As the traditional moving season draws to a close, most new sellers hoping to find a buyer in 2008 have recognised the need for more drastic action and have listed their properties with estate agents at asking prices 2.9% lower than those last month.
This is the biggest fall that Rightmove has ever measured in November; new sellers are now asking 7.1% less when they come onto the market compared to a year ago. However, with agents reporting that sales are being agreed at around 20% below peak asking prices, quicker sales would be achieved if sellers started at an asking price closer to where they are highly likely to end up.
Miles Shipside, commercial director at Rightmove comments: “Some sellers could avoid months of disillusionment and despair if they started marketing at an asking price a lot closer to where the evidence indicates they are likely to end up. While average asking prices have fallen by 7.1% over the past year, in most parts of the country you should look to at least double that discount to achieve a sale.
Not all will be willing or able to consider it, especially those struggling with negative equity. However, those that do will increase their chances of selling more quickly and could cut out the months of asking price reductions to get to the ‘buyer friendly’ price that they could have started with.”
The number of new sellers continues to dwindle to an average of just 20,000 a week; at this time last year the average was circa 35,000 a week. We estimate this is the lowest since 2002. It indicates that many potential sellers are not under time pressure and are unwilling to come to market until prices or the outlook improve. This trend is resulting in a steady fall in the average number of properties for sale per estate agency branch, which peaked at 77 in July and stands at 73 in October. This is not only a result of a lack of property coming onto the market and the low level of successful sales, but also due to seller disenchantment leading to more properties being withdrawn from the market without selling.
As a result, we have seen a slight fall in time on the market over the last 3 months from 90 to 87 days. While in more buoyant times a fall in time on the market would be an indicator of quicker sales, in these turbulent times it is unfortunately due to properties being withdrawn unsold. This often occurs before Christmas as sellers take a marketing break over the festive period.
Also of note is that from the 1st October an Energy Performance Certificate was required even for those properties initially marketed before the new Home Information Pack regulations came into effect. Some of these properties will have been on the market for almost a year and look hopelessly overpriced. The cost of a HIP gives sellers an additional marketing cost of circa £300, often payable upfront.
As well as new sellers being deterred by the depression in both the economy and prices, these additional costs to come to market (or to stay on the market) are a likely contributory factor in falling numbers of new instructions and the withdrawal of existing sellers who have given up hope of getting a buyer.
Shipside adds: “With people reining in spending because of concerns over the economy, prospective sellers may find it easier to delay marketing until the New Year to find the money for a HIP. All the woes that are currently affecting the property market are compounding each other, making it a tough Christmas for those that have to sell but giving opportunities to those looking to buy.”
The lowest base rate since 1955 and the promise of further aggressive cuts gives the potential for a greater volume of sales in 2009. Buyers that are currently cash-rich or mortgage-ready face a tempting combination of quality property, sellers willing to do deals, and cheap mortgages. Lower interest rates make rental yields look increasingly attractive to the long term professional investor – with examples of rental yields of over 7% starting to be achieved by canny investors buying the right properties.
Cash-rich buyers may make the judgement call to hunt for quality bargains starting this winter. They are in a position where mainstream buyers are still forced out of the market by restrictions on mortgage availability and lenders demands for bigger deposits, and this should start to ease at some stage next year. Whenever it does, there is likely to be a degree of pent-up demand fuelled by historically cheap borrowing and cheaper property, lessening the advantage of those that are in a privileged position to proceed now.
Shipside adds: “New sellers have dropped 2.9% in the last month alone and as it’s not the traditional buying season they have to give consideration to any offers. The number of forced sellers is still limited, but it’s potentially a good hunting ground for the bottom feeders whilst the mainstream buyers are still being kept on the sidelines. There will be a few real Christmas bargains snapped up in the darker evenings leading up to the New Year.”
