06 Aug Buyers warn sellers: ‘mind the price gap’
Rightmove’s latest Consumer Confidence Survey of nearly 40,000 home-movers finds that around half (49%) of people planning to buy in the next 12 months are of the view that current house prices in their local area are above what they consider ‘fair and reasonable’. By comparison, only around a third (36%) of those expecting to sell holds the same view. These results highlight a significant price gap between what sellers hope they can achieve for a property and what buyers are willing or able to pay.
Sellers need to look for ways to address this valuation mismatch in order to be successful, at a time when the UK housing market continues to be blighted by low transaction levels.
Miles Shipside, director of Rightmove comments: “A difference of opinion on price between buyers and sellers is nothing new as both are obviously keen to protect their own interests – not to mention pockets. However, unless both parties are able to bridge the price gap, then a stand-off situation ensues leading to lower numbers of successful sales. Naturally, sellers have an interest in standing their ground in order to achieve the best price but in the current housing market, where sellers outnumber successful buyers by around two to one, sellers need to lower the price or increase the perception of value to avoid being outflanked by their competition. First impressions are vital, and if a prospective buyer’s first impression is that a property is over-priced, they may not take their interest any further.”
Despite the valuation mismatch between buyers and sellers, only a quarter (24%) of home-movers expects property prices to be lower a year from now. Indeed, with seven out of ten expecting prices to be the same (40%) or higher (30%) one year hence, there is little evidence to suggest the gap will close any time soon.
Shipside adds: “If you are selling through choice then you are perfectly entitled to stand your ground on price and wait to see if a buyer comes along. How long that might take is dependent on a number of factors such as the location of your property and how competitively you priced in the first instance. The bad news for buyers is that in a market lacking downward price pressure due to limited numbers of forced sales there is little driver for change. However, there is some good news as it does give canny sellers, who are willing or able to price more keenly than similar properties up for
sale, the chance to stand out.”
Each quarter Rightmove asks those respondents who expect prices to be higher over the next 12 months for the main reason why they hold that view. This quarter there has been a surge in respondents putting price growth down to sellers and estate agents overpricing, up from 16% a year ago to 22% in this latest survey. The growth in the belief that properties are being overpriced by sellers and estate agents does not give sellers much comfort in dealing with their main fears. 56% cited receiving a sensible offer as their single biggest concern when selling.
Shipside observes: “Sellers and their estate agents should take note of the emergence of a substantial group of ‘price-sceptics’. One in five believes that house price growth will be driven by overpricing and this, coupled with the fact that half of intending buyers believe local prices are currently above fair and reasonable, provides a stark insight into the concerns of many homemovers in today’s property market. Prospective sellers should set their price expectations by gathering the right market intelligence on what is happening locally and work with their agent to price at an appropriate level to sell. Setting a compelling asking price is part of the equation, but increasing the perception and reality of a property’s value by thoroughly preparing it for sale is no less important. Enhancing its kerbside appeal, interior finish and ‘photogenics’ to be better than the rest can help sellers in their goal to receive a sensible offer.”