New and existing property sellers are reacting to the quieter time of year by launching an autumn sale to tempt buyers, according to the latest index from Rightmove.
The property portal found that new-to-the-market sellers trimmed the asking price of their home last month, albeit by a modest 0.8% (£2,392).
Over one-third (37%) of properties already on the market have reduced their asking price since the first listing – the highest proportion at this time of year for five years – a sign of initial over-optimism and a tougher market.
With existing sellers holding an autumn sale and obviously keen to sell, there’s an opportunity for buyers to negotiate a good deal in the quieter run-up to Christmas.
As stretched buyer affordability is tested further by the recent interest rate rise, sellers should be increasingly wary of over-pricing, rather than hoping for a Budget reduction in Stamp Duty to boost buyer activity.
Rightmove Records Autumn Sale as House Price Cuts Hit Five-Year High
Miles Shipside, the Director and Housing Market Analyst at Rightmove, comments: “In the run-up to the festive season, many sellers are trying to tempt distracted buyers to look at their property by dangling the bauble of more attractive pricing, given the quieter time of year and more challenging market. Many sellers who have been on the market for a while are curbing their initial pricing optimism, and are hoping that reducing their property price will result in buyers selecting it as this year’s must-have Christmas gift. The effect is an impromptu autumn sale, with the largest proportion of sellers on the market having reduced their initial asking prices at this time of year since 2012.”
A drop in new seller asking prices is the norm at this time of year, and the 0.8% decline is the smallest recorded by Rightmove in November since 2007, in the early period of the credit crunch. However, with the largest proportion since 2012 of existing sellers at this time of year who have reduced their initial asking prices, it seems that many of this month’s new sellers are being too optimistic by not discounting by a greater factor than 0.8%.
For those who have had to reduce their asking price at least once, the average size of the reduction between first marketing price and current asking price is 6.3%. Analysis of those properties that actually sold last month after having reduced their prices shows that the average reduction was also 6.3%. For these sellers, their price reductions tempted buyers to make an offer and a sale has now been agreed.
Shipside advises: “Given that the market has been price-sensitive for a while and a five-year high proportion of sellers are slashing their prices, some sellers and their agents are over-pricing. These sellers may well be asking themselves if they could have saved some time and stress by pricing a lot more conservatively than an average of more than 6% ahead of what the market subsequently proved it could sustain.
“Rightmove analysis of over 100,000 properties that successfully sold shows that those that sell typically generate over 40% more online interest in the first three weeks than those that do not sell. The danger of going too high at the outset is that you jeopardise that vital initial three-week period, and may have to start on a series of price reductions while potential buyers watch and assume that no one is buying your property because something is wrong with it other than the price. An average reduction of over 6% means that some properties will be considerably more over-priced than that, and such a big margin of error in the initial price of many properties that come to market can leave them stale and unsold.”
Those who are struggling to sell may hope that the Chancellor lends a helping hand in the forthcoming Autumn Budget (on 22nd November) and gives a boost by reducing Stamp Duty, or at least declaring a Stamp Duty holiday for first time buyers. However, with buyers’ finances already increasingly stretched by rising house prices in recent years, they now have to contend with the reality rather than speculation of increasing interest rates – up for the first time in over a decade.
Shipside adds: “While there are still some very cheap fixed-rate mortgage deals available to protect buyers from rising mortgage rates, it has been trailed that this is only the beginning of a series of base rate rises. However, with guidance that the upper limit for now may well be around 1%, buyers who are disappointed that rates are on the up after a ten-year break should note they are still historically very cheap.
“Sensible pricing by more sellers, bearing in mind the stretched buyer affordability, could help buyers’ mood. This could also help to increase longer-term market activity more than just a short-term Stamp Duty holiday, which, whilst it would initially make the cost of moving cheaper, could also result in fewer price reductions and higher property prices. There’s no doubting that both measures together would be welcomed by buyers, although it remains to be seen if sellers chopping their prices this autumn is the only potential Christmas gift for cash-strapped homebuyers.”
Lucy Pendleton, the Co-Founder Director of independent estate agent James Pendleton in London, responds to the index: “It’s crucial vendors move with the market when competition from sellers is stiff and there is negative pressure on prices. However, it’s also vital they don’t discount their home in dribs and drabs. By dropping the asking price in increments, all you succeed in doing is making your property look stale and unwanted, with none of the surge in viewings that a keen discount can bring. There are also far too many vendors in London who think a reduction of £10,000 is enough. This barely moves the needle when you turn it into a percentage. A reduction should be in the order of at least 5% if you want to drive substantial interest, which, ironically, can result in you achieving the price you originally wanted anyway.”
The National Sales Director at Leaders, Kevin Shaw, also reacts: “There has always been seasonal variation in terms of demand, and this year is no different. Things are generally quieter as we head into the Christmas period and this, along with the prevailing local market conditions, must be taken into account when setting the price for successful sale. Overall, demand from buyers remains strong across the country and sellers can be positive, but now is not the time for over-optimism. Starting too high and having to reduce the price can result in a property going stale on the market and possible further price reductions later, which no seller wants. Being realistic achieves far better results in the end.”
We also have the thoughts of Russell Quirk, the Founder and CEO of online estate agent eMoov.co.uk: “No huge surprise that we are seeing a large proportion of properties reducing asking prices as we head into the quieter festive period, especially given the current market conditions.
“It is always recommended that sellers price their house appropriately based on the current market climate, particularly with the slowdown in price growth we have seen of late. There have been signs of life returning to the market over the last few months, and so it is likely that some sellers may have jumped the gun a bit and priced a little too optimistically as a result.”
Quirk concludes: “However, we’re confident that when the market springs back to life in January, we will see it continued to build momentum, with sellers once again able to price a little higher than they currently are, albeit increasing at a slow and steady rate.”