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OPINION - Sellers are finally accepting big discounts on asking prices – but don't expect a crash

 (ES Composite)
(ES Composite)

If age is just a number, where the heck does that leave house prices? Inexperienced buyers (and given the irregularity with which people purchase property, that is most of us) are often intimated by the imposing number placed beneath that misleadingly wide lens money shot on Rightmove.

But asking prices can mean anything from the greed of the vendor to the desperation of the estate agent to secure the business. It certainly doesn't bear much relation to the inherent value of the property. For that, you need a market.

For months, analysts have been predicting a house price correction. That is, something well short of a crash, but perhaps falls in the region of 5-10 per cent this year. In some ways this is simple economics: the cost of borrowing has soared, and so many buyers are now unable to afford as much house as they could before. But this is the UK housing market – nothing is straightforward.

The market (in reality there are many small markets) has not followed suit. The problem, and I'm by no means the first person to describe it this way, is that for a long time, vendors still wanted to sell at last year's prices while buyers were only prepared to pay next year's. Thus, a standoff ensued. But that chapter may be drawing to a close.

The latest Zoopla House Price Index is out and its executive director Richard Donnell calls it "the best market for buyers in 5 years" as sellers have become more realistic. In terms of the data, that means vendors are accepting 5.5 per cent off the asking price, with an average discount of £18,000. In London, those figures rise to 6.1 per cent and £25,000 respectively.

One other factor that had been placing something of a floor beneath house prices was the low level of stock. But Zoopla finds that homes for sale are now at a six-year high, with 34 per cent more properties on the market compared with a year ago, meaning buyers have far more choice.

So, demand (as constrained by borrowing costs) is down while supply is up. In any functioning market, that ought to translate into falling prices. Zoopla's figures suggest 1.2 per cent down nationally and 2 per cent in London. Though it is important to note that house prices remain far above their pre-pandemic levels, roughly £40,000 on average.

Meanwhile, the normal rules still apply. So-called 'best in class' homes, those located on the prime streets and finished to a high level, are still selling, often at a premium.

Interest rates remain key. On the one hand, it seems likely that they have peaked, while 5-year fixed mortgage rates have been dropping below 5%. On the other hand, as noted in yesterday's newsletter, monetary policy will remain tight for some time, while next year hundreds of thousands more borrowers will fall off their cheap fixed-rate mortgages.

The buying agent Henry Pryor is clear: don't place much stock on asking prices. You can secure a large 'discount' and overpay, while some of the best deals he has made involved going over.

By the way, if you've come this far and are screaming into the void about rents, you and me both. After rising 31 per cent in two years, you'd think they couldn't go much higher. But then you'll read this piece by India Block.

In the comment pages, Nimco Ali asks when it comes to sexual violence, why is it that Israeli women don't count? Simon Hunt warns of cash-strapped London councils heading for financial armageddon. While Nick Levin says the closure of G-A-Y late is further evidence of how the capital is growing less safe for LGBTQ+ people.

And finally, Nancy Durrant speaks with the acclaimed artist Grayson Perry about his one-man show. Just don't call it stand-up.

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