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Buy! Buy! Buy!
Sonia Purnell10 Mar 2009
For buyers, it's finally back to the good old days. After months of famine, houses are trickling onto the market and tales abound of dramatically reduced asking prices. Price cuts of about 25 per cent are seeing a resurgence in London house sales, which sends the strongest signal yet — the buyers' market is back.
Agents reported twice as many offers — and twice as many accepted offers — in February as they saw in January this year.
“Normally, we would have around the same number of offers in both months,” says Ed Mead of Douglas & Gordon. “So the fact that we did twice the business in February as in the previous month certainly suggests things are looking up. We are seeing a sea-change in the market as buyers really feel that asking prices are now at the right level. Secondly, there is very little up for sale, so that also has an effect. I believe that we're finally seeing prices begin to bottom out.”
Although many vendors still feel the pain of cutting so deeply into their original asking price — one seller, who didn't want to be named, compared it to giving the “house away with a packet of cornflakes” — at least they are seeing far more interest in their properties and sales. Some vendors report dozens of viewings and multiple bids, once they have reduced by on average 25 per cent from the peak value.
Some have even seen minor bidding wars, or at least competitive bids, once they have received one firm offer. At least one vendor we spoke to sold above the reduced asking price as a result of competing bids. “It seems as if once one dares to go in, the others feel it is somehow safe to plunge in, too,” she said.
Lindsay Cuthill of Savills says: “It's a game of chess, choosing how much to discount the price or whether to keep it the same price publicly but make it clear you will take a significantly lower offer. But property certainly does feel a lot more affordable now and if you have the money, with interest rates what they are, what else are you going to do with it?”
I SLASHED MY PRICE TO GET A QUICK SALE, THEN KNOCKED £100,000 OFF THE PRICE OF MY NEW HOUSE
Setting up home with a new partner
Slash factor: 15 per cent from £530,000 to £450,000
Where? Holloway
Status: Accepted an offer
Journalist Deborah Maby remembers when her three-bedroom house in Holloway was worth £630,000 — its valuation two years ago. “That's a far-off dream now,” she says. But wanting to move in with her new partner and having found their perfect house for a new life together, she put it on the market in December for a seemingly realistic £520,000.
“We had plenty of viewers but no sale. In the meantime, we had done something really stupid: looked at one house only, which we had fallen completely in love with.
“So after returning from holiday in India at Christmas, we asked the agent to knock £20,000 off the price, a mere month after putting it on the market, to show we meant business.
“Yet more people trooped around being polite about my fireplaces but still no sale. Then, two weeks ago, I was offered £450,000. I accepted it without a second thought. After all, I bought the house 10 years ago for just £250,000.”
Meanwhile, Deborah and her new partner have had an offer accepted on a house that was initially up for sale five months ago at £900,000.
“They've agreed to take £800,000 so we're going with it. We even allowed ourselves a half-bottle of champagne the night our offer was accepted — although we are aware that anything can still happen.
“Nevertheless, so far it's been, if anything, a less painful process than 10 years ago.
“For one thing, we've had full care and attention from our agent and certainly no gazumping to worry about.
“It shows that you can sell if you're straightforward and prepared to slash the price.”
A BIDDING WAR BEGAN ONCE WE HAD A FIRM OFFER
The lawyer leaving London
Slash factor: 35 per cent from £600,000 to £390,000
Where? West Hampstead
Status: sold
David Coulter and his family were keen to start a new life in the Derbyshire countryside, well away from the pressures of London. His wife had landed an enviable job as a deputy headteacher, and their two sons were offered places in their schools of choice.
They even found their dream house, where they could finally keep a dog, and bought it, confident that they would quickly sell their three-bedroom flat in West Hampstead. “We thought it would be all so straightforward,” said Mr Coulter.
That was last March, when four separate estate agents said it was worth £600,000. After a brief flurry of interest, viewers disappeared completely as spring turned into summer and the economy dived. “We moved up to Derbyshire in July, we had no choice,” says Mr Coulter.
“We steadily cut the price in chunks of £20,000 or £30,000 but absolutely nothing happened. The flat was empty so we tried to rent it, but that didn't work either.”
Finally, at breaking point, the Coulters reduced the price in October by 35 per cent from its original valuation to £395,000, pretty quickly prompting an offer of £367,500.
“We reluctantly accepted it, but two days before we were due to exchange, somebody came in with a much higher offer of £390,000. So I'm afraid we gazumped the first buyer and went with them. There didn't seem to be any rules any more. The property market has become like the Wild West, anything goes as long as you sell.”
CUTTING MY PRICE TO A REALISTIC LEVEL PROVED IT IS A GOOD TIME TO BUY
Venture capitalist retiring to the West Country
Slash factor: 25 per cent from £1.695 million to £1.295 million
Where? Wimbledon
Status: Three offers, now competitive bids
After 30 years in London and a successful career in venture capital, Ian Mabbutt wants a simpler life in the West Country. His substantial house in Wimbledon would make a great home for almost any family, so when he put it on the market in February 2008 for £1.695 million there were 12 viewers within the first three weeks. Many came back for a second or third look. Two offers came in for near the asking price. He selected one but on the day of exchange in March the buyer pulled out.
“I think they got spooked by the Bear Stearns collapse,” recalls Mr Mabbutt. “It then went completely quiet with all the banks collapsing. After the pictures of boxes being taken out of Lehman Brothers, there were no viewers at all.”
Despondent, Mr Mabbutt took the house off the market at the end of last year. But he was prompted by a recent article in the Evening Standard to ring his agent, Savills, and try putting it back on at a 25 per cent discount. He was immediately besieged with viewings and within 10 days received three firm offers very near the new asking price. With a fourth in the offing, Mr Mabbutt is giving bidders 10 days to come up with their best and final offers.
“Reducing the price by 25 per cent provided clarity for everyone,” he says. “I am very pleased indeed at the response. It proves that it is a good time to buy and I'll now be looking to do so in Dorset or Devon.”
I REDUCED MY ASKING PRICE and HAD A QUEUE OF BUYERS
Empty nester looking to downsize
Slash factor: 25 per cent from £4 million to £2.95 million
Where? Notting Hill
Status: Accepted an offer
Two of Katie Cardona's three children have left home, so she put her five/six bedroom family house in Chepstow Villas on the market last summer to move somewhere smaller.
“I just didn't want to rattle around this big place any more,” she says. “It's in a glamorous street and normally you would expect a great deal of interest and a sale within three weeks. We just chose the wrong time to downsize.
“The market just seized up. The few viewers we had seemed reluctant to offer or couldn't get finance. We cut the price last year to £3.4 million but it still didn't work. But when we reduced the price again a month ago to £2.95 million, the difference was phenomenal.
“We've had this splurge of people pouring through the door, more than 25 of them. Some have been busy making offers. I had three within days, and realised it was going to sell at a price I could live with.
“It seemed that once one offer was in, people felt it was safe to make their own, perhaps higher, bid. I have accepted an offer. I see no real point in waiting forever for the market to come up again as other places are cheaper, too.”
Reader views (13)
Pure madness - the only sense in this article is the comments made underneath it - the property boom is over for the time being, we are at the start of the worst recession since the 30's and the only reason we are surviving is that unlike back then we have created serious wealth over the last 20 years or so. Property has been a one way ticket for so long that now as the world de-leverages, unemployment increases to over 2m and the days of cheap credit have gone people must realise that property has been a bubble and is slowly unwinding. Property works in cycles and economist say that a cycle tends to be 6 yearly from trough to peak. we are less than a year into house price drops, our banks have been fully propped up by the tax payer, people are poorer in the pocket and yet estate agents (and it seems only estate agents) predict now is a great time to buy a house! On what basis is it a good time to buy a house? I put this question to my friends in the property industry and am yet to have a valid response. The only people i can see any value for is cash buyers who can put down 50% or more. What we will see is a time now where buyers need to put down between 30-40% deposits and guess what - on a £300k starter flat that is anywhere up to £120k and if the majority of first time buyer can find that then I am living on cloud cuckoo. Wake up, smell the coffee estate agents - the game is up for the time being
- Youvegottaloveestateagents, London, 11/03/2009 12:03
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It beggars belief that a three bedroom house in Holloway, could ever be considered 'worth' £450,000, let alone £630,000! What is it built with - bars of gold? This pyramid scheme nonsense has to stop, and soon, or this country is finished.
- Austin Allegro, London, 11/03/2009 11:26
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The stock market is down to levels last seen in about 1995. Buy a house when their prices do the same.
People convinced their precious house is 'worth' 98% of it's peak value are on borrowed time, literally.
- James Harmston, Bedford UK, 11/03/2009 10:06
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Is London fairy-land? Does everyone there 'earn' 100k plus? It baffles me.
It is amazing how many people still do not realise the party is over. The growth in property prices over the last 10 years was funded by a growth in debt created by banks basically lying about their capital adequacy - by constantly re-packaging debt to use as security for more loans.
Have people not noticed what is going on. The banking system is bankrupt and is being kept above water by the government - borrowing on behalf of our children to pay the money back over a generation. The stock market stands lower than 10 years ago ... yet people still think this is a blip and it will all, somehow, blow over.
People need to get used to the idea that if they pay daft prices for property now, that property will not be worth what they paid for it for another 50 years.
It's over. Property is in the process of returning to a normal relationship with affordability. Salaries at the moment are going down. Try getting a new job. 100 people applying for each job and employers quick to realise they can fill the vacancy at a salary 20% less than the last person was getting.
Within a few years a 3 bed semi in an Outer London suburb that was selling at 350k will be selling at 100k.
- Mike Wilson, Winchester, UK, 11/03/2009 09:25
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I concur with the other commenters here. The twin credit and property bubbles which fed off each other were nothing more than a gigantic Ponzi scheme that is now unwinding. Over the coming months as prices fall further we will see more and more articles such as this, no doubt claiming that great deals can be had. However, their reference point are the overinflated peak prices. A bargain is a price that is less than intrinsic value not less than it's peak. What's intrinsic value? 3.5x income has been a historical standard. Prices will almost certainly undershoot that. Stay out if you can until then and you will get a true bargain.
- Jonathan, New York, 11/03/2009 08:12
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The economy's on its knees.
House prices remain horribly over-valued by any historical standard [real prices or prices as a multiple of income].
- Steve A, London, 11/03/2009 00:06
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Buy now at your peril when interest rates go up due to the massive inflation the Government is stacking up with quantative easing.
- Albert Hall, hove england, 10/03/2009 17:01
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Bruce, Amen! people still think in terms of 2006/07 prices not realising they were 50%+++ over inflated, it will take time before people realise what house prices should, and even worse they think once this is over prices will skyrocket but it will take 10 years ++ before prices are back to 2006 levels
- Mike, London, 10/03/2009 13:44
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It wasn't too long ago that one wouldn't be caught dead buying a house in Holloway or Notting hill. Prices for these houses have been pushed up by greedy Realtors and even greedier owners. I used to work at a real estate agent and our motto was "push the price up" somebody will buy it. 6% of 100K was better than 6% of 80K. The prices of houses in UK are way out of proportion to wages being earned. We spent 9 months trying to find a house ANYWHERE in England for a price that we could afford to buy. We left UK, again, to buy a two bedroom house with garage on 1/4 acre in the USA for 95,000 pounds. It's no wonder that young people,up to 35 years old, are living with their parents. I can also see why the young people are being so rebellious. What hope do they have in the future for anything. Sad ,Sad sad.
- Jon Vickers, SC USA, 10/03/2009 13:39
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I have to ask what multiplier of income the lenders are using ? It seems to me that we are going down the same disasterous avenue as before. Who gains - Up front charges for overpaid lawyers , banks and estate agents . High price houses is only interesting to borrowers wh buy all on credit. I have money I saved and I will buy when the market bottoms out .
The government is playing into the banks hands by supporting excessive borrowing against sensible saving.
By the way I will buy a new car as now the inflated credit buyers are out of the way I can get an honest deal.
Inflate the market by encouraging savers to know that they will get a return on their savings . Once secure we start to buy with real money.
The government shows it cares only about the short term
- Terry, Hennebont France, 10/03/2009 13:34
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Borrow, Borrow, borrow - Never mind getting yourself in debt - such recklessness. Property prices are still far too high and all buyers should hold off buying until greedy property sellers drop their prices further or they should keep their properties as homes for the long term as they were meant to be.
- Peter Noterfed, Paris, France, 10/03/2009 13:18
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Shock horror, hugely overpriced houses do not sell. Reasonably priced housing will.
Encouraging people to Buy Buy Buy is simply irresponsible however. The market still has a long way to fall and once it has hit rock bottom will not be bouncing back up any time soon.
Why is the media so intent on painting a false picture of the housing market and attempting to re-inflate the bubble? It has burst, the world is a different place. Accept it and move on and if that means your buy to let empire is now in trouble or you are in negative equity. Tough.
Lower house prices are better for everyone except agents, bankers and speculators.
- Bruce, London, 10/03/2009 12:39
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FOOLS FOOLS FOOLS - the property market has much further to fall and anyone that buys now is playing with fire. Seems like people are just in love with the prospect of negative equity, think about it, with the money markets still siezed and a recession in it's early stages how can prices recover?. This whole mess was caused by a property bubble - another one will finish our whole system off, totally. Prices must come right down for our economy to even have a chance of recovery.
- Mark Burton, St. Ives Cambs, 10/03/2009 12:35
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