Analysis reveals gaps in property market expectations
Asking price expectations remain out of kilter with wider residential property market conditions, according to the latest market index review report.
There is also a reality gap between the mortgage approval prices of buyers and the reality of sold prices, the report from lettings and sales agent Benham and Reeves suggests.
The latest report shows that based on date from Nationwide, Halifax, Rightmove and the Land Registry, the current UK house price during the second quarter of this year is £251,682, up 1.7% quarterly and 1.4% annually, the first quarterly increase since the third quarter of 2018.
In London, the current average price is £512,193, up 1.5% annually and the first quarterly increase since Q2, 2018, although prices are still down 1.6% annually.
When looking at the price buyers are securing at the mortgage approval stage compared to the asking price expectations of home sellers, there is a 36.2% gap across the UK and a 32.7% gap in the capital.
When looking at the final stages of the property selling process, UK buyers are paying 25.5% less on average than the average asking price, while in London buyers are paying 24.5% less than the average asking price in the capital.
While the first increase in quarterly house price growth for some time is positive, according to the firm’s director Marc von Grundherr, there is still a reality gap between the price buyers are entering the market at, the price sellers are trying to achieve and the price they are ultimately doing a deal at.
‘While there are a number of factors that can influence this price gulf, it will do little to help a lethargic market that is currently struggling to shake off the shackles of Brexit uncertainty,’ he explained.
The report also points out that the gap between a seller’s desired price and sold price has been widening since the end of last year, as current market conditions play their part and sellers continue to lower their price expectations in order to secure a buyer.
‘It’s only natural that sellers want to achieve the best price for their property but what many are failing to understand is that this price is dictated by current market conditions and not their emotional attachment, or a previous valuation,’ said von Grundherr.
‘While we haven’t seen prices tumble per se, we have seen a hesitance from buyers to transact. The result in this demand reduction is always going to be a widening gap between asking price expectation and the price a property will actually sell at and we’ve seen this gap continue to widen so far this year,’ he added.