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Slump knocks 40% of price of home in four months
Jonathan Prynn, Consumer Affairs Correspondent25.06.08
A family home has had its asking price slashed by 40 per cent in what is believed to be the capital's steepest property reduction.
The six-bedroom Victorian house in sought-after Bedford Park, west London, went on the market in early March for £3.2 million.
Since then, the collapse in interest from buyers has forced the sellers to cut the price, first to £2.6 million in April, then to £2.25million in May and finally to £1.9 million this month - a total reduction of £1.3 million.
It is the starkest example yet of how the credit crunch and dearth of buyers has driven down asking prices in all but the very top of the central London market, which is dominated by wealthy foreign investors.
The Grabiec family, originally from Poland, are thought to have owned the house for many years and are likely to be sitting on a big profit in spite of the price cut. Estate agents said the property, although in a desirable location, had been badly overpriced initially and was only now attracting offers.
"The owners are pretty disheartened about the whole thing," said one. No house on the Grabiecs' street has ever sold for more than £2.1 million.
A spokesman for agents Faron Sutaria, who are marketing the home, said: "I think it's going to go pretty quickly now, but it started a bit too high. Even when it was on at £3.2million there were lots of viewings but no offers."
The 3,135 sq ft house has been modernised with a new roof, plumbing, wiring and bathrooms to increase its marketability. The spokesman said: "They did it up with a view to selling. It was pretty run-down before."
Dozens of other London properties have had 20 to 30 per cent carved from their original asking prices after failing to attract interest.
In recent weeks analysts have become increasingly pessimistic about prospects for the market, with forecasts of falls of up to 25 per cent over the next two to three years. Website propertysnake.co.uk, which monitors price reductions across the country, lists a sixbedroom house in Stadium Street, Chelsea, which has gone down 29 per cent from £1.7 million to £1.2 million.
Yesterday, it emerged that the number of mortgage approvals dropped to an all-time low of just under 28,000 last month, less than a third of the peak figure recorded in February 2002. With London accounting for roughly 15 per cent of the UK property market by number of transactions, that means only about 4,000 mortgages were approved in the capital in May.
WHAT THE EXPERTS ARE SAYING
Ed Stansfield, economist, Capital Economics
THE latest mortgage figures appear consistent with house prices falling by 15 per cent this year and continuing to fall next year and in 2010.
With no evidence that the mortgage credit squeeze is easing, affordability still poor, unemployment now rising and falling house prices likely to dent buyer confidence further, it is hard to avoid the conclusion that the housing market correction will be deep and prolonged.
Indeed, the dire picture of market activity painted by the the mortgage figures seems consistent with our recently revised forecasts - that by late 2010 or early 2011, house prices will be 35 per cent lower than at their peak late last year.
Howard Archer, economist, Global Insight
I am forecasting a fall of 12 per cent in house prices nationally both this year and next. I suspect London prices may fall slower than the national average this year but by a similar amount as the national average next year.
Latest survey evidence, including that from the Royal Institution of Chartered Surveyors and Rightmove, shows the London housing market is struggling markedly, although there are significant variations across the capital with the top end still growing.
However, it is still extremely hard for first-time buyers to get a foothold due to affordability constraints, while City job cuts and expectations of sharply lower bonuses are likely to have an increasing negative impact on prices.
Lucian Cook, research director of Savills
The contraction of mainstream mortgage markets, which we have seen since February, together with the rise in the costs of mortgages, are now biting in London.
Agents' stocks are three times last year's levels and sales are well down. Over the spring and early summer there has been a realisation that the credit crunch will have a lasting impact and that we are living with a completely different set of market conditions. So, even though affordability is not the main driver, prices have fallen much more rapidly over the past three months than in the early part of the downturn.
Reader views (6)
If it was overpriced in the first place then the fall is not 40%. However, property by 2012 will have fallen by 40% from the peak in my opinion.
- Mgrelton, London
It's just the start and long overdue. In the Barnard Marcus auction yesterday it was carnage, about 75% unsold. Yes I am in property, or was, the smart money got out back in 2006.
I know some pretty well placed experts in many fields and they are now in shock over our future, it looks very grim. Take a good look at the debt UK people are in, the highest in the entire world. If I were a betting man, I'd say property will drop no less than 40% over the next few years and some experts privately agree. This could well be an understatement. Too easy credit plus a lack of houses built and no way of stopping the influx of more people. Add inflation for commodities including oil and you have a perfect storm. Today's lower house price will seem like a overpriced rip off, in a few years because it is. I'd also bet that prices will not rise again for at least 8 years, if then.
This country is governed by short sighted PC correct morons. I actually left the UK in late 2004, we / now you are a sad joke abroad. Worst of all, there will be no change. I've just been to Canada, go there, property prices 1/6th of the UK South east price, detached 4 bed in just under 2 acres are $230k, take away Starbucks type coffee $1.27 and a ride on mower $1,200. I paid 4 x that for a smaller one in the UK. I could go on, but what's the point, glad I left and won't be back anytime soon.
- Tim Miller, Road Town ' BVI's
Unscrupulous agents routinely over value properties to secure the business then are forced to discount heavily.
However I think Ed Stansfield is right - prices ought to sunk by a third over the next three years however if unemployment starts to bite, (Edmund Conway of the Telegraph and others have with good reason called unemployment 'the dog that hasn't barked') then you will find instances of distressed sales at levels significantly under that figure.
For the cash rich and well prepared property auctions could be an attractive opportunity two or three years hence...
- Jonathan, London
Anyone paying nearly £2m for this terraced eyesore in a London suburb will be nursing a 50%+ loss in 2 years, believe me.
This kind of property will be back below £500K in no time.
- Mike, london
It was obviously over priced anyway (specially if the ceiling in the street was £2.1 million) so clearly they were just being greedy. What I'd like to know is the difference between the price the estate agent truthfully considered it worth when it went on the market and now. It won't be a 40% difference.
- Louise, Essex
The fall in (public)property prices is largely,in my opinion,in anticipation of the influx of surplus money from accrued profits, within limited hands, from metals,crude-oil,food prices etc. which could lead to global inflation on one hand and not a corresponding increase in income of the public at large, on the other hand i.e. not much for the middle class. Property may not be regarded as a safe 'hedge' in the shorter term.
Hence the relative lack of demand for property. The rest are result of market-forces.
- Emran Khan, Karachi - Pakistan
