Following last week’s report from Which? on overpricing homes, Rightmove says that agents must get the price right to avoid deterring price-sensitive buyers.
Rightmove reports that the price of property has increased by just 2.0 per ent (+£5,986), the smallest price rise at this time of year since February 2009; well below the average +5.0 per cent February uplift over the previous seven years. This contributes to a further slowing in the pace of price rises, with the annual rate of +2.3 per cent being the lowest since April 2013.
Miles Shipside, Rightmove director said, “While the prices of goods in shops are rising at a faster rate, the pace of price rises in property coming to the market is slowing. They’re still 2.3 per cent higher than a year ago, but perhaps we’re approaching the territory where many buyers are unable or unwilling to pay what sellers are asking, given the negative combination of rises in the cost of living, tighter lending criteria, and a dose of Brexit uncertainty. The housing market has had a long sprint since April 2013 when the annual rate was last below this level, so it’s not surprising that upwards price pressure is running on tired legs with average prices today being 23% or nearly £60,000 higher than they were then. This surge in the cost of home-ownership highlights some of the issues referred to in the government’s recent White Paper on fixing the broken housing market.”
Mr Shipside added, “While seller pricing power appears to be on the wane overall, the numbers of deals done is very robust, scarcely lower than during last year’s tax-saving rush, although understandably quieter in the investor sector of two beds or fewer and in parts of London.”
Get the price right before marketing
The slower pace of price rises means that over-priced properties are at greater risk of standing out as poorer value for longer, diminishing the interest of potential buyers. If prices are rising quickly then they will catch up with an over-priced property sooner, making it less obvious that it is more expensive than local comparable properties. With buyer affordability increasingly stretched, three quarters of agents (75 per cent) surveyed by Rightmove report their local market as price sensitive and that an asking price more than a few per cent too high will harm interest levels in the property. Only one in four agents (25 per cent) said interest was still generated if prices were more than 5 per cent too high. In addition, Rightmove analysis of over 100,000 newly-listed properties shows that sellers are 40 per cent more likely to sell with that agent if they get the price right when they first come to market.
Shipside advises: “The majority of the market is price sensitive with most agents we surveyed reporting that possible buyers are reluctant to enquire about a property just a few per cent too high, so it’s vital to get the price right.
With the annual rate of price increase now at 2.3 per cent a property that is over-priced by more than 5 per cent will have to wait more than two years for the market to catch up with it. Some sellers may have thought there is no price to pay by starting high and reducing the asking price later. However, our extensive tracking of properties that have found a buyer shows that your property should substantially out-perform the level of interest in similar properties in your local area during the first three weeks of marketing to minimise the risk of being left on the shelf. Over-pricing loses you that vital initial interest and impetus, and buyers often have reservations about a property that has not sold as quickly as others or has had a price reduction.”
Kevin Shaw, national sales director at estate agency Leaders, says: “Tempting as it may be, it’s never in the interests of a seller to set an asking price above what a property is really worth. Get the price right, based on local market conditions, to achieve a quick sale and the best possible price. Overpricing, particularly in a price-sensitive market, will result in the property sitting on the market until the price is dropped, losing the interest of buyers and ultimately achieving a lower price in the end. With demand as high as it is and the current lack of supply, we know that an accurately priced property will sell within the first few weeks of coming onto the market, provided it is well-presented and marketed correctly. Sellers need to be more aware of the risks of over-pricing and choose an agent that will give them a reliable, honest valuation to help them achieve the best price for their home.”
James Sims, Director at Brik Estate Agents in Fulham said, “The sales market in Fulham is currently very price sensitive. We’re noticing that reducing properties by even a marginal 2-3 per cent can make a significant difference to the level of interest from potential buyers. As is usual at this time of year we’ve had more sellers of properties in higher priced brackets come to market, and so we’ve been working with them to make sure get the price right for their property.”