Asking prices are down 0.5% according to Rightmove. This is hardly a gargantuan swing in the market. Nevertheless, it shows that there is a definite mood change. Indeed there has been a huge increase in the number of price reductions (or price “adjustments” as the agents like to describe them…) in the past month.
As you will know I am not particularly fond of statistics and this one is pretty useless as well. Firstly asking prices are merely an indication of seller/agent bullishness. As I would recommend that you virtually ignore asking prices – you are much better advised to calculate fair value by studying what properties sold recently. You then put forward an offer accordingly.
Anyway, back to the statistic: it is about asking prices in London as a whole. It does not tell you what is happening in Knightsbridge or Kensington or Mayfair, for example. In fact even that information would still be too general. You need to know what is happening in your specific target market, i.e not just the area, but also the price range and style of property.
For example, a classic Belgravia townhouse priced between £8-12m will have massively underperformed an apartment in the same price range in the same area. Of course, if you do not understand exactly what is happening in your target market it is very easy to make an expensive mistake. For example, an estate agent could show you how much an apartment has sold for and use it as a comparable to make a house look “cheap”. This is a classic case of comparing apples with oranges and will cause you to massively overpay if you do not know what you are doing.
I have lost count of the number of times I have said to agents “I can’t believe you managed to get that price” and they have responded “Nor can we, but if you don’t ask…”. This is why I am very wary of the prices being paid for new build properties in certain areas of London. There is simply a mass of buyers who have little idea of what they are doing. Those who hope to flip these properties may well be in for a nasty surprise.
But if you are planning to offer on a property at the moment, I would use the reduction in asking prices in the negotiations to highlight the fact that there is a shift in momentum in the market. There is lots of other “information” on lower prices that you can use too. You should collate this and use it to back-up your logic in the negotiations.
However, it is vital that you do not rely solely on logic. Handling the sellers’ (and the agents’) emotions is often just as, if not more, important than the logic behind the offer.