"Buyers know they hold the power and have become far more savvy and willing to shop around for the best deals in the market"
It’s taken nine months, but sellers are slowly starting to realise and acknowledge that it’s a buyer’s market out there. With recent figures showing that house prices are going down, buyers now hold the power.
At the beginning of June, Nationwide figures showed that house prices had dropped by 3.4% in the space of 12 months. The biggest decline seen since July 2009 and 4% below the peak seen in August 2022.
At the same time, the level of good quality stock in the market is also falling – albeit only slightly. But, where this normally means that sellers can expect to command more money, with mortgage rates at a nearly 20-year high, there are fewer buyers in the market. And those that are buying remain cautious.
When lenders dropped their rates a few months ago, most in the industry knew this was not sustainable if inflation didn’t come down as the BoE had hoped. This has proved to be the case as base rates continue to rise. This means that mortgage rates also continue to be pushed up – already reaching 6% for a two-year fixed.
It’s a scary thought for those used to sub 2% rates and many homeowners have found their mortgage costs rise significantly when renewing this year. The recent media attention around last-minute product withdrawals from lenders does little to help the situation too. All this combined has led to less movement in the property market all-round.
Subsequently, house prices will continue to decline, even though there is less stock on the market. Many aspiring home-movers are simply unwilling to commit to a potentially larger mortgage. With another interest rate rise on the horizon this week, the market is uncertain and high borrowing rates are putting many homeowners off making a move. The only buyers with any bargaining power right now are the cash buyers.
These buyers are also normally able to move quickly which is another attraction for vendors and some will be prepared to take a reduction in price in return for speed and certainty that a sale will go through.
Buyers know they hold the power and have become far more savvy and willing to shop around for the best deals in the market. Sellers who receive an offer close to the asking price should seriously consider accepting it as those offers could be 5-10% less in the next three-six months.
Sellers should also remember that if they accept slightly less for their own property – they could see that transfer over to the house they are buying, so it’s all relative.
Not wanting to scare potential buyers off - there are still plenty of instructions coming onto the market but sellers need to be more realistic if they genuinely want to sell their properties. It’s a competitive market out there as the good stock is being snapped up quickly as these homes are few and far between.
Buyers should get their finances locked in with a lender and do their best to get an offer accepted at a level they can afford before starting to view properties. The quicker they can move in a transaction the more appealing they will be to a seller in this market.
We also need to remember that we’re likely to find more first-time buyers in the market. These individuals often feel more comfortable with the higher borrowing rates we’re seeing right now. Many of these will be used to renting and the monthly mortgage rate is still going to be better than paying rent.
Instructions coming into the market are not the issue, but sellers need to be more realistic with what is happening and what is coming in the second half of this year if they genuinely want to sell their properties. Buyers are all too aware of the power they hold and many will want to feel like they have secured themselves a good deal.
In today’s market, both sides of the transaction want certainty that a sale will go through and they want speed of transaction, so the deal can be done before the market moves again and someone changes their mind.
