15 November 2022 – New research suggests that in the first week of October the number of fall-throughs doubled, compared to the previous month.
New research by chain-breaking service UPSTIX suggests that the number of sales falling through in the first two weeks in October was twice as high as in September.
They put this huge increase down to a loss of buyer confidence amid rising mortgage costs and economic instability. As a result, UPSTIX warns that it could get worse.
This will make the already stressful process of buying a house even more stressful.
Cooling Property Market
An increased number of fall-throughs is indicative of a cooling property market. But it’s not the only sign.
Rightmove‘s latest data shows that the average asking price fell by 1.1% in November. With this reduction of £4,159, the average asking price in the UK now stands at £366,999.
While the property portal points out that this decrease is normal for November and is in line with pre-pandemic levels, other signs also point towards the cooling of the market.
The frenzied market of the past two years has turned into a more normal market more abruptly and less smoothly than we were expecting. Though many are getting on with moves, especially those with a purchase already agreed, understandably there are people who are pausing for thought. Some buyers have decided to turn their attention to Christmas instead, and be part of the New Year jump in home-moving activity.Tim Bannister, Director of Property Science at Rightmove
One of those signs is the increase in properties that have their price reduced, with 8% of properties on the market having had a price reduction in October. This is a 4% increase compared to the same time last year.
Buyer demand has dropped by 20% compared to last year, but is still 4% higher than in 2019.
In the first-time buyer sector, demand has dropped sharply compared to last year, by 26%. However, it is still 7% higher than in 2019.
In the second stepper sector – people who sell their house to buy a bigger one – demand has decreased by 17% compared to last year and at the top of the ladder, demand is by 15% lower.
The mortgage market has also seen a drop in demand in the third quarter of 2022 by 4%, according to the Intermediary Mortgage Lenders Association (IMLA).
This is probably a sign that the financial pressure on households is intensifying, which is also a reason for the increased number of fall-throughs.
Should You Drop Your Asking Price By 10%?
HOP estate agents recommend sellers to reduce their asking price by 10%, if they want to ensure their property sells.
The estate agent argues that reduced buyer demand and rising mortgage costs make houses unaffordable for many buyers. By reducing the asking price by 10%, sellers are more likely to find a buyer.
You need to be really realistic as a seller, if you want to sell your property you need to be realistic and consider a 10% reduction on what you would have done six months ago.Luke Gidney, Managing Director at HOP
Given that economists have predicted that house prices could fall by 12% in the next 18 months, this approach might seem sensible. Demand is still there, but due to the economic uncertainty, many potential buyers consider waiting until next year, when prices likely have fallen.
The increased number of fall-throughs does also suggest that buyers rethink their decisions after agreeing to a sale due to worries about affordability.
However, not everyone agrees with Mr Gidney. Tom Craneburgh, from rival estate agents GetAnOffer, thinks this reduction in demand is only temporary due to economic uncertainty.
But he doesn’t think that it will be necessary for sellers to reduce their asking price by such a high percentage.
Jonathan Rolande from property firm HouseBuyFast agrees. He says the only reason to reduce the price by 10% would be if it was overpriced in the first place.
He recommends always getting a second and third valuation to make sure that a seller knows what a realistic price for their property would be.
He also points out that prices have only marginally dropped in the past few months, so such a big drop in price should not be necessary.
So while there are clear signs that the market is cooling down, sellers should not panic even if the number of fall-throughs has hiked.