New research, conducted by Mouseprice.com, has revealed the extent of the problems faced by both home sellers and buyers in the current market. Using data from the Mouseprice website built up over the last two years, researchers have found evidence that gives an insight into just how divergent sellers’ and buyers’ opinions on price have become.
The average length of time it took to sell a property increased a staggering 40 per cent, from 3.9 months in the last quarter of 2007 to 5.5 months in the last quarter of 2008. In line with this, sales volumes decreased by approximately 50 per cent between 2007 and 2008. Interestingly however, price levels over the period decreased by relatively small amounts, for example Land Registry reported a price drop of 13.5 per cent for 2008.
This shows that home sellers are refusing to let their properties go at lower prices than they believe were obtainable even a few months ago. This phenomenon is not new and is known to economists as price "stickiness", with individual vendors and homeowners emotionally, and often financially (because of high loan to value mortgages), unable to accept that their properties' prices have fallen significantly. The data also suggests that buyers are well aware of their power in the market, and are content to hang on to their cash, as they seem confident that there will be more price reductions to come.
Zipporah Morrison Baker, a spokesperson for Mouseprice said, “The fact that average selling times have increased is evidence that buyers and sellers are not reaching agreement on price as quickly as before. After a period of assuming that your property is worth a certain amount, people are reluctant to settle for less. This is a psychological effect brought on by relentless house price rises over the last few years”.
“House prices rises over the last few years have greatly outstripped earnings growth and have made individuals and families “feel” wealthier. With the myth of inevitability of house price growth exposed, many people will realise the necessity of living within their earnings, as their property can no longer be relied upon to grow their net wealth”.
As well as the generalised effect upon spending patterns brought on by this change, property professionals are particularly feeling the crunch. Estate Agents and Surveyors are paid on a case by case basis, and as transaction volumes have fallen, these professions have been at the bleeding edge of the recession.
