The media has been inundated with news of house prices decreasing recently, with research from plenty of sources citing some of the possible reasons why this is happening.
Rightmove, RICS and Nationwide are amongst the companies that have conducted the research and they have all found similar findings. A brief overview of the findings are below:
Rightmove have reported that in London, asking prices for properties for sale have dropped by 0.5% last month, compared to the first 5 months of 2014 where the increase was much more substantial. The report further states that there had been an increase in sellers on the market, but with the implementation of stricter mortgage lending criertia introduced by the Mortgage Market Review (MMR), buyers have become more reluctant to purchase.
A report by the Royal Institute of Chartered Surveyors claims that the slowdown in the market is due to a lack of choice of properties for buyers. The possibility of rising interest rates also is a deterrent to those who were initially interested in buying a home. They also reported that there has been a decrease in the demand for local properties for the first time since June 2013.
Nationwide’s report informs us that for the past 13 months, prices have risen, but similar to the other reports, they have also reported the growth to be slowing down. Their report have also placed some of the blame on the MMR, but also said that “the underlying pace of activity should become more evident as we move through the summer months and the impact of MMR becomes clearer.’
How has all of the recent news regarding the slowdown of growth affected sellers? I have been speaking with a client who has instructed a handful of agents, including myself, to sell his property. We valued it at £330,000, and advised him to consider offers below this amount. We believed the valuation to be an honest and true reflection of his property considering the age of the flat, the facilities it has and based on the view it had (which was of the main road – not one of the best looking roads at that). This was in March and he had agreed with the figure we had given him so we proceeded to take marketing pictures and place the property on all the major portals. We had interest in the property fairly quickly and conducted two viewings at the flat. One of the viewings went particularly well and they placed an offer on the property at the full asking price of £330,000. By the time the offer had been received, it was now April. I sent the details of the offer to the vendor and then called him to follow up and to see what his thoughts were. Based on the valuation I had given him and his apparent agreement of the price when we were first instructed, I was confident I would get the offer agreed for the buyer so we can proceed with the paperwork and instruct solicitors.
We spoke at great length about the offer and he told me that prices have increased, which I agreed with. I also reminded him that the figure of £330,000 was the top-end of what he could expect to achieve and that we had previously advised him that he should consider offers less than this amount. He wasn’t too happy with it as he believed he could sell the property for a lot more, and he informed me that Zoopla have valued similar properties for £343,000. I told him I didn’t agree with this figure as it is too high. Newer properties, with a better location, better facilities and better views were selling for this amount. But he was determined to achieve a higher amount, so he rejected the offer. We then adjusted the asking price of the property to meet his demands. I informed the buyer of this who (unsurprisingly) didn’t agree with the new figure and immediately withdrew his offer. He had enough money to increase his offer but felt it wouldn’t be a good investment to spend that much money on that particular property.
Enquiries dried up for the flat, and by now it was May. I called the vendor to catch up with him and to provide some feedback on how we were doing after the price increase. We actually had no interest and no viewings. I advised him his expectation is too high and he needs to lower the price, which he again disagreed with. He then told me Zoopla has valued similar properties now at £351,000! I actually couldn’t believe what I was hearing. I informed him that Zoopla’s figures are estimates, and they actually haven’t seen his property and he needs to listen to what we are advising him as we are active in the market – the most his property can achieve now is around the £335,000 – £340,000. Realistically, he wouldn’t get more than this. He then told me one of the agents actually got him an offer at £337,000. In my mind, I thought ‘wow, that’s a great offer’ and assumed that he had accepted it. However, he then told me he had rejected it and he now wants £350,000 as the minimum as per Zoopla’s suggestions. I couldn’t help but think he is going to be disappointed if he keeps rejecting offers based on a valuation from someone who has never seen the property.
A week later, I called him again to see if the property was still available. He informed me that the offer was withdrawn as the buyers couldn’t increase. He then started citing some research he conducted on the Internet about house prices and I gave him our feedback, which was the same as before – no interest at the price he is looking for.
Now it is June, and I am due to speak with him again shortly. At £351,000 we have received no enquries whatsoever for his properties. With all the recent media coverage on the prices slowing down, I wonder if he regrets rejecting the two offers he had received. It will definitely be an interesting conversation.