Unrealistic house prices damaging housing market
Homeowners reluctance to reduce the asking prices on their homes is contributing towards a stagnant market, says property website Rightmove.co.uk.
The average asking price in February is £230,030, up by 3.1% from January's average of £223,121. In contrast, the average selling price is £165,000 for properties in England and Wales, according to the Land Registry.
In 2010 1.3 million properties were on the market against only 530,000 available mortgages. Lenders predict that 2011 will mirror last year's lack of movement.
Miles Shipside, director of Rightmove warns that the current static market is set to become the new norm: "Any hopes that transaction volumes may be preparing to return to historic norms will have been dashed by lenders' predictions that 2011 lending volumes will match 2010's dire levels."
The waiting game
Shipside cites a lack of mortgage finance and insufficient equity in homes as the main reasons for a slow–moving market but he also speaks of sellers forced to play the waiting game with their properties who won't budge on the asking price: "[People are] unwilling or unable to drop their asking prices to bargain basement levels and this helps explain why new sellers' average asking prices remain broadly static year–on–year."
David Hollingworth, spokesperson for mortgage broker London & Country agrees that muted activity will continue throughout this year and adds that a lack of equity in their homes means many sellers physically cannot accept much below their asking price.
"It's the age old balancing act: buyers will look to bargain as much as they can and sellers want the best price they can get. But with fragile confidence in the economy in general, many sellers simply can't keep decreasing their price."
Shipside also takes the view that the majority of sellers can afford to hold off selling so won't reduce the sale price. This lack of urgency to change prices explains why local markets are so slow moving and according to Rightmove traffic statistics, there is a trend for househunters to discard less attractively priced homes in favour of the more competitively priced bargains.
"Most sellers can afford to hold out for a buyer who will hopefully pay a fair price as the house ideally suits their needs and represents comparative value. In areas of more plentiful supply that can mean a long wait with no guarantee of success," he says.
Property expert Sarah Beeny thinks sellers need to be more realistic: "The fact is you will only sell for what your property is perceived to be worth, an overinflated price will just mean you don't get anyone through the door to view, but a lower asking price will only go upwards if there is enough interest. Better to have several offers on the table at a lower price, than none at all at a higher one," she says.
For those homeowners desperate for a sale – at a fair price – Hollingworth advises keeping in close contact with your estate agent to make sure the valuations are fair. "It could just be a presentation issue. I'm not one to go all 'house doctor' but it's worth finding out why potential buyers lose interest and if it's something that can easily be fixed."
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