Metro - 01 November 2013
By Jo Eccles
There’s been a lot of recent press with sensationalist headlines saying that asking prices have risen 10% in London since the middle of September.
These stories always frustrate me because they spread panic amongst buyers who haven’t yet managed to find or secure a property. They also make sellers think that they should perhaps be asking even more. The problem is, asking prices don’t actually paint the “real” picture of the property market, as the actual sold price could be very different, so people need to be cautious of asking price statistics – they’re not always based on what the property is actually worth!
Asking prices can vary hugely, depending on several factors. For example, they are often an aggressive figure proposed by an estate agent who is vying to win the instruction, or an opportunistic figure demanded by the seller. They can therefore give a good insight into how motivated a seller actually is. If a ridiculously high asking price is advertised, most of the time it signals a vendor who will only sell for a certain price as they have no financial need to sell.
In other cases, the asking price will deliberately be set low to create a lot of interest and hopefully spark a bidding war or sealed bids. We have just seen that situation with a property in South Kensington, where two identical flats are on the market, but with a £75,000 price difference. The cheaper property went to sealed bids with 8 bidders. The more expensive property hasn’t received one offer. Asking prices can therefore be tactical, and bear no resemblance to the property’s actual value.
We are sometimes asked by potential clients how much on average we negotiate off the asking price for the buying clients we’re representing. We always explain that it isn’t as simple as that – for the reasons I’ve explained above, it’s important that buyers understand not to use the asking price as a bench mark.