The latest data and analysis from Rightmove has revealed that as many as 37% of properties already on the market have reduced their asking price since first listing - a five year high for this time of year.
Although more sellers are trimming prices, the 0.8% fall (-£2,392) is the smallest that Rightmove has recorded in November since 2007.
However, with the largest proportion since 2012 of existing sellers at this time of year who have reduced their initial asking prices, Rightmove says many of this month’s new sellers are being too optimistic by not discounting by a greater factor than 0.8%.
For those who have had to reduce their asking price at least once, the average size of reduction between first marketing price and current asking price is 6.3%. Analysis of those properties that actually sold last month after having reduced their prices shows that their average reduction between initial and last advertised asking price was also 6.3%.
Miles Shipside, Rightmove director and housing market analyst, commented: “In the run-up to the festive season many sellers are trying to tempt distracted buyers to look at their property by dangling the bauble of more attractive pricing given the quieter time of year and more challenging market.
Many sellers who have been on the market for a while are curbing their initial pricing optimism and are hoping that reducing their property price will result in buyers selecting it as this year’s must-have Christmas gift. The effect is an impromptu Autumn Sale with the largest proportion of sellers on the market having reduced their initial asking prices at this time of year since 2012.
Given that the market has been price-sensitive for a while and a five-year high proportion of sellers are slashing their prices, some sellers and their agents are over-pricing. These sellers may well be asking themselves if they could have saved some time and stress by pricing a lot more conservatively than an average of more than six percent ahead of what the market subsequently proved it could sustain. Rightmove analysis of over 100,000 properties that successfully sold shows that those that sell typically generate over 40% more online interest in the first three weeks than those that do not sell.
The danger of going too high at the outset is that you jeopardise that vital initial three-week period, and may have to start on a series of price reductions while potential buyers watch and assume that no-one is buying your property because something is wrong with it other than the price.
While there are still some very cheap fixed-rate mortgage deals available to protect buyers from rising mortgage rates, it has been trailed that this is only the beginning of a series of base rate rises. However, with guidance that the upper limit for now may well be around one percent, buyers who are disappointed that rates are on the up after a ten-year break should note they are still historically very cheap. Sensible pricing by more sellers, bearing in mind the stretched buyer affordability, could help buyers’ mood.
This could also help to increase longer-term market activity more than just a short-term Stamp Duty holiday, which whilst it would initially make the cost of moving cheaper could also result in fewer price reductions and higher property prices. There’s no doubting that both measures together would be welcomed by buyers, although it remains to be seen if sellers chopping their prices this autumn is the only potential Christmas gift for cash-strapped home-buyers.”
Russell Quirk, founder and CEO of eMoov.co.uk, commented: "No huge surprise that we are seeing a large proportion of properties reducing asking prices as we head into the quieter festive period, especially given the current market conditions.
It is always recommended that sellers price their house appropriately based on the current market climate, particularly with the slowdown in price growth we have seen of late. There have been signs of life returning to the market over the last few months, and so it is likely that some sellers may have jumped the gun a bit and priced a little too optimistically as a result.
However, we're confident that when the market springs back to life in January we will see it continued to build momentum, with sellers once again able to price a little higher than they currently are, albeit increasing at a slow and steady rate."
Brian Murphy, Head of Lending for Mortgage Advice Bureau, said: “The data suggests that asking prices have cooled slightly in November, potentially as a result of optimistic pricing earlier in the year. That said, asking prices have still risen year on year, with the highest increase seen on ‘second stepper’ properties, which are normally categorised as three bedroom, family homes. The chronic shortage of this type of property in many areas is probably what’s leading to the sustained increase on this particular sector of the market, as buyers of these properties are moving because they need to, rather than it being a discretionary decision.
The rise in base rate earlier this month hasn’t actually had too much of an impact on the competitive mortgage products available, and deals are still at or around the same levels as they were a few weeks ago, albeit perhaps a few basis points higher, but nothing that would be seen to be a sensational increase. The other factor is that the interest rate has returned to where it was for the best part of a decade, rather than above the previous rate.
So in terms of borrowing, it’s possible to suggest that the situation post November 2nd isn’t one that would spook would-be buyers out of their purchasing decision, however it may perhaps make them consider a longer term fixed rate when arranging their mortgage, given that we know rates will rise, albeit slowly and gradually, over the next couple of years. But these factors aren’t probably the main cause of an ‘Autumn Sale’. It’s more likely that properties have been ambitiously priced previously, and now with Christmas just around the corner, sellers have become more realistic about what is actually achievable.”