The global credit crisis and the ensuing plunge in housing values have caused buyers to become equity-conscious and extremely sensitive to prices. So, although demand for quality country houses remains healthy, if your asking price is above today’s market, you’ll struggle to get a purchaser. But what is realistic pricing? Rupert Sweeting of Knight Frank believes: ‘It’s the level at which a house should sell within two months of coming to the market.’ Alternatively, it’s ‘the price at which you’ll attract able and willing purchasers’, according to David Adams of Chesterton Humberts.
The theory is simple, but the practice is not hitting the right asking price is as difficult as it is crucial. ‘What vendors usually do is look at property portals and see what similar properties would sell for,’ says Mr Adams. ‘However, many of those properties are over-priced, and offers on them may be 10% lower than the asking price.’ Agents also find it difficult to determine realistic values, but they have more tools at their disposal. They’ll look at sale prices for comparable properties, reduce them by an amount that’s proportional to the time that has elapsed since the sales took place, and adjust the numbers by thinking of prospective purchasers who are in the market for the kind of property under valuation. The final figure is often a blow to sellers’ expectations.
Although getting the price right in the first place can be difficult, you’ll soon find out whether you need to revise it downwards. ‘If you have very few viewers, and they all say your home is overpriced, you know the answer drop the price by 10%–15%,’ says Mr Sweeting. And you need to do this quickly. ‘The longer your property is exposed, the less likely it will be to achieve good offers,’ adds Mr Adams. But beware: realistic pricing may no longer be enough to achieve a sale. ‘In order to have a better-than-average chance of selling, one needs to make sure the property looks better value for money than similar properties,’ says Jonathan Cunliffe of Savills.
Faced with all this, owners who don’t have an urgent need to sell will inevitably wonder whether to go ahead or wait for better times. ‘It’s good sense to sell at realistic prices if you’re trading up, as you’ll gain substantial savings compared with a move in mid 2008,’ says Robert Russell of Fisher German. Mr Sweeting provides an example to put this into perspective: ‘You’re looking to “trade up” to a house that was worth £4 million when yours was worth £2 million. Yours has now retreated to £1.6 million, but the other house may well have dropped to £3.2 million the gap between the two is considerably less than before.’ But, he adds, ‘it’s often a difficult pill to swallow if you’ve bought in the past three or four years, and have seen your house’s value drop from the price you bought it at.’
This is why many sellers are choosing to let their home rather than sell it Mr Adams reports that the Chesterton Humberts letting offices have twice as many properties on their books now as they had at the same time last year. However, he has some hard facts for vendors-turned-landlords to ponder. ‘If you look at the previous recession, people who bought property at the peak in 1988 saw prices fall by 25% at the bottom of the market in 1991. To resell at the same price they had bought their home for, they would have had to sell in 1997, so it took nine years from peak to peak. Even if the market bottoms out this year, you need to factor in a much greater peak to peak at least 10 years.’
So, unless you plan to hold onto your property for the next decade, now could be as good a time as any to put it on the market especially if you think you may need to sell within the next six months. ‘In some parts of London, prices have fallen by 30% in a year,’ Mr Adams says. ‘What happens in London comes to the Home Counties three to four months later and ripples beyond in six months. Prices in the Home Counties are now down by 20%. If the Government doesn’t change its economic policy to one that’s more favourable to the property market, it’s not so hard to predict that they will be down by 30% in the near future.’