It is very rare to see a property sold at the asking price although there are a number of reasons why this may not happen. That said, back in the late 1980s when there was a property price boom many homes were going for in excess of their initial asking price. Competition was so intense that buyers were desperate to invest in property and were often willing to go over and above the actual guide price. Whether or not we see the emergence of such market conditions in the short to medium term in the UK is doubtful. Will we ever see a property boom like the 1980s again?
We will now take a look at the relationship between original asking price and eventual sale price for properties across the UK.
Average selling price in the UK
A report by Zoopla towards the end of 2019 confirmed that there are different trends across different markets in the UK – no surprise there. Taking in England and Wales, with Scotland and Northern Ireland maintaining their own property records, the average selling price during the 12 month period to September 2019 was 96.3% of the list price. When you consider that some people would list their properties at a level higher than they expected to achieve, with the option to negotiate down, this is not too bad a result.
Reasons for negotiating a lower sale price
As we touched on above, there can be various reasons why a property sale may go through for less than the asking price. These include:-
While the UK property market is often reported as “one” it is actually made up of various regional segments which can move in different directions at the same time. Obviously, the greater the demand for property in a particular region the more chance of achieving a sale price close to the original asking price. On the flipside of the coin, where there is little or no demand for property in a particular area then there may well be scope to negotiate a significant discount above and beyond the average for the UK.
It is not uncommon for property sellers to list their property at a price above that which they expect to receive. In many ways this gives scope for both the seller to walk away happy and the buyer to have negotiated a “controlled” discount and feel as though they achieved a good price. The “seller psychology” strategy can backfire if a property is listed at a price which is way beyond the actual value.
Unfortunately, in more challenging economic times we often see homeowners falling into “negative equity” which effectively means that they owe more on their property than it is worth. As a consequence, it is not uncommon for fire sales to be undertaken by sellers/mortgage lenders to try and partially rectify a difficult situation. In these scenarios it is not inconceivable to negotiate discounts of 20% or more on the “market value” with the promise of a quick settlement.
If you are a cash buyer with no chain then there is every chance that you would be able to negotiate a more than modest discount on a property list price. The reason, simple, cash is king and the ability to complete relatively quickly with no chance of a “broken chain” causing delays is priceless. So, if you are a cash buyer it is highly advisable to try and negotiate a significant discount. Start lower than the price you expect to achieve and work your way back towards your target!
Regional variations in sale prices
As mentioned earlier, the trends and variations in UK regional markets will change on a regular basis. What we do know is that in the 12 months prior to September 2019 there were some distinctive patterns in the England and Wales property markets:-
• Sellers in Driffield, Dronfield and Salford managed to achieve 100% of their asking price
• Those in Sheffield and Droitwich negotiated around 99.5% of their asking price
• Mountain Ash and Abertillery (both in Wales) and Bishop Auckland saw discounts in excess of 8%
• Buyers in Ascot (high property values) were able to negotiate discounts of just under 8% – the largest cash discounts in the UK
At the time of the Zoopla survey there was a distinct difference between northern property markets, very buoyant and competitive, and those in the south where there was reduced competition and a greater ability to negotiate discounts. In reality, there has always been a North/South divide but in property terms it has generally been in favour of the South.
London property prices
London is an extremely competitive property market which tends to outperform the rest of the UK in the boom times and underperform in challenging economic scenarios. As a consequence, at the time of the survey there were few areas of London able to achieve 100% of the asking price. Some of the better performers were Waltham, Bexley and Barking with over 97% of the asking price achieved. Next were Havering, Newham, Redbridge, Greenwich and Sutton all achieving between 96% and 97% of the asking price.
In reality London is a very different property market to the rest of the UK. As there generally tends to be greater competition for London properties it is not unusual to see listings above the actual market valuation. As we touched on above, this then offers scope for buyers to negotiate a discount with all parties walking away thinking they have “got a deal”.
Trends in the UK property market can change on a sixpence although interestingly even the worst performing towns in this survey only saw maximum reductions of around 8.5% on the asking price. It is also worth noting, as many experts mention, that the UK has constantly failed to fulfil demand for new housing for decades. The current government and many previous governments before them have promised an increase in newbuilds but more often than not failed to deliver. Therefore, with an ongoing chronic shortage of property and rental accommodation there will always be a relatively strong backbone of demand. As a consequence, in general it may be challenging to negotiate discounts anywhere near double-digits. However, that should not stop you trying!