The latest survey of asking prices from property web site Rightmove.co.uk suggests that in large areas of the country sellers are building room to negotiate into their guide prices. Average guide prices in April were up 1.2% across the country. This masks falls in regions like the East Midlands and East Anglia of 1.5%, a 2.5% annual fall in the North West and amazingly rises in the last month of 3.9% in Kingston-upon-Thames and a whopping 26.4% over the past year in the City of Westminster. But can this be right?
In the last two property recessions that I have worked through we saw a gap appear between asking prices and eventual sale price as buyers knocked sellers exceptions to feel comfortable that they were getting a deal. What we are seeing now are vendors thinking that by inflating their guide price, they are leaving themselves room to negotiate – to accept a reduced offer that should appeal to the buyer.
This is all very well and when it works the result is a happy buyer and a happy seller. The problem is that buyers today are much better informed than they were in the 80’s and 90’s. The internet gives access not only to guide prices for comparable properties but also, since 2000, to the Land Registry database of sold prices. You can actually see what neighbouring homes sold for rather than what the agent was asking.
If there is such a thing as ‘an average asking price’ then Rightmove thinks this is £237,361. The Halifax, which calculates the average price based upon the value that they are lending mortgages on to be £189,027 and the Land Registry said in April that the average completion price was £184,798. A full 22% below the average asking price. These surveys are compiled in different ways so it’s not totally fair to say that buyers are slashing prices by this much but it’s not easy to find someone looking today who expects to offer the asking price when they find a suitable property.
The result is that, as last time buyers will simply refuse to go and see a house that they think is optimistically priced. They assume that the seller is either not serious or is just flying a kite. Experienced agents understand that this means that the number of viewings will be down and that sellers will find less competition for their homes which in turn means that they get lower offers. The open market is just as brutal a mistress when it’s going down as it is when it’s going up!
It looks like some vendors are getting the message but we should expect the figures from the Land Registry next week to show that the gap between asking price and sold prices has widened as the mortgage based indices fall which in turn means that sellers and their agents must take care to remain credible in the eyes of today’s more discerning buyers. As a seller, it is still possible to achieve your asking price but many buyers are now hiring the services of a buying agent who can gauge just how sensible a guide price is before their client wastes time looking for the kite.