Too bad.  HSBC is about to take massive market share.  They are already the biggest net lender this year.  Not bad for a bank who did not participate hardly at all in the UK property market back pre-2007.

It is funny how things change.  Things can really swing with lightening pace.