When to buy? That is the question Tuesday, 12th May 2009

Is now the time to buy, or is it wiser to hold fire until concrete evidence emerges that house prices are finally starting to rise again?

As the average price of your home has slumped by a whopping 15 per cent to around £150,000 over the past year as the global recession and the credit crunch began to bite so the question belomes more relevant.

There is growing optimism that the pace of the decline in values has slowed right with a string of interest rate cuts, an increase in the number of mortgages being approved, and measures introduced by the Government to stimulate the market.

And so,what should people do? What will happen to house prices?

We could expect prices to continue falling throughout this year and into 2010 as well..

This is largely based on the awful outlook as we expect the economy to continue contracting and for unemployment to rise quite sharply.

House prices could fall a further 14 per cent, while the two previous property slumps have seen values falling for four years, and then stagnating, before rising.

Being currently two years through this downturn, you're probably not going to miss out by holding off from buying for a bit longer.

As long as buyers can strike an attractive deal, this should cushion the effect of any further price falls over the next couple of years.

Maybe average values will stabilise over the next few months.

We might then expect there a very small increase in average prices over the next couple of years amounting to between one and five per cent. But this will depend on your locality as some areas are still likely to suffer falls.

For first time buyers, homes are more affordable than at any time in the past six years, according to Halifax, whose house price to earnings ratio has fallen 26 per cent from a peak of 5.84 in July 2007 to 4.34 in March 2009.

Martin Ellis, housing economist at Halifax, says this proves houses have become more affordable, even though market conditions are likely to remain tough with the potential of further falls.

However, it can be argued that it's now more difficult for them to get on the property ladder. A couple of years ago they could get 90 or 100 per cent mortgages, but the available loans-to-value have shifted downwards.

The reductions in interest rates are now having an effect and people are beginning to realise you can now buy a property cheaper than you can rent one.

The advantages of buying now are that interest rates are extraordinarily low, which means mortgages are generally more affordable, while it's also possible to drive a hard bargain as those needing to move are struggling to attract potential buyers.

It could actually be a good time to climb up the property ladder, becuase if you're trading up then, theoretically, things ought to be moving in your favour because 20 per cent off a £500,000 house is more than the same percentage off one worth £250,000."

The tightening of lending criteria during the credit crunch is also starting to be relaxed now which will help the market

However, the more money buyers can put down, the cheaper the rate they will pay. Ideally, they will need to have a deposit of at least 15 per cent and even more attractive deals are available for those who can stretch to 25 per cent.