Tuesday, Feb 17, 2009
Sense from Savill's?
Daily Mail: The 25% tipping point: That's how much you need to cut your asking price to sell your home
Estate agents have identified a 'tipping point' that they claim will bring buyers flooding back onto the property market. Homeowners willing to price their property at least 25 per cent below its peak value are swamped with offers, agency Savills said. The company's branch in Putney, London, said that this month it had seen several 'realistically' priced homes go to sealed bids after each spent only a week on the market.
Posted by uncle chris @ 12:41 PM (1543 views) Add Comment
23 Comments
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1. need-a-crash said...
Seems true from what I've seen as well, but does this mean prices won't fall any further than 25% from peak in London??
2. will said...
Sounds like a damage limitation exercise. Maybe they hope 25% is enough, but don't believe a word of it.
3. japanese uncle said...
Those who could afford to buy houses at this level (25% discount) are the ones with enough equity in their existing properties (wishing to relocate, or buy second house), which is obviously a small fraction of the entire market. And such equity will keep shrinking as the value of their own houses keep going down. The HPC won't stop until and unless the prices are low enough for FTBs to take on housing investment.
4. rm96696 said...
Sounds like too little to me. Even with 25% off are prices "realistic"? And 25% off what? Current asking prices? Any old price one wishes to quote?
5. Adrockuk said...
It’s nonsense to say because houses are now selling if reduced to 25% of their peak price that this is some kind of price floor.
It’s simply the current market price, and the market price is falling.
6. timmy t said...
There is always an immediate assumption that if houses are selling then the house market is recovering. Don't forget that just as people scramble to get up the ladder when prices are rising, so some will scramble back down as prices are falling to mitigate their losses. There are quite a few retired couples near us, all living in 5 bed detached places. If I was them I'd be trying to sell my 750K house and looking for something around 400K. Plenty big enough for 2 and a few quid in the bank, and by reducing my homes worth by 350K, that's 350K i'm not going to lose 40% of when prices tank further. I personally think that this explains the recent Halifax price increase too. There are no FTB's out there so a bigger % of transactions are happening further up the value chain.
7. mark said...
very few people can borrow money without a 40% deposit, this really means prices have to drop at least another 20% before they will become affordable..
this is just agents trying in vain to boost a market before march, a crash does not last 1 year it lasts several years from peak - bottom - rises, they are just trying to save their ar*es before they go bust themselves.
8. it_is_going_with_a_bang said...
It is a story stating the obvious. If you price something 10% to 25% less than what others are pricing at you will get the desired reaction from potential buyers of which there are still some - no matter what the state of the market.
The issue here is whether 25% is the lower limit from the top. Of course this is nonsense. Buyers will forget what prices 'were' in 2006 / 2007 all they will be interested in is the last 12 months and are they getting a good discount from say 12 months ago.
Provided people who wish to sell keep undercutting prices from previous months then they will continue to get interest/buyers.
This is the momentum behind house price declines - it has nothing to do with tipping point. It just so happens at this time in the cycle to sell your home quickly you need to be 20 to 25% below the peak. In 6 months it will probably be 25 - 30% from peak.
9. 51ck-6-51x said...
If I were an EA I would be be gently persuading my sell-side clients to lower their asking prices fairly dramatically... of course it's in my interest to achieve a maximal sale price and for that some competition amongst buyers is the best thing to have.
I don't think it says anything about the final floor - it could be less or more - it only states something about those willing to buy now - that they feel that this discount is enough for the risk.
10. 51ck-6-51x said...
timmy t - some good observation there I think.
11. jack c said...
To back up timmy t's theory - "First-time buyers are resorting to renting because they cannot get a mortgage, according to the Intermediary Mortgage Lenders Association (IMLA)"
http://www.ftadviser.com/FTAdviser/Mortgages/Products/BuyToLet/News/article/20090216/13a53b08-fc23-11dd-ac57-00144f2af8e8/Advisers-struggling-to-secure-lending-for-firsttime-buyers.jsp
12. inbreda said...
1. need-a-crash said...
Seems true from what I've seen as well, but does this mean prices won't fall any further than 25% from peak
as stated @7, it is all relative. There will always be someone buying a house, and of course they will go for the one that is 25% cheaper than the rest. And once EVERYONE has repriced their home to 25% less than peak, the houses that will be selling will be the ones that are a further 25% discount from there. And on and on and so is so.
Tomorrow is another day, and the vested interests will have to adjust their forecasts.
13. markg said...
Are you guys hoping or expecting prices to fall further. Looking at the blog it would seem the former, I would go further and say that you are probably not property owners. If it is the latter I have not seen any logical argument only idle speculation. Three reasons for the world to go around...debt,death and divorce...nothing else changes, only the people!
14. timmy t said...
Markg@12 - Both. I hope they fall further - not because I want some swanky mansion for a bargain, but because houses are for living in and a lot of people can't afford one with prices as they are. You are right I am not a property owner - I sold a couple of years ago and put the money in the bank.
Your last point - Let me get this straight Markg - are you saying you cannot see any logical argument for why we should expect house prices to fall further???? You're kidding right?
15. Chilli said...
The weakening pound explains a great deal with what is happening in the housing market at the moment. In real terms from a foreign perspective, the housing prices have dropped dramatically. I hazard that they are expecting for the pound to gain in strength again.
Over the long term, house prices must reach an equilibrium set by the usual micro economic forces in relation to average spending power. If this is not so, then, over an infinite period, houses will eventually either cost an infinite amount or nothing.
So if the proper equilibrium is higher than it was, why? Because of greater demand or reduced supply?
We have the ability to build a block of flats in six months. The issue with housing supply if it exists, has to be caused by mismanagement, which means that the lack of supply is temporary if there is a lack at all. On the demand side, a lot has been said about immigrants etc. But I don't believe we technically lack the ability to keep up with demand. Bear in mind that the UK is about 12% urbanized in its entire history. A couple million poles are not going to stress this island. You might comment on limited infrastructure, but what do we really lack to supply this infrastructure?
So there are no real reasons for a house price explosion in my opinion. What we are seeing today has been manufactured. Whether intentionally or otherwise.
If we do manage to stabilise the houseing price at this level, then we have another crash to look forward to in the near future. Either that, or high inflation.
16. realist75 said...
chasing the market down to save their skins. it's a dirty game they play.
17. george monsoon said...
I rent a house at present and the house has just been valued using a current measurement system to be the "peak market price - circa 2007!!"
the databases that estate agents use does not appear to be shifting downward, which means they are currently in denial. An estate agent friend is only selling houses with 20 - 30% off the list price, so when are these baselines going to be adjusted?
18. Crunchy said...
Well it's a start. The camels back is finally being broken.
This is where the fun begins and with no real spring bounce on the horizon this development could get very interesting.
19. 51ck-6-51x said...
Another thing... if the market has fallen 18% from peak then a reduction of 25% from peak is actually only a 9.5% discount, so it's pretty much on the money for the general EA view of only about another 10% fall to the bottom. No doubt this will attract anyone who is currently out looking for a 'bargain' as they will of course err on the side of being nearer the bottom (after all they are considering buying).
20. 51ck-6-51x said...
Actually 8.5%, sorry:
100 * ( 1 - ( 100 - 25 ) / ( 100 - 18 ) ) = 8.5
21. 51ck-6-51x said...
realist 75 - they are just brokers. Their business is the margin and the value they add is minimal (of course it's less than the margin since they are running a business). However, it is not law to use their service.
22. Tenyearstogetmymoney Back said...
I agree with most of the comments here especially those from it_is_going_with_a_bang and inbreda.
Locally on this estate a three bed just sold in a week for £206000.
In contrast a two bed from the same builder has been on the market with the same
Estate agent for £233000 for the last six months. What planet are these people on ?
A bit of a clue is that the three bed was empty so I guess the owners really wanted to sell.
:- Duncan
p.s. for MarkG Yes we are hoping for prices to fall more. Back to £70000 which is what I sold
my three bed house in the New forest for in 1999 (when I moved in with my now ex girlfriend) would be nice.
Anyway the main point is that if everyone dropped their prices 25% then only the people
who dropped further would have any chance of selling.
:- Duncan
23. quiet guy said...
Markg,
Prices are clearly dropping now. Perhaps it's true that less logical arguments are being posted now but that's simply because there's no need to justify our stance at the moment.
You're right that I'm not a property owner. I did my sums and came to the conclusion that I couldn't afford it.
A bull or troll pops up every time there is some 'good' news for the property market. I'll be interested to see what sort of posts we get the first time there is a substantial bounce in prices.