Home sellers are facing a reality check, with more are being forced to cut their asking price in order to get the property sold.
According to Rightmove, the average time it takes for a seller to find a buyer has jumped by three weeks, from 45 days this time last year to 66 days now.
Price cuts have also become more widespread during 2023, with 39 per cent of properties now having their price reduced during marketing compared to 29 per cent last year.
Adjustment: Rightmove says 39% of properties now have their price reduced during marketing compared to 29% last year
Despite this gloomy outlook, Rightmove predicts that sellers will continue to price their homes optimistically, with the average asking price on a newly-listed property only set to fall by 1 per cent by the end of 2024.
A year ago, Rightmove predicted average new seller asking prices would drop by 2 per cent in 2023, and it says they are currently 1.3 per cent lower year-on-year.
But Tim Bannister, a property expert at Rightmove argues that the market has proved much more resilient than many expected given higher mortgage rates.
He said: ‘This year has been better than many predicted, with no significant signs of forced sellers, lower than expected price falls, and good buyer demand for the right-priced quality properties.
‘However, it has been a challenging change in mindset for some sellers to transition from the frenzied market of the previous few years.
‘The level of sales being agreed is 10 per cent lower than at this time in the more normal market of 2019, so sellers will need to price even more competitively next year to make sure that they ensure a buyer.’
How can sellers find a buyer in 2024?
Even with newly listed asking prices remaining relatively flat, it is the ultimate selling price that really matters.
Sellers who price too highly are likely to find themselves waiting a while to find a buyer and may find they have to reduce their asking price in order to do so – perhaps more than once.
Sellers may also find themselves forced to seriously consider low offers.
Zoopla recently reported that one in four sales are being agreed at 10 per cent or more below asking price, thanks to a rise in the number of homes on the market.
Motivated sellers are being advised to price more competitively to ensure a buyer in 2024, particularly if there is a glut of homes for sale in their local area.
Rightmove says that pricing correctly from the outset ‘maximises the initial impact’ among local buyers and gives new sellers a much greater likelihood of a successful sale.
Bannister adds: ‘The housing market is made up of thousands of local markets, each with their own unique dynamic of supply and demand.
‘In areas with more discretionary sellers and fewer homes for sale, we may see new seller asking prices remain flat, or even very slightly enhance compared to this year.
‘In areas where sellers are struggling to attract affordability-stretched buyers or needing to sell quickly due to a change of circumstance, new job opportunity, or strong desire for a lifestyle change, we are likely to see even more competitive pricing.’
Will 2024 be a buyer’s market?
Though interest rates are still high compared to recent historically low levels, the mortgage market is much calmer than it has been of late.
Mortgage rates have now fallen steadily since July, providing movers with more stability and certainty over their potential monthly costs compared with the more volatile mortgage market of this time last year.
The average five-year fixed rate is now 5.65 per cent, according to Moneyfacts and the cheapest deals are now below 4.5 per cent.
Those who delayed moving plans during the last year may ascertain the start of 2024 is the right time to return, now that they can better strategize for what they can afford.
Past the peak: Average fixed mortgage rates appear to be falling back somewhat after a barrage of rate hikes during the first half of the year
Jeremy Leaf, north London estate agent and a former Rics residential chairman believes more optimism will return to the market at the start of next year.
He says: ‘Despite a 15-year high in base rate and continuing inflation, buyers are showing there is little chance of a correction, although sales are taking longer and prices are softening. Strong employment is also supporting activity.
‘We don’t expect to see much change in the months ahead, but there will be a gradual improvement as optimism always seems to become more apparent at the beginning of the year.’
Mark Harris, chief executive of mortgage broker SPF Private Clients believes mortgage rates are becoming more palatable which should inspire more buyers to press forward with their home buying or moving plans.
‘The direction of travel for new mortgage rates is downwards, with a number of lenders making reductions this past week and bringing some early Christmas cheer to borrowers,’ he says.
‘With two and five-year fixes available from below 4.5 per cent, we may be in a higher interest rate environment but rates are becoming more palatable.’
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