A prominent buying agent says nervous buyers are pre-emptively slashing asking prices before the housing market worsens.
If true, this could present opportunities for investors seeking to expand portfolios at lower-than-expected prices.
Jonathan Hopper, chief executive of Garrington Property Finders, says: “With rapidly rising interest rates thinning the number of determined buyers, those who remain are finding that the market is tilting ever further in their favour.
“We’re starting to see a shift in pricing behaviour. As the summer slowdown approaches, some pragmatic sellers are recalibrating their aspirations by cutting prices pre-emptively to get ahead of the market, rather than slicing off thousands in response to a low offer.
“In some areas double-digit price reductions are now not uncommon, with regions that saw the frothiest excesses during the boom, as well as those with high levels of Help to Buy ownership, seeing some of the sharpest price falls.
“For many sellers this will be a bitter pill to swallow, albeit one that is preferable to the limbo of having their home sit unsold for months before they cut the price anyway.”
Hopper’s comments come on the back of the latest government figures showing plummeting transaction numbers.
Property sales in May - the latest data available - were 25 per cent lower than a year earlier, at 74,360. Take into account the seasonal adjustment and the drop was no less than 27 per cent in a year. Aside from when the market was effectively shut in May 2020, because of Covid, it’s the slowest May in a decade.
This has prompted siren warnings of a worsening market over the rest of 2023 - again an opportunity for some investors who want too bag a bargain investment.
Sarah Coles, head of personal finance at business consultancy Hargreaves Lansdown, says: “It was a barren May for the property market, with sales drying up in the face of scorching inflation. May’s sales were a quarter lower than a year earlier, and these were agreed months earlier, well before the mortgage rate hikes that are wreaking havoc on the market today. It means there’s the risk of a serious sales drought taking hold later in the summer.
These figures are for sales completed in May, and given that it takes around three months from agreeing a sale to completing, many of them were actually sold in February. Back then, it was inflation dominating our every waking thought. Buyers were worried that committing to a big mortgage would mean being squeezed harder with each passing month. It was enough to encourage plenty of them to sit on their hands, and hope that life got easier.
In fact, since then, life has got even harder, because we’ve been hit with a new mortgage nightmare. Back then, Moneyfacts figures show an average two-year fixed rate mortgage cost around 5.3 per cent and a five-year fix around 5.0 per cent. Right now, an average two-year fix will set you back 6.37 and a five-year fix 5.94 pier cent.
“It makes the most incredible dent in what people can afford, so buyers either need to make serious compromises about what they can buy, or face sky-high monthly payments at a time when they can ill-afford it. Neither of them are a tempting prospect, which is why we can expect property sales to dry up even more as we go through the summer.”