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Home sellers slash house prices
Mira Bar-Hillel, Property Correspondent18 Apr 2008
House sellers are being forced to offer massive discounts as the credit crunch engulfs the London property market.
Prices are being slashed in almost every borough, with even the most exclusive streets suffering drops of £33,000 on the average asking price.
Analysts warned values will tumble by another 10 per cent, as a report claimed a million people will be pushed into negative equity.
Property website Rightmove said the most expensive homes had become the latest victims, with Kensington and Chelsea sellers cutting asking prices by two per cent since last month. It added that purchasers in all but five boroughs could take advantage of discounts as values plunged by record levels.
The fall will bring hope to first-time buyers - but many are still caught in a credit crunch trap, with banks and building societies tightening lending criteria, such as ending 100 per cent mortgages.
Meanwhile, bankers are braced for thousands more job cuts as Citigroup prepared to release its latest figures today.
Royal Bank of Scotland became the first on the high street forced to go to shareholders for extra cash. It is considering launching a £12 billion rights issue.
Sellers face the crunch in Chelsea
Asking prices for houses in almost every London borough have plunged in a month.
Sellers in the most exclusive streets are being forced to offer huge discounts as the credit crunch finally closes in on the property market.
Average asking prices in Kensington and Chelsea have fallen £33,000 to £1,458,558 - down more than 2.2 per cent between March and April.
Across London, at least £3,838 was shaved off the £403,454 average house price while only five boroughs reported increases, according to property website Rightmove. The number of unsold homes per estate agent branch also jumped from 67 to 70, the highest figure since early 2005.
Rightmove director Miles Shipside said: "The shine has come off even the top end of the market and the best price sellers can achieve has fallen.
"They will have to get smart and accept this new reality or find their property sticking. But if they are planning on buying in the same area, they stand to gain as much as they lose." Asking prices fell by 2.7 per cent (£14,604) in Richmond and owners in Ealing saw 2.4 per cent (£10,303) wiped off their home last month.
Yet in Hackney, values continued to soar by 3.8 per cent, another £17,616 per house. Westminster also saw increases of nearly one per cent (£8,854) on average asking prices, while in Kingston values rose £6,357 - 1.3 per cent.
Experts warned that the disparity will get worse before it gets better.
Analysts at Morgan Stanley predict that prices will fall 10 per cent this year and five per cent next year, forcing 1.2 million people into negative equity, when a home is worth less than the mortgage.
Earlier this week the Royal Institution of Chartered Surveyors also revealed that 78.5 per cent of estate agents reported falling prices last month, worse than the dark days of the early Nineties.
The Halifax reported prices down by 2.5 per cent between March and April, a time when the market normally picks up and buyers go house-hunting.
The Council of Mortgage Lenders is predicting 45,000 repossessions this year and Howard Archer, chief European economist at Global Insight, said price falls of 20 per cent over a couple of years were now a distinct possibility.
The sharp falls in normally buoyant Kensington andChelsea could be made much worse by the prospect of mass redundancies in the City.
Those who lose their jobs may have to sell very quickly and accept low offers.
Owners coming to the end of cheap fixed-rate mortgages and facing massive increases in repayments could also join the ranks of the "must sell", further reducing prices.
Reader views (3)
This is only the very beginning, prices are still priced at crazy levels.
- Bob Hampton, London, 18/04/2008 15:21
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Its not a problem for first time buyers that its so difficult for them to get mortgage funding. Its a blessing. Lenders are only worried about lending to them because they know the market will fall a lot further. If its going to fall further, why buy now?
If you are a first time buyer, sit tight, watch prices fall, and once the falls eventually stop (perhaps 2-3 years), then the lenders will be much happier to lend, and they'll have managed to buy in a a much lower level than today's inflated prices.
- Mart, London, UK, 18/04/2008 13:47
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Serves the greedy people right.
People will wait for all this to bottom out before they re-enter the market and that could be quite a few years seeing as the cycle has only just tipped over.
Let the market correct itself; the market will decide what happens next.
There is no housing shortage, just an asset bubble created by politicians and bankers.
- George, Aylesbury, bucks, 18/04/2008 13:02
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