The gap between buyer-seller expectations in the property market
Simon Nosworthy is head of residential property at Osbornes Law
According to a report in The Guardian, the UK’s property market is stalling during a period that usually marks the midst of the house-selling season.
The Royal Institute of Chartered Surveyors (RICS) had predicted that Brexit would impact both house sales and prices and this seems to have borne out.
What is more, the gap between the asking price and selling price of houses is now around 96%, equating to a difference of more than £10,000 on the average UK house price of £305,000.
So, as house price growth slows, sellers are noticing that when their property lands on the market, the true price realised in the sale is significantly less than they expected.
There are reasons other than Brexit that may be attributed to this pricing gap.
Martin Ellis from the Halifax stated to The Financial Times that the rapid growth in house prices between 2014 and 2016 made houses less affordable, which had a knock-on effect on demand.
In addition, buyers are becoming more comfortable with challenging prices: this confidence is based on a number of factors, including slowing house price growth and rising transaction costs.
Ultimately however, the gap between a seller’s hope of a high return and a buyer’s expectations of a substantial discount, is a reflection on the fact that in general, many houses have been over-priced.
So the message is: those in the property market need to be more realistic.
Sellers – some advice
- Go for the agent who definitely wants to sell your property. It has happened that sellers become locked into contracts with agents who are not adequately working for them.
- An overvaluation can detrimentally impact on the saleability of your home so don’t be tempted by inflated estimates.
- Try to agree on a price that raises the maximum amount of interest from buyers – admittedly a difficult call to make.
- Question the agent more. Find out what properties the agent sold within the previous six months and what actual discount was levied on those properties.
And for potential buyers…
- Many homeowners who would otherwise want to take advantage of rising prices are now holding off putting their house on the market. This is leading to a general lack of affordable housing. So, if you find a property that is suitable for you, move quickly.
- Be open-minded and flexible with your wish-list. You may not get everything you want in a property, so you may have to make compromises in order to get on the property ladder.
- Bear in mind when applying for a mortgage that interest rate rises are expected before 2020.
- Gazumping, where sellers pull out of an accepted offer because they have received a higher price from someone else, is more likely if your offer is relatively low. With gazumping you run the risk of losing money that you have already invested in the transaction for example professional and valuation fees. So, be mindful of this possibility when making an offer and agreeing on a price.