The average London home is now sold at 4 per cent below its original asking price, according to the Hometrack Cities Index, up from just 0.5 per cent in 2014. Many are taking it as a sign that homeowners are desperately discounting their homes in an effort to sell, and that the capital has now officially become a buyers’ market.
However, the view on the ground is that there are still more buyers than there are properties. So what could be causing this gap between asking and selling prices? In my opinion, the real reason behind this gloomy-looking stat is the fact that, in order to secure the instruction, many agents are promising asking prices that go above and beyond what a property can realistically fetch.
We all want to imagine our home is worth top whack, and so sellers are inevitably attracted by the agent who provides the highest valuation. However, listing your property even slightly too high could actually be a costly and time consuming mistake. Once on the market, interest will be limited as buyers are put off by an over-inflated price.
Agents with fair and realistic pricing strategies are being undermined by those only concerned with hitting monthly targets, rather than the health of the market and making the sales process as smooth as possible
Sellers then become impatient, often because they may have an offer on a house they wish to move to, and the asking price inevitably has to be dropped to a more realistic level. In recent years we have seen rising reports of properties being sold, often after being on the market for long periods of time, for significantly less than the initial asking price.
Unfortunately this can impact on other potential sellers in the same area, who may be put off selling their property after researching the area’s recent transactions and believing prices are falling. This can seem like an extremely depressing prospect for anyone trying to sell their home, and a bad sign for the UK property market, when in reality it’s a case of irresponsibly high pricing.
Some agents are effectively telling sellers what they want to hear, and it is not helpful to the overall health of the market. If asking prices were realistic in the first instance, properties would attract more interest earlier on and more movement would be seen throughout the market. Increased transactions leads to increased market activity, ultimately preventing periods of stagnation.
Responsibility for fixing this issue lies with irresponsible agents. Agents with fair and realistic pricing strategies are being undermined by those only concerned with hitting monthly targets, rather than the health of the market and making the sales process as smooth as possible.
We must educate sellers on the need to be realistic with their pricing strategy, too, to do their own research and ask a number of agents to offer estimates so that outliers can be identified. That’s not to say that the lowest price is always right, but it’s highly unlikely that an agent would quote you a lower price than your property is worth. As with most things in life – if it sounds too good to be true, then that’s because it is.