Date Published 23 May 2008
New-to-market sellers, not facing financial distress, are testing the market at prices now in excess of the peak of the boom and ignoring the consequence of ever-tightening mortgage availability. New sellers can see the storm clouds overhead but seem to believe it’s only raining on other people. The reality is it started raining last September, and has reached storm force in the last month. The free flowing mortgage tap has been turned off. Sellers who are out to achieve last year’s prices need to accept that the market has fallen and that they will end up being punished by a lower price in the long run. Discretionary movers can afford to test the market and sit there for months. Whilst this is a usual trend at this time of year, it is still indicative of the ‘business as usual’ mindset following 10 years of steadily rising prices.
In the current market, over-pricing is the wrong tactic both to sell your house and speed a recovery in sales volumes. Potential buyers of these properties are more mortgagable than those in lower price brackets. However, if a lack of funding and affordability is affecting buyers further down the chain, sellers at the top need to price more realistically to get the market moving. Lenders are looking after number one by raising mortgage arrangement fees, monthly repayments and deposit requirements, and the amount they are prepared to lend is falling. Sellers therefore need to act in a more coordinated way to help improve affordability throughout the chain. However, there are thousands of estate agents and hundreds of thousands of sellers, so reaction to a deteriorating market is a slow process. Average unsold property stock per estate agency branch has jumped to a new record figure, rising from 69 to 73; the highest ever figure Rightmove has measured since records began in August 2002. The previous high was 72 properties in August 2005.
Sales are still happening where sellers are pricing realistically, especially where they are getting similar reductions on the home they are buying. With the current mortgage famine forecast to last for 2 years, sellers need to focus on trying to attract the limited number of buyers who have access to funds. Some estate agents are now turning away new instructions if they are similar to the properties they already have on their books and cannot sell. This is a major cultural change for most estate agents, but those of us with experience of previous downturns recognise there are big costs in burdening ourselves with even more over priced stock.