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Home sellers forced to slash prices
Mira Bar-Hillel, Property Correspondent18.04.08
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 and Chelsea 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 (10)
Sam, are you Real Estate specialist? I need some advise on property.
- James Naran, Acton
Good luck Charles! I was a first time buyer in '93 and I can tell you that even good areas were 20-30% lower than they had been. If City bonuses dry up who else is going to be able to afford or want to pay £1 million for a 4 bed terrace?
- Mark, London
Beatriz, you are in dreamland if you think 2008 is a good time to buy. Accept it, the boom is over - and about time.
Blaming the press is feeble, too. Blame irresponsible lending, a government obsessed with maintaining the boom and blame the greed and stupidity of those who thought property ownership was the one-way ticket to financial success.
Although you're quite right to say that a house is worth what someone is prepared to pay for it. And with restricted lending and a shift in sentiment, that amount is falling fast.
- Cp, London UK
Prices are on the floor, as an agent I can tell you no one is buying. The only people selling now are the ones who; are financially forced to and will have to take a hit. Its good karma that the prices are falling, too many people got greedy and remortgaged to go on holiday.
All the better to pick up a bargain shortly.
- Jason, London
The media love to hype up disaster. In a dead market with no buyers reducing your asking price is a waste of time. Best to leave it on at the agent's price and get him to ask for offers. Brown is bound to try to artificially boost prices before the next election because if he doesn't he'll lose. Best to wait it out and ignore he hysteria. In the last crash prices actually ROSE in some areas so all the figures the press give need to be taken with a large pinch of salt. Flats in warrens may well fall a lot but good houses in good areas will always be in demand.
- Charles, London
Did anyone really think, that after 10 years of rampant house price inflation, that we wouldn't see a correction? And anyone thinking London is somehow immune might like to remind themselves of the last crash when prices were hit hard. I remember, I suffered - inflation to a degree masked the figures back then but won't this time.
Also, there's more speculative money in London now; hundreds of properties are coming onto the market daily as investors bail out. The supply & demand ratio is shifting too, as buyers quite rightly wait for prices to drop further.
And the biggest disgrace of all? After presiding over this hugely damaging boom, Gordon Brown is now trying to suck first-time-buyers in to prop up the property pyramid sham by making money available again instead of allowing the market to correct itself to more sustainable, sensible levels. Nice one, Gordon. Real prudence.
- Cp, London UK
I wish somebody would tell people looking at my flat in Westminster that prices in this area are remaining firm! Despite taking advice with the original asking price and then cutting the amount sought three times nobody has made an offer. I think this market is much more fragile than the banks and valuers are saying.
- Sarah Edwards, London
If the media publishes reports like this every day, it is bound to cause panic. An overview of the market once a month would be enough. As it is, I have seen 3 different reports on my area. At the end of the day, a house - like everything else - is worth what someone is prepared to pay for it. Homes are a long term investment; most people don't buy with the intention of selling next year. The cycle will work its way and in a few years people will wonder why they did not buy in 2008.
- Beatriz, London
The problem here is that Rightmove report asking prices and not selling prices, this is why the Rightmove index is inherently flawed. Something that was vastly overpriced last month may have dropped to the correct level this month, which incorrectly states that there has been a market drop at that postcode whereas the actual sale price may be identical month on month.
- Naz Teaboy, Finsbury Park
A 20% fall over a few years is a very conservative estimate. Prices here in Chiswick are plunging, we are getting daily calls from estate agents telling me that the seller of such and such property has reduced the asking price by £25k here, £50k there. Add in the bloodbath in the City and I think that the housing market is on very thin ice. It's not just the number of job loses, it's the fear and belt tightening that goes with it. What rationale person would buy today knowing that it's a racing certainty that the price will be x% lower in a few weeks/months?
- Sam, London
