That's true, but in the last three years we haven't been facing a massive economical crash like we are now. The credit crunch is the precursor to a housing market fall.
Yes and no. The housing market is overvalued by about an estimated 25%. What caused the economic crash however, is not so much an overvaluation of property but bad lending practices: extending huge ammounts of credit (including mortgages) to people who had no realistic way of repaying it. This lending has in part resulted in property prices skyrocketing, but the fact is that property has always been desirable, and always will be. People need a decent place to live (in Maslow's hierarchy of needs it is right there with the fundamentals of food and warmth); there is a housing shortage; some negative equity is better than paying rent (which is, in effect, a 100% loss). I agree that it is not the best time to buy a place, but I would look at up-and-coming areas, the cheapest houses in a reasonably desirable street, cosmetic (but not structural) fixer-uppers and track how prices are going to evolve over the next year.
I'm about 1.5 yrs ahead of you (graduated in summer 2005 and have been doing software development since then) so I'll throw in my 2p. I've had an ISA account since my gap year when I was working full time and still love at home and have never regretted it. You only need £1 to open an mini cash ISA, you can pay in what you want (upto £3k per financial year) when you want and can withdraw as much as you want whenever you want. If you get a mini cash ISA there's no risk and at this stage in your life, a £3k limit per year shouldn't cause any problems (3000/12 = £250 per month). If you open one now, dump as much as you can in before the end of March - when the £3k limit will be reset My fiancée and I decided to get on the property ladder ASAP so we used my ISA to build up a 5% deposit and survey fees, etc. Being first time buyers and both graduates, an immaculate home was not realistic and we under estimated how much repairs, decorating and furniture would cost. Having said that, London is far more expensive than up north and if your on your own, getting a high enough mortgage might not be feasible yet. We were advised to not spend more than 25% (abs. max 30%) of our monthly household income on a mortgage. It's also worth noting that your salary is likely to increase in the early years. Paying an extra £50/m (roughly a £1k pay raise) on our mortgage could decrease it by 4yrs! It would be silly to bet on future pay increases when shopping for a mortgage. The next thing I'll be doing is joining my companies pension scheme as they match whatever I put in - upto a certain %age of my salary which I can't remember right now.
