Author Mark Fairlie
The UK’s largest online real estate company Rightmove announced in their November edition of the Rightmove House Price Index that price cutting by existing house sellers on the property market has reached a five-year high.
The report states that some 37% of available properties on their website are now asking for a lower price than when they first went on the market, making it the highest figure for October since 2012.
On average, asking prices have come down a considerable 0.8% in just one month. The drop can be seen all across the UK, according to Rightmove’s infographic. The only exception to the nationwide trend being Yorkshire and Humber. This was the only area to see a rise in their house prices, increasing 0.6% in the last month.
The North East was undoubtedly the worst hit, with their house prices plummeting a massive 5% in comparison with the national average of 0.8%. The second highest was a substantial 1.4% in the West Midlands, with Greater London only seeing a price drop of 0.2%.
According to global property news service Property Wire, the 0.8% decrease amounts to a loss of £2,392 on average house prices for England and Wales.
However, for those who have had to reduce their asking price at least once, the difference between their initial asking price and the price the house is eventually sold for shows a reduction of 6.3% on average. The Daily Mail also reported that a £200,000 property would see a reduction of £12,600 under that figure.
So why the change in house prices?
Director of Rightmove, Miles Shipside, has put this sudden decrease down to the run-up to the season. He says,
“many sellers are trying to tempt distracted buyers to look at their property by dangling the bauble of more attractive pricing given the quieter time of year and more challenging market.”
This ‘Autumn Sale’ as it has been dubbed is due to sellers curbing their initial optimism in the price of their houses, and are reducing their prices with the hope that buyers will select the property as “this year’s must-have Christmas gift.”
This has resulted in the highest number of sellers on the market having reduced their asking prices at this time of year since 2012. Shipside also suggests that the change is in part due to sellers and agents initially overpricing their properties, which can greatly lower buyer interest.
In the housing market, the usual pattern follows that homes that sell tend to generate more than 40% more interest in the first three weeks on the market than those that fail to sell. According to Shipside, initially pricing a property too high can “jeopardise that vital initial three-week period.”
He warns that a “series of price reductions” on property can lead to potential buyers watching and assuming that no-one is buying your property because there is something wrong with it other than the price.
Lucy Pendleton, the co-founder and director of London estate agents James Pendleton, also said that it is crucial that sellers do not discount their homes in “dribs and drabs”. She continues to say that doing so will make your property look “stale and unwanted”, whereas a “keen discount” will bring in a surge of viewings.
She believes the bigger the price reduction, the more interest in the property will increase. “A reduction should be in the order of at least 5% if you want to drive substantial interest,” says Pendleton, “which, ironically, can result in you achieving the price you originally wanted anyway.”
National sales director for letting agents Leaders, Kevin Shaw, concluded “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.”
The future of the property market
Global real estate agents, Savills, have forecasted that the UK house price growth will continue to slow over the next few years. Between 2018 and 2022, they predict there will only be a 14.2% price growth in comparison the 28% seen in the past five years.
News site Business Insider asked analysists and forecasters about the reasons behind the decelerating growth, who put it down to “Brexit uncertainty, mortgage constraints, and interest rate hikes”. However, it was also reported that a “chronic shortage of supply” in the housing market means growth will remain positive, if slow.