UK's prime property vendors need a reality check
Sales volumes are up to 60% lower than average in many of London’s most desirable postcodes, including prime and super prime property, suggesting continuing unrealism among vendors.
The lack of mortgage finance is undoubtedly a factor affecting sales as well, according to Knight Frank, a UK-based estate agent.
Despite price falls, the agent said it is difficult to reconcile vendor and buyer expectations. There are a growing number of rejected offers for properties, with some as much as 30% below asking price – a reflection of where many buyers expect prices to fall to.
Liam Bailey, head of residential research at Knight Frank, said: “After over a decade of rising prices in the capital, it is difficult for many homeowners to accept that their homes may be worth as much as 20% less than a year ago."
He added: “ As a result, they are unwilling to accept agent advice on appropriate asking prices or offers. However, as many have high levels of equity in their property and relatively secure jobs, they do not yet have to sell. Consequently, many properties are withdrawn from the market or remain unsold for long periods of time – producing an unprecedentedly low number of transactions.”
“Unless their properties are absolutely outstanding, it is even more essential than ever that London’s vendors adopt a realistic attitude and listen to their advisers if they want to achieve a sale.”
The review predicts further falls in prices throughout 2009, with the bulk of price falls in place by March next year. The structural under-supply of housing in London will prevent a more dramatic fall from occurring. As a result, transactions may fall even lower, perhaps reaching a low of as little as 30% off historic trends.
However, there is a growing buzz in the rental sector with many buyers opting to put off a purchase until the market stabilises. Rents should rise throughout this year, and with prices falling, investment yields will rise.
Although buy-to-let investors with highly geared portfolios may find the next year very stressful, it will be a more benign climate for new entrants.
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