Read a headline like ‘Sellers make rapid house price reductions’ and no one would blame you if you immediately think that the property market is crashing. And that simply isn’t the case. Not for the time being at least. However, recent weeks and months have seen a significant reduction in asking prices on property being marketed as interest in purchasing dwindles slightly in the UK.
House Price Reductions In the UK
Being based in Putney, South West London, it is our job to keep up to date with the local property market. Every day we at Oportfolio Putney speak with local estate agents and familiarise ourselves with properties on the market in Putney through Rightmove and other property websites. It is evident that properties that were once snapped up immediately are remaining listed for longer and it is also evident that more sellers are opting to reduce their asking prices to try and ensure a speedy sale.
For sellers who can afford to knock £10,000 or £20,000 off their asking prices, this isn’t ideal but can be manageable if they accept that the property market is tougher in 2023. However, for home owners with a large mortgage that need to sell at the top end of valuations in order to make any kind of equity, dropping property asking price is simply impossible. That can lead to a property sitting on the market for months and months without even a sniff of interest.
Struggling to Sell In 2023
These house price reductions aren’t just a Putney or South West London property phenomenon either. They are being felt citywide in London and countrywide in the UK as a whole. A friend of mine purchased her first flat in London back in 2018. A one bedroom starter apartment in Stanmore on the London Help to Buy scheme for £280,000. After living in the property for four years, her and her partner decided that they wanted to move out of the city and purchase a house together. They listed their flat on the market in October for £310,000 (a very realistic value at the time for the flat and the area). However, this was just as the mini-budget was announced and mortgages began to get more volatile.
Their flat has now been on the market for 9 months and they have had to drop the value down to £280,000. Because of the mortgage they still owe and the 40% Help to Buy loan they still need to pay back, they literally can’t reduce the price anymore. The Telegraph reported in a recent article that a third of all home listed for sale in the third week of June 2023 were listed with discounts on their asking prices. An increase of 18% compared to the same time last week.
Is Now a Good Time To Buy UK Property?
That is indeed a loaded question. Undoubtedly there are some properties on the market right now that are cheaper than they would be in normal circumstances. And there will likely be more and more asking price reductions in the coming months as homeowners and landlords alike start to consider selling up and are hoping for a speedy sale. So from the outside, it sounds like a perfect time for buyers to snap up a great deal, right?
However, if property prices continue to drop, there could be a serious risk that you could be left in negative equity if you purchase. What do we mean by this? For example, if you purchase a property for £350,000 with a 90% LTV mortgage of £315,000 but your property drops in value to £310,000 you will owe more on the property than it is actually worth. Although unlikely, this could be a reality for some people in areas most impacted by property value reductions.
In our opinion a property market crash is not on the horizon and property is still a sound asset to invest in. Demand for property is still high and once mortgage rates reduce and people get used to the average mortgage rate being higher, it is likely that property prices will be resilient and increase. Only time will tell if this is the case, but the reductions we are seeing at the moment aren’t at a concerning level yet and property especially in London, is still very profitable.
Looking To Buy Property in London? Speak To a London Mortgage Broker
We have been a specialist London mortgage broker based in London for over 15 years, so we are experts in the London property market and high net worth mortgage loans. If you are considering purchasing a property in London, feel free to give our team a call or drop us a message today to see how we can help you. Our initial mortgage consultations are free of charge and can be done via telephone, zoom, or face to face.