The recent news that nearly three quarters of properties sold during the first month of 2015 went for less than asking price 1 might prompt the question: is this a buyer’s market?
The dip in price paid relative to price requested, which is far more pronounced than is typical for the season, certainly suggests that buyers are wielding more control. Other factors that indicate a buyer’s market include the average length of time that a property is on the market, which according to separate figures stands at 125 days 2.
This is only part of the story, however. The same figures show that average marketing periods have actually shrunk by 18 days since February 2014. In fact, the time taken to shift a property has been trending downwards for the last five years. So while properties are selling more cheaply than expected, they are also selling more quickly.
In short, buyers may have the upper hand, but a transaction is still a high-pressure scenario and there is the potential to make a mistake. A bargain is still not guaranteed, so to limit the likelihood of making a property purchase you’ll regret, bear the following tips in mind:
1: Research the area
Look at both local listings and local statistics for the area in which you wish to buy before making a decision. By way of example, let’s compare the national picture to that of London.
Asking prices in the capital have risen by 1.8% in the last month and 14.6% in the last 12 months, both of which are more than double the rise seen nationally. The median marketing time is 87 days in London, compared to 125 days nationally.
But London has also seen a 51% increase in supply, compared to 19% across the rest of the UK. The average marketing period has also increased by 20 days since last year, compared to the 18-day national dip.
When we look at sold prices, we get a fuller picture: prices in London took a 0.2% dip in January, compared to a 1.3% increase in England and Wales. The annual change was still higher (12.0% in London compared to 6.7% in England and Wales) 3, but the glut of supply and growing marketing time point to a possible price slump in the capital.
If this occurs, then London buyers could be in a better position than the figures initially suggest.
2: Research the purchase
A seller who has first listed their property several months ago and has reduced their asking price on more than one occasion is usually keener to sell than someone whose property has only just come onto the market. When a seller is more motivated, your bargaining position is strengthened, giving you more room to negotiate things like the listing price and what is included in the sale.
Of course, a new market entrant might also be attempting to affect a quick sale, so the time that has elapsed since the first listing is not the only measure of keenness. How the asking price compares to those of comparable local properties (particularly those marketed by the same estate agent) can also be a good indicator.
3: Don’t skimp on the checks
Desperate sellers are a common sight in a suppressed market, and it can be easy to forget the more traditional reasons one might be eager to offload a property such as overriding interests, planning restrictions and local factors and structural problems with the property itself.
– Consider commissioning a homebuyer’s report for anything other than a new-build property, and consider a more detailed building or structural survey for older or more unique properties.
– Make sure your solicitor conducts in-depth local searches to find any local factors that might affect the property’s use or value.
– Consider paying for a Land Registry search on the property to confirm ownership, the size of the property’s boundaries and flood risk.
– Visit it at different times of the day and night and ask around about the neighbours.
– Research local crime statistics. The comprehensive crime maps provided by Police.UK allow you to map locally reported crimes by area, time period and type of crime, so you can find out not only how desirable (or not) a street is, but how frequent and persistent individual problems are.
4. Stick to your set price
You should already have run over the numbers and decided exactly how much you can afford. By sticking to this price you avoid getting caught up in potentially volatile (and expensive) bidding wars with other buyers keen to grab a bargain. The desire to win for winning’s sake shouldn’t override the desire to not break the bank, so keep a cool head and remember that there are other deals out there.
5. Have finance in place
If you want to be able to grab a bargain at the drop of a hat, it is best to have the behind-the-scenes processes – such as your finance application – in motion. It helps to know that you are submitting your case to a lender who is likely to accept it, so consider using a professional broker to place your deal more quickly, and try to obtain a decision in principle from a lender before you start making bids.
A decision in principle is non-binding, and is not the same as an official mortgage offer. It is, however, a good indication that a lender will proceed with your application should your property bid be successful.
- National Association of Estate Agents Housing Market Report: January 2015. NAEA. Retrieved on 2 Mar 2015.
- Asking Price Index: February 2015. Home.co.uk. 12 February 2015.