Morning:
8°c
Reality of slump hits home as prices fall £100,000 in fortnight
Mira Bar-Hillel, Property Correspondent26 Nov 2008
ASKING prices for London homes are being slashed by up to £100,000 to secure sales in the run-up to Christmas.
In the last two weeks, sellers have finally faced up to the "new reality" of the depressed London market after months of denial, figures reveal today.
They show that hundreds of asking prices have been dramatically cut in the past fortnight with reductions in the two most expensive boroughs averaging more than £100,000.
Sellers in Westminster who have dropped their price have knocked off an average of £108,166, while those in neighbouring Kensington & Chelsea have lopped £100,797 from their original demand. Across London as a whole the average reduction among vendors who have lowered their price was £28,796 in the two weeks since 10 November, according to figures from property search engine Globrix.
Experts said sellers had been slow to accept that their properties are now worth much less than they were at the peak last year before the credit crunch started to bite. As recently as last month, vendors were expecting asking prices to be only 5.4 per cent down on a year ago. But actual sales are being agreed at around 20 per cent lower than this time last year.
David Smith, of estate agents Dreweatt Neate, said: "In recent weeks, not only are people putting their properties onto the market at a more realistic price to begin with, but unsuccessful sellers are cutting original asking prices. There's only one way to sell your home in this market, and that is to ask a price for it that is totally realistic. Prices are falling and being slashed left, right and centre."
Globrix has for the first time tracked the actual amounts by which asking prices have been reduced across the boroughs. In Camden the reduction averaged £55,728, in Richmond it was £44,313 and in Lambeth it was £40,842. The smallest cuts were in the cheapest boroughs: £11,464 in Barking & Dagenham, £11,629 in Havering and £11,213 in the Olympic borough of Newham.
Globrix director Daniel Lee, who compiled the figures, said: "For cash buyers and people with the finance in place to move quickly, there are some great opportunities at bargain prices. Buyers are now holding all the cards and sellers need to realise that if they want to sell then they may have to accept an offer they wouldn't have even considered six months ago."
One reason for lower prices is the continuing mortgage squeeze. The number of home loans approved last month was 52 per cent down on October 2007, only just above the all-time record low set in August. Seema Shah of the Capital Economics consultancy said: "Mortgage lenders are not passing on the full cuts in base rates to new borrowers and have continued to tighten lending criteria, the economy is contracting and is set for a deep recession. Buyers are hardly likely to return in their droves and activity is set to remain very subdued."
Reader views (35)
Your headline last night said 'London House Prices fall 100,000 in a fortnight.' Factually this is incorrect - the 100,000 refered to people in Kensington & Chelsea who had chosen to reduce their asking price by 100,000 in order to sell before Christmas. Some other Boroughs only had an 11,000 asking price reduction. Bearing in mind that most properties in Kensington & Chelsea wil be in the 750k to 1.5m price bracket, this isn't as alarming as the paper makes out on its headline by suggesting that all House Prices across London have fallen across the board by 100,000. And it is the vendor's choice to reduce the asking price, if they so wish. I know you have to sell papers but at least get the facts right and if we could get journalists in this country to increase morale instead of promoting doom and gloom, we might actually get out of this recession without too much damage.
- Nico, London, 27/11/2008 08:13
Report abuse
Great news!!! I already own my flat in the center of London, so I will be able to buy house next year!
- Leila, London, UK, 27/11/2008 08:09
Report abuse
People are asking themselves - do you want a life or do you want to pay off a mortgage? Go on folks put a millstone round your neck.
- Never Owned A House, London UK, 27/11/2008 07:10
Report abuse
Could we now have companion reports on commercial property and land prices, and both residential and commercial rents? They too should all be falling, but somehow I would rather imagine rents, despite rising to reflect the property valuation rises, are not following them down.
I would also love to read about how the valuations were done that led the prices up, and how they are being done now. Are those concerned still claiming any professional credibility?
- Jenny, Twickenham, England, 27/11/2008 03:32
Report abuse
The price of housing in the U.K. is still stupid. My brother bought a house in Upminster, Essex in April 1983 and I bought a house in Calgary, Canada at the same time. My house was $124,000 and my brother's house was 62,000 pounds, at the time the dollar was 2 dollars to 1 pound so they were exactly the same price. We have both lived in our houses over 25 years and my house is worth $500,000.00, approx. 250,000 pounds whereas my brother's is worth 650,000 pounds, where's the sense in that. I realize we are in different countries but it just goes to show that house prices in the U.K. went up at a ridiculous rate.
- Dido, Calgary, Alberta, Canada, 26/11/2008 23:29
Report abuse
I have seen list prices come to the level of 2006 and offered prices much lower than that..as a first time buyer still worth atleast a 6 month wait. More staff being made redundant, more businesses closing doors, crunch time at high street retailers, banks not lending, stocks still haven't recovered from the bail out. All I I want for Christmas is the official figure stating UK economy is in Recession. I think thats when panic will hit.
- Shane, London, 26/11/2008 23:23
Report abuse
NJ, prices are not going to just shoot up once they hit the bottom, they have a lot more to fall, and it will be a lot longer than 5 years, before you see these prices again. You would be an absolute fool to buy today! There is no economic justification for buying at these prices in this market. You sound the same as the estate agents, get on the ladder before you miss out, the UK is running out of land, etc etc etc... So sorry for the suckers that fell for this and felt they HAD to buy, and bought at silly prices...
- Mike, London, 26/11/2008 23:22
Report abuse
How can a 3 bed victorian house in Newington green n16 be worth one million? I beleive the real max price to be £700 thousand. This is the same story in the whole of London so the prices have to fall in order to be real and affordedable Ie the people who can afford a million pound mortgage would never want to live there.
- Karen,Islington ,Uk, London, 26/11/2008 20:56
Report abuse
Sellers im afraid its time for a reality check ,banks will eventually return to normal lending criteria APPROX 3.5 X salary plus a deposit.
So how much do i need to earn to buy your flat studio house and how much do i need as deposit,obviously we all earn 25k and have 50k in the bank errr NO and even if we did we still cant afford a studio flat can we !
Ridiculous lending criteria,self cert lies and creative accounting have got us here, do not expect that to get us out of this mess.
To all estate agents that want to stay in business just like any other you have to sell your goods at an affordable market price .Maybe you need to have a word with your suppliers .
- Pete, herts, 26/11/2008 20:07
Report abuse
Q. Why are house prices in freefall?
A. Because the market cannot survive without FTB’s.
{Want proof? Pick up a newspaper and see how many Estate Agents have closed down)
When all these economists speculate how much they will drop by. 40%, 60%.
What they are reall trying to di is forecast WHEN FTB’s will return to the market.
Not until until they reduce threefold.
Back to 2000 prices, when this bubble began.
Thats a threefold decrease in prices from their peak. Not 25%, 50% 0r 60%.
We, the FTB's control how far house prices will fall.
Not the treasury, Estate agents, Banks, Newspapers, or economists.
- Broadswordcallingdannyboy., Yorkshire, 26/11/2008 19:48
Report abuse
Couldn't agree more with Peter's comment "greed at the top, denial in the early stages of decline, panic as prices fall sharply and then nervousness as prices slowly increase again."
- Gavin, Buckinghamshire, 26/11/2008 19:42
Report abuse
Pre credit crunch, peoples apetite for risk (or blindness to it) tends to overshoot and therefore with the dramatic bursting of the credit bubble pessimism overshoots also. Given that most people would reasonably think that prices will drop in short term, given that most people are concerned about unemployment rising and given that people are risk intolerent now I doubt that a freeing up of the mortgage market will do anything but a slight stimulation in demand which will crumble under the weight of supply. Once the sellers realise that a return to some degree of availability of mortgages is still not bringing in droves of buyers thats when the panic will set in amoungst those die hard sellers !
- Dylan, London, 26/11/2008 18:58
Report abuse
I have friends in large estate agencies and they tell me that prices are inflated initially. Then, when a potential buyer approaches, they work downwards giving the impression of a deal.
As a mortgage broker, surveyors are downvaluing everything - by 15-20%. If yo have to sell up, then only then will you lose. What caused the boom was lenders throwing money at you - that won't happen again and those that are fortunate to have been able to get a mortgage should stick and not sell. The first time buyers are the ones that are suffering as well as landlords.
Remember the 1990's? if not, to remind you, within 10 years property prices almost trebled after the collapse. The market will recover and it will take 10 yrs - every asset has a cycle.
- Mortgage Broker N3, London, England, 26/11/2008 18:35
Report abuse
The Nu Labor dream goes BANG! It is over for Crash Gordon. HIPS report anyone??
- Jacqueline, Hampstead, London, 26/11/2008 18:30
Report abuse
Forced sellers? This is just the beginning...imagine what will happen when people start to lose jobs. These unemployed, combined with immigrants leaving in ever greater numbers, will also mean BTL will be facing falling capital values while also having difficulty renting out their properties (and even then they may be subsiding tenants as they are no longer able to remortgage at the rates they enjoyed before).
So there are two groups risking the housing market. The 1mn+ about to lose their jobs and the 1mn+ who are, or are about to, remortgage their properties. Many of these will not belong to both groups i.e. that is two sets of vulnerable people. For the latter group, should they really have had mortgages to begin with? They will only end up on higher rates if they need more than multiples of 3.5 and/ or with deposits below 15% i.e. that is what was standard 10 years ago. There was a reason banks considered that as standard then, it was because that was sustainable. Those rules are merely coming back into force.
The government is therefore currently trying to resuscitate a defunct "business model"!
- Trevor, South east, 26/11/2008 18:18
Report abuse
Economists are playing the game with half the cards missing.Anything marked Henry George and Single tax is avoided like the plague.But his system,based entirely on keeping land values down with a tax, stops property prices entering bubbles and then collapsing and screwing up the banking system.Once bigger than Karl Marx you never here of HG now ,not when his thesis has been proved right.One of life's bigger ironies.Perhaps one day the Bankers for Henry George movement will take to the street pleading for the tax that will take the inflationary element out of house prices i.e. the land price so making it possible to lend again without fear of house-price bubbles forming, then collapsing,taking all their investments with them.
- Dbc Reed, Northampton UK, 26/11/2008 18:08
Report abuse
"One reason for lower prices is the continuing mortgage squeeze"
Yeah, but the main reason is that house prices in England are MASSIVELY OVERPRICED!!
- I, Notts, 26/11/2008 17:53
Report abuse
Great news, about time. Roll on 50%+ reductions. Those who have borrowed beyond their means (espically the BTL crowd) deserve to loose it all! Yipeeeeeeeeeeeee!!!!!
- Lloyd, Barnet, 26/11/2008 17:50
Report abuse
I suspect that prices have a lot further to fall. If they are down 20% to date then there is at least another 25% to go in London. It's rose tinted to think that property prices land so softy and so quickly after the run up that they have had. I predict that next year the trickle of sellers taking down will turn into a flood as the trend in prices becomes undeniable.
This isn't just about the credit crunch, although that has obviously made things a lot worse. Fundamentally houses are over-valued. Rather than just focusing on the interest cost of servicing a mortgage, consider the burden of repaying the capital.
Cycles have different phases - greed at the top, denial in the early stages of decline, panic as prices fall sharply and then nervousness as prices slowly increase again. The housing market is only at the denial stage. It cracks big time next year.
- Peter, London, UK, 26/11/2008 17:46
Report abuse
Perhaps now ordinary people in moderately payed jobs can afford to buy a home.
- Jon Vanner, Hoxton London, 26/11/2008 17:23
Report abuse
Just to say in response to Vijay in Surrey. VAT is coming down by just over 14% not 2.5%. The nett effect on goods in the shops, if retailers pass it on is a reduction of a little over 2%.
- Charlie, Rugby, England, 26/11/2008 17:00
Report abuse
Buyers are stupid if they're waiting for the bottom of the market, by the time that happens then sellers will know that the ball is firmly in their court again, prospective buyers will pile in and prices will rise rapidly, buyers will lose any advantage they had in the falling market. The housing market will recover so if you want to buy then why wait? You may lose money in the short term but if you're planning on living there 5 years or more so what, as you'll have more than made them up.
- Nj, London, 26/11/2008 16:43
Report abuse
Agree with John. The issue is not the mortgage squeeze. Why buy a depreciating asset and lose money from day one? Properties have another 25% to drop next year and even a few savings on VAT or mortgage rates won't make up for an average monthly loss of £7,000 per month in central london. And why do you think banks are not lending? Because they believe prices are and will keep on falling. The only thing that drives the market is price expectations. And price expectation do not reverse often in the real estate market.
- Albert, Chelsea, London, 26/11/2008 16:43
Report abuse
Vijay hit the nail on the head. Problem is being made worse by money-hungry banks not making mortgages available. All thiose people with 75-80% mortgages 2 or 3 years ago will be coming to an end now with LTV ratios closer to 100% making it vitually impossible to get a decent mortgage deal. Hence, either suffer the lenders SVR or try to sell at huge losses. So ,everyone, be prepared for it getting a lot worse if banks don't start lending again soon at reasonable rates.
- Km, London, 26/11/2008 16:41
Report abuse
Smart money is selling right now even at 10% off.
- John Middle, Wandsworth, 26/11/2008 16:13
Report abuse
The reduction in the market is only going to affect those who are finding it difficult to meet their mortgage payments and are forced to sell the property. The VAT reductions of 2.5% will only help businesses; most businesses with the exception of major supermarkets will not be passing on the VAT reduction. It only benefits the business cashflows. Then the reduction in the interest rate is a way the government is helping banks make money at the expense of the home owners. What choice do the home owners have? We are left with the mortgages that do not give any real benefit to the borrower. I have a buy-to-let mortgage; my bank has stopped doing buy-to-let mortgages. When the fixed term ends I will have to look for another lender who can offer a better rate than the banks variable rate, which is very difficult, based on what is on offer. What about those who are just coming to the end of their mortgage term. Most of them will also face the possibility to sell the home instead of holding it. This will have a greater impact on the banks and the taxpayer’s funds. I am surprised that nobody is talking about their pensions. When will this time bomb explode? Are we throwing money away?
- Vijay, Surrey, UK, 26/11/2008 14:29
Report abuse
Everything that has been part of this insane economy based on borrowing will loose its value more rapidly than most people think.
A new economic world order is emerging from the rubbles of capitalism as we know it.
The free market is rapidly being nationalised in desperate attemps to ensure some sort of stability.
Most people are simply just loosing money they never really had anyway.
- Johnson, London, UK, 26/11/2008 13:56
Report abuse
The only buyers out there are the bargain hunters - everyone else is sitting tight. They are not going to shell out for today's meagre price drops when there is more in the pipeline. And with huge job losses racking up as we speak, there will be plenty of forced sellers. Supply and demand: you work out where prices are headed!
- Daniel, London, 26/11/2008 13:42
Report abuse
It was only a month ago the Standard was telling us what a great time to buy!
- Guytom, London, 26/11/2008 13:12
Report abuse
Nigel, you should work in the City with that ability to forecast the market.
- Darren, London, 26/11/2008 13:00
Report abuse
Wow. If this keeps up for a few more months I might even be able to buy my first house . . .
- Roz, Chamonix, France, 26/11/2008 12:30
Report abuse
Oh well. Like the projected tax hike on people earning over £150,000 a year, this only affects a TINY, TINY, proportion of people (in that tax example, 1.3 percent, to be precise). I do wish the media would desist with these pointless stories. The so-called "prosperity" of the "good times" only really kept things ticking over for the vast majority of us. Now we'd quite like a bit of the redistribution that was hinted at in 1997. When I hear than £200,000 has been wiped off the cost of a £5m house, it's about as relevant to me as hearing that Damian Hurst's obscene diamond-studded skull might have become a little closer to my reach. I know this is just another housing story, which no doubt your correspondent will have had to turn in to meet some sort of quota, but there must be so many housing stories of real interest to many more people. Like people who, for the first time, are finding themselves able to afford shared-ownership properties because of the slump, and homebuilding costs actually coming DOWN for larger builders not too overcommitted to take advantage...
- Karli, Tottenham, London, 26/11/2008 12:29
Report abuse
Excellent news. I sold all my stocks at their peaks last year, sold my other house at the same time. Next year, it's time to buy them back on the cheap!
- Nigel, Kensington, London, 26/11/2008 11:40
Report abuse
It would be more helpful if price reductions in percentages were given. To knock off £ 100.000 of a £ 5 million asking price is only 2% ,whilst a reduction of £ 20.000 of a £ 100.000 property is 20%.A very misleading headline.
- Adrian, London UK, 26/11/2008 10:09
Report abuse
The reason for falling prices is not the mortgage squeeze. It is expectations that overvalued house prices will fall further next year.
- John, London, UK, 26/11/2008 10:01
Report abuse
