Sellers still setting prices too high
Despite the fact that UK house prices are still down by approximately 17% year on year, many sellers seem to be ignoring the market realities and listing their properties at unrealistically high prices, which they then have to negotiate downwards.
[UKPRwire, Thu Apr 23 2009] Despite the fact that UK house prices are still down by approximately 17% year on year, many sellers seem to be ignoring the market realities and listing their properties at unrealistically high prices, which they then have to negotiate downwards.
Estate agents have reported an increase of 1.8% (an average £3,996) in sellers’ asking prices for the third consecutive month, though it is too early to say whether this indicates a genuine bottoming out of prices and returning confidence, or is merely a seasonal bounce.
The average selling prices at the Halifax and the Nationwide are around £157,000 and £151,000 respectively, yet the average listing price, according to Rightmove, is £218,000 – clearly illustrating the gulf between what sellers are initially asking and the price they eventually sell at. On average, vendors are reducing prices by up to 2% a week until they are able to find a buyer both willing and financially able to commit to the purchase.
The fact that more vendors are coming to market – up 13% on last month, or 22,260 per week – indicates a growing confidence on their part. But they are still setting their asking price too high, which results in their losing the initial marketing impetus of a newly listed property, and the selling process dragging on as they reduce the price week by week.
While the larger number of sellers is an encouraging sign, there is nothing to indicate that any real recovery is underway just yet. For that to happen, house prices need to stabilise at realistic levels of affordability (a world away from the artificially inflated prices of the days of easy credit), and this correction would involve a further 17% drop – which suggests that the market is only at the halfway mark in the correction process.
More importantly, the housing market is unlikely to see any kind of recovery until the level of mortgage approvals rises significantly. While there are signs that lenders are starting to release more funds for house purchases, mortgage activity stands at around a third of its 2002 to 2007 levels. Furthermore, the prospect of rising unemployment over the next few years will also act as a brake on recovery.
As Miles Shipside, commercial director of Rightmove, predicts: "2009 will not see the triple whammy of recovery of confidence, the economy, and institutional lending. Some sellers are doing deals at prices that have adjusted to the new reality, though there also remain some real property black spots of overpriced supply outstripping recession-dimmed demand. Those less desirable and harder hit areas will lag well behind in the recovery given the new era of financial prudence, and those that have to sell must be even more realistic."
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