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25 per cent - that's how much you need to cut your asking price to sell your home
Sri Carmichael, Consumer Affairs Reporter17 Feb 2009
ESTATE agents have identified a "tipping point" that they claim will bring buyers flooding onto the property market.
Homeowners willing to price their property at least 25 per cent below its peak value are swamped with offers, agency Savills said.
The company's Putney branch said that this month it had seen several "realistically" priced homes go to sealed bids after each spent only a week on the market.
Now the properties are expected to fetch more than the sellers asked.
Savills director Caroline Bell said: "The reaction is extraordinary when you get the price right. We're getting more than 10 viewings within a week of the price change in many cases, and then several offers. It's a situation people had stopped expecting.
"Properties sell when they are priced at their true value, which the market believes they're worth. That appears to be 25 per cent below a property's top price in the summer of 2007. There's a clear tipping point and people are increasingly putting their home up for sale at that price."
She said vendors were more willing to drop their prices after a year of stagnation in the property market.
A two-bedroom period terrace cottage with a courtyard garden and cellar in Wadham Road, near Putney railway station, had 12 viewings followed by seven offers at or above the guide price of £425,000 after only a week on the market.
Savills estimates the price represents a 26 per cent drop from the house's peak value of £575,000. It has now gone to sealed bids. Around the corner in Disraeli Road, a three-bedroom period townhouse with a large garden received four offers in the week after its price was slashed to £650,000.
This was £250,000, or 27.8 per cent, below the original asking price of £900,000 in October 2007. Its owners are also now taking sealed bids.
Lucian Cook, director of residential research at Savills, said the fact the market was clearing at 25 per cent below peak values suggested prices would not drop much below that in the long run.
Indexes suggest that so far, sale prices in London have dropped by between 17 and 18 per cent since their peak in August last year. But there have been few sales in recent months to provide further evidence.
Ms Bell said: "There's a lot of pent-up demand and as vendors decide they want to get on with their lives and sell we'll see things moving. They may sell for less than they hoped but they will probably buy for less than they expected as well." Mr Cook said prime central London property - worth between £1 million and £5 million - is likely to be at the forefront of the recovery because of an influx of overseas buyers, with prices hitting their lowest point by summer.
The weak pound, and a British property market which is falling faster than in many other countries, mean London homes are up to 40 per cent cheaper for foreigners than a year ago.
Today the Royal Institution of Chartered Surveyors said new buyer enquiries had risen for the third month in a row - the first time this has happened since the end of 2006.
Nearly half of buyers believe the bottom of the market is in sight, its research showed.
Reader views (21)
"Lucian Cook said the fact the market was clearing at 25 per cent below peak values suggested prices would not drop much below that in the long run."
Can someone tell me what economic theory and model is being applied here? "Nonsensical trying to sound grand" comes to mind.
If one is already in the market there will be some movement as people still buy and the New Year is one time to do it. However, there is no new money coming in.
Not because IQs have gone up, but because idiots cannot get any money. Look what happened to prices when sellers were in denial and the economy seemingly fine (2008).
Buying with new money now is suicide, given only now is London entering recession (and the worst in a generation).
John:
Only Effective demand counts. The Ability to pay drives that, not Willingness. Prices were driven by the government allowing lenders to give whatever...
that is now over. In fact, if anyone remembers. Brown saw it as a matter of pride that FTBs could get ever more debt YET now he says it was a bad thing...
it was at the time an OBJECTIVE. At all costs people should have houses and if it meant too much debt that was fine, as all that stamp duty was coming in.
He was a happy chancellor who relied on a cycle of a credit boom and an asset bubble. Now he is saying he had nothing to do with it? He actively encouraged the banks!
Expectations are important. Can anyone deny that EAs set the expectations, and then sent us to their brokers?
- Trevor, South east, 18/02/2009 16:04
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What I find interesting about this article is that there was much mention of offers being made but NO mention of completions.
Also, very little emphasis is made as to why the 'sealed bid' method (as used in Scotland but with no mention of the bid being binding) was being utilised for offers on the Disraeli Road propety rather than the more traditional 'trash talk' verbal bidding which is meaningless until exchange of contracts.
Finally, as the estate agents are advising more realistic pricing on behalf of property sellers I hope they practice what they preach and drop their commission rates for what, in many instances, is just a property listing service.
- Graham, London, 18/02/2009 12:19
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Desperate times leads to desperate measures by the STILL "unregulated" estate agency sector . . . After all, "No Sales = No Commissions" and eventually the estate agents go bust!
The "true" value of a property has always been "what buyers are prepared to pay for it" rather than any capricious value an estate agent may care to suggest!
- Fraser, Telford Park, 18/02/2009 09:49
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Knock off 50%, and peeps still won't get a mortgage.
The futures market predict 55% reduction, and they usually get it right. I'm say 66%. Have a look at what happened in Japan.
Funny how so many people rabbit on about the precious housing market, when an economic meltdown is under way. Soon house prices will be the least of our problems, and in a year or two house prices will be toast.
People who use the market for their income, like EAs, would be better getting another job. There won't be a living to be had for years.
- Np, Cornwall, UK, 18/02/2009 03:36
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Estate agents have identified a "tipping point"!
Never agreed with "Tipping", these Estate agents are on a par with our Bankers!
GERONIMO
- Geronimo, LONDON MIDDLESEX, 18/02/2009 02:59
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If there are a flood of offers at 25% below asking price, then that shows it is too low. Estate agents will be happy with any revenue at the moment though.
- Ces, London, 17/02/2009 22:06
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You can get a big four bedroom detached house in a nice area for that much money out of London.
- Louise, London, 17/02/2009 19:07
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I dislike estate agents as much as the next man, (or woman) but to blame them solely for the absurd property boom is both incorrect and unfair.
When it boils down to it, it is the SELLER who decides what price their property goes onto the market for, and the buyer who deems it worth that or not.
Who here, on being told by a group of different estate agents that their house was worth approximately £425k, would argue against it - and demand that it be put up for sale at a 'sensible' £250K?
Anyone?
- John, London, 17/02/2009 19:07
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The true method: Calculate how much prices have increased over the last 8 years, back it all out (profit), then add 5% each year and you will have the true value your house is worth. Backing out 25% is daydreaming and estate agents are just desperate to get any business as it will take years for the housing market to recover.
- Nick Nack Paddy Mac, Kiburn, London UK, 17/02/2009 18:47
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High property prices have been the catalyst for the whole credit crunch - starting here and in the US, but nobody seems to want to admit it.
House prices need to fall 50% from their peak to get even close to where they should be!.
- Mark Burton, St. Ives. Cambs, 17/02/2009 18:14
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Kiss goodbye to 2007 prices. If you don't know why then perhaps you never should have taken on such huge debt for the rest of your life. The whole world is resetting at a much lower level without grotesque levels of debt available to cause huge unsustainable price increases. Homeowners will have to as well or live in denial. Why would you easily accept ridiculous price increases as fact but then deny similar decreases? This is not a slump that will recover to 2007 and upwards. Sorry.
- Kr, Florence Italy, 17/02/2009 17:59
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I wouldn't bother putting my house on the market until at least next year. There simply will not be a real market for anything until the credit situation really settles down.
- James Ritchie, Oyster Bay Cove, NY, USA, 17/02/2009 15:19
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why would a man, or women come to that, trust anything an estate agent said?
- M.O'Brien, london.uk, 17/02/2009 14:22
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I agree with Neil - this whole price madness was created by the EA's to begin with. Now we have hard-working citizens living in over priced rented accommodation, or living at home with their parents, with no chance of owning a place of their own. What makes a two-bedroom period terrace cottage worth £425,000? – Greed & commission that's what. There is no property slump - just reality kicking in. I feel sorry for those who were duped into believing that these fairy-tale prices were sustainable, tying a noose around their necks at the same time. You don’t need a financial adviser to tell you that borrowing 7-8 times your income will result in nothing but financial hardship. Bring on the recovery I say.
- Jen, Camberwell, 17/02/2009 14:12
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Funny, I was looking at houses last night in Putney and this certainly wasn't the impression I got from the agent. These guys are desperately trying to use the press to boost the market.
- Jon, London, 17/02/2009 13:46
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Where are these supposed buyers getting mortgages from?
And are they sure that they are they are going to be immune from losing their jobs?
- Matt, London, 17/02/2009 13:41
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These estate agents will tell us all kinds of fairy tales to get us back in the same mess as before. No house in Putney is worth more than what I am prepared to pay for it. I grew up there and it ain't that wonderful.
- Rodney, London, 17/02/2009 13:27
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"Properties sell when they are priced at their true value, which the market believes they're worth."
Wow ! Who would have thought that ? This guy could be a professor of economics !
House prices always have a tendency to overheat in boomtime-they are ridiculously overpriced and have been for years. How anybody on a normal salary can buy one is beyond me.
- Jason Stone, Stratford, Newham, 17/02/2009 12:14
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Estate agents were calling the recovery after the last recession about four years before prices actually bottomed out. They are notoriously obtuse and naive and are responsible for the grotesque overpricing of houses. When prices fall another 40% then the recovery may begin.
- Neil M., london uk,, 17/02/2009 11:17
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There is pent up demand for Rols Royces and villas in Monte Carlo, I'm sure. But this demand is not matched by an ability to buy, or to get a mortgage at stupid multiples.
At 2 bed house at over 400k? Putney is nice, but not that nice. These prices are still out of touch with reality.
- Rob, London, UK, 17/02/2009 10:46
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A two-bedroom period terrace cottage for £425,000 lol
Madness, estate agents can dress it up which ever way they want, property is grossly over priced and has a long way to fall. As much as 20-25% on top of last years falls.
As for the estate agents claim of an increase in sales/enquiries its called the Spring bounce and happens every year. Dn't believe the hype!
- Terence Harrington, Canterybury, UK, 17/02/2009 10:40
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