Asking prices fall and existing sellers drop their prices, latest UK index shows
Asking prices in the UK fell back slightly this month by 0.8% bit are still 1.8% higher than in November 2016 at £311,043, according to the latest index figures to be published.
The Rightmove monthly report also shows that some 37% of properties already on the market had their asking price reduced, the highest number at this time of year for five years which the property portal suggests is a sign of initial over optimism and a tougher market.
Miles Shipside, Rightmove director and housing market analyst, believes that sellers will be tested further with this month’s rise in interest rates and should also be increasingly wary of over pricing rather than hoping for a Budget reduction in stamp duty to boost buyer activity.
He said that many sellers who have been on the market for a while are curbing their initial pricing optimism and are hoping that reducing their property price will tempt buyers at a time of year when the market is slower.
He pointed out that the 0.8%, which amounts to an average price reduction of £2,392, is the smallest that Rightmove has recorded in November since 2007, in the early period of the credit crunch.
However, with the largest proportion since 2012 of existing sellers at this time of year who have reduced their initial asking prices, it seems that many of this month’s new sellers are being too optimistic by not discounting by a greater factor than 0.8%.
Indeed, for those who have had to reduce their asking price at least once, the average size of reduction between first marketing price and current asking price is 6.3%. Analysis of those properties that actually sold last month after having reduced their prices shows that their average reduction between initial and last advertised asking price was also 6.3%. For these sellers, their price reductions tempted buyers to make an offer, and a sale has now been agreed.
‘Given that the market has been price-sensitive for a while and a five year high proportion of sellers are cutting their prices, some sellers and their agents are over pricing. These sellers may well be asking themselves if they could have saved some time and stress by pricing a lot more conservatively than an average of more than 6% ahead of what the market subsequently proved it could sustain,’ said Shipside.
A Rightmove analysis of over 100,000 properties that successfully sold shows that those that sell typically generate over 40% more online interest in the first three weeks than those that do not sell.
‘The danger of going too high at the outset is that you jeopardise that vital initial three-week period, and may have to start on a series of price reductions while potential buyers watch and assume that no one is buying your property because something is wrong with it other than the price,’ Shipside pointed out.
‘An average reduction of over 6% means that some properties will be considerably more overpriced than that, and such a big margin of error in the initial price of many properties that come to market can leave them stale and unsold,’ he pointed out.
He believes that sensible pricing by more sellers, bearing in mind the stretched buyer affordability, could help buyers’ activity and this could also help to increase longer term market activity more than just a short term stamp duty holiday, which whilst it would initially make the cost of moving cheaper could also result in fewer price reductions and higher property prices.
According to Lucy Pendleton, director of independent estate agent James Pendleton, it is important that vendors move with the market when competition from sellers is stiff and there is negative pressure on prices. ‘However, it’s also vital they don’t discount their home in dribs and drabs. By dropping the asking price in increments all you succeed in doing is making your property look stale and unwanted, with none of the surge in viewings that a keen discount can bring,’ she said.
‘There are also far too many vendors in London who think a reduction of £10,000 is enough. This barely moves the needle when you turn it into a percentage. A reduction should be in the order of at least 5% if you want to drive substantial interest, which, ironically, can result in you achieving the price you originally wanted anyway,’ she added.
Kevin Shaw, national sales director at Leaders, pointed out that overall, demand from buyers remains strong across the country and sellers can be positive, but now is not the time for over optimism. ‘Starting too high and having to reduce the price can result in a property going stale on the market and possible further price reductions later, which no seller wants. Being realistic achieves far better results in the end,’ he said.