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Your Money > Retail Bargains Articles > 10 must buys...
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By Richard Evans
Recessions are times of great hardship for many, but they can also bring opportunities. For one thing, prices often fall as manufacturers and retailers are forced to compete harder when consumers cut back on spending. Here are 10 things that could be worth buying before the recession is over. 1) A new car Many famous names in the motor industry, such as Chrysler and General Motors, are fighting for survival as demand for new cars goes rapidly into reverse. While many list prices may have stayed the same, discounts and incentives abound. But perhaps the best reason to think about buying a new car now, as opposed to postponing a purchase until times improve, is the Government’s “scrappage” scheme. If you have a car that is at least 10 years old, you can claim a £2,000 discount on a new car - provided that your old car is scrapped. From the consumer’s point of view, the scheme offers a guaranteed minimum trade-in value of £2,000 for cars that in many cases will be worth nothing. But watch out that you don’t miss the boat: the scheme will end in March 2010, or sooner if its fixed budget runs out before then. Not all dealers are taking part, however. For More details, check out the Government's website. Also try Yahoo! cars 2) Your first home Some of the most dramatic price falls of the recession have been seen in the property market. The price of the average home has fallen by nearly £45,000 from the peak reached in the summer of 2007; it now stands at £154,716, according to the Halifax house price index. As a result, property is at its most affordable for more than six years, Halifax calculated. “The house price to average earnings ratio - a key affordability measure - has declined by 27 per cent from a peak of 5.84 in July 2007 to an estimated 4.26 in April 2009,” the bank said. “The ratio is at its lowest level since September 2002.” The long-term average is 4.0. With several surveys pointing to signs of life in the property market, many commentators believe that prices are “bumping along the bottom” and that there could be no better time to buy. “There is a feeling that the market may be on the turn,” says Jeremy Leaf, an estate agent who is also a spokesman for the Royal Institution of Chartered Surveyors. “We've been predicting a change since late last year, when forward-looking surveys into buyer enquiries picked up.” Mr Leaf’s advice to aspiring home owners is: “If you are thinking of buying don't wait too much longer, but do your research and take professional advice.” 3) A bigger home When property prices are low, it can make sense to sell your current home and buy a more expensive one instead - even though the price you receive for the existing property is likely to be lower than it was. This is because, if both properties fall by the same percentage, the fall in pounds and pence will be larger for the more expensive property. So the amount of money you need in addition to the proceeds of your old home is lower than when prices generally were higher. 4) Lease extension If you own a leasehold property (as you almost certainly will if you have a flat), you can usually buy an extension to your lease. This will make your home more valuable and possibly easier to sell in the future (buyers and lenders do not like leases to have a short time left before expiry). The cost of lease extensions has fallen in line with the overall property market so it could be a good time to buy one. “The cost is calculated by a formula based on the capital value, so it should have gone down,” says Mr Leaf. “For example, to extend the lease on a £150,000 flat from 70 to 160 years could cost in the region of £25,000, although there are lots of variables and you will need to pay for professional help.” 5) Property improvements or extensions Builders are charging less and are easier to get hold of during the current downturn in the property market so it could be a good time to put in a new loft or build a garage. “Builders are cheaper now, although some have quit the market, and prices of building materials have come down a little,” Mr Leaf says. “It is quite a good time to think about extending.” But think carefully before you start, he adds. “Always take advice about the effect on values of any changes to your home and bear in mind the scale and character of the property. For example, don’t put in a loft extension without considering reception space. If you get it wrong you could end up spending £30,000 to add only £5,000 to the value.” 6) Furniture, carpets etc. Many goods related to home improvements have fallen in price because fewer people are moving house. “Carpets and furniture - anything related to doing up your house - are likely to see prices fall in a recession and then increase in a recovery,” says Vicky Redwood of Capital Economics, the City consultancy. 7) Diamonds “Price wise, this is a very good time for consumers to buy diamond jewellery,” says Edahn Golan of IDEX Online, a trading platform for the diamond industry. Overall, prices of polished diamonds have declined by an average of about 4.5 per cent since April 2007, he adds. “Prices increased during 2008, peaking in July and maintaining prices until August of that year. The economic fallout that started in September and the resulting cashflow problems brought prices down sharply - by nearly 11 per cent on average. As a result, there are excellent offers for someone shopping for a diamond ring these days.” IDEX expects prices to remain stable before starting to rise late in 2009 and recovering during 2010. 8) A holiday of a lifetime Airlines and holiday companies are feeling the pinch and offering some great incentives to attract customers, so if you’ve always wanted to take a round-the-world cruise, for example, now could be the perfect time. Cruise operators are offering some very tempting deals, including discounts of hundreds or even thousands of pounds, free flights and two-for-one offers. 9) Shares The stock market is often described as the best predictor of the economic future, as investors factor in or “discount” the current troubles and look ahead to recovery. So if you wait until the recession is emphatically over before you put money into shares, you will have left it too late: the market will have anticipated the recovery and prices will already have risen. Many commentators believe this process has started, with the FTSE 100 index of leading shares about 900 points above the lows of around 3,500 seen earlier this year. > Buy shares online 10) Other investments Many assets outside the familiar arena of the FTSE 100 have suffered huge falls in value during the recession - and are tipped to recover strongly when the economy picks up. Some private equity investments, for example, staged an astonishing comeback in the years after the recession of the early 1990s. “The average return on these investments in the five years after 1991 was 82 per cent per year, compound, according to figures from the British Venture Capital Association,” says Gary Robins of Hotbed, an alternative investment firm. “We are convinced that it will be a similar story this time - the opportunities to make investments in private companies are staggeringly attractive, with valuations 30 to 40 per cent lower than pre-slump levels.” Private investors can gain exposure via venture capital trusts, which are quoted investment companies, or via more familiar stocks such as 3i. Mr Robins’ firm also arranges investments in commercial property and he believes this sector too could see a strong recovery. “Values have fallen by about 40 per cent from their peak and could fall a little further, although we see them as close to the bottom. “Properties that were yielding 5 per cent a couple of years ago, when interest rates were at about that level, are now yielding perhaps 8.5 per cent - and interest rates are much lower. This sector should do extremely well over the next few years.” Investors considering such assets should buy them only as part of a well-diversified portfolio and make sure they are in line with their risk tolerance, advisers say. It may be worth taking specialist advice. |
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