Why A High Asking Price Might Be Something Your Regret.
There have been a couple of headlines recently which have caused us a little concern and, for once, it’s nothing to do with Brexit, football or Donald Trump – well, at least not directly.
First of all, some of the regular research carried out to monitor house prices is suggesting they’re not rising as fast across the UK as they were a year ago.
No doubt, if you’re a first-time buyer, you won’t be too bothered. After all, it’s hard enough to scrape a deposit on a new home together as it is; the fact prices aren’t cantering off at an ever-growing pace is probably something of a relief.
But, if you combine that with an increase in asking prices, then what we’re witnessing is a growing chasm between hope and reality – and the end result could be more buyers facing the grim reality of negative equity if nothing improves.
The Risks of Going High
Of course, you want to sell your home for as much money as possible; that’s perfectly understandable. There are also plenty of estate agents out there who will be willing to play on that and who will win instructions by persuading vendors that they should hike their asking price by £10,000.
But, in the current climate, what we ought to be asking ourselves is if that’s either realistic or ethical.
First of all, if you ask too much for your property, you’re running the risk that your home could be on the market for months. Not only that but, if you then have to drop the price more than once in an effort to attract a buyer, you’ll be risking the irony that it actually becomes harder to sell. The more the asking price drops, the more buyers suspect it’s because there’s a problem.
But, on the other hand, if you do manage to find someone prepared to match or at least come close to an inflated asking price, it may be great for you – but not necessarily for the property market.
Negative Equity Bites
Think about it … If asking prices are rising at, say, 5% year-on-year and selling prices only at 1.5% then surely the time will come when too many buyers realise they’ve paid too much?
“More fool them,” you might think. But if enough people become trapped in negative equity, then the property market risks a malaise. Before long, the number of buyers could drop as fewer risk making a significant loss on their property investment and a downward spiral begins.
If the mismatch between selling and asking prices continues and negative equity becomes more widespread, prices may have to drop – and drop quite a bit – before a recovery kicks in.
So, if you are selling your home at the moment, remember even if you only bought it last year for £250,000, a 1% rise in value is still a significant sum of money. Naturally, you will want the best price for your home and we would certainly encourage any vendor to research what other properties sold in the area recently have fetched.
But, no matter how tempting it may be, if you are selling your home now or in the near future, we’d urge you to keep it real. There are some out there willing to try to win you over by promising huge returns but, although it may sound like easy money, an over-inflated asking price may not be in your interests in the long-term.
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