How to behave in a buyers’ market
For the first time in over 15 years it’s a buyers’ market for property in East Central Scotland. We take a look at how buyers and sellers will have to adapt to cope with these new conditions.
The credit crunch has seen a sharp tightening in lending criteria which has seen demand for property fall well below the high levels of recent years. Over the last two months the number of homes purchased in Edinburgh was over 40% down on the number recorded at the same time in 2007.
This fall in the number of homes being bought has resulted in the selection of properties reaching record highs. There are now almost 6,500 properties available for sale in East Central Scotland, over 2,000 more than at this time last year. With more sellers competing to attract a smaller number of buyers the balance of power in the market has clearly shifted.
Those buyers who are in a position to secure a mortgage are in a very strong position to negotiate good deals. Sellers and their agents are having to find ways to make their property stand out from the crowd. This is the first time in over 15 years where the ball has been firmly in the court of these potential buyers, meaning many of the rules of thumb for how to buy and sell property that have held for over a decade no longer apply.
We offer our expert advice on how to behave in a buyer’s market to help you adapt to today’s conditions.
Sellers
As a seller, the first thing you have to do is attract potential buyers to your property. With over 2,000 more properties on the market this won’t be as easy as in previous years. Be prepared to be flexible with viewing times to accommodate buyers and make sure your home is as well presented for viewings as it was for schedule photographs. Speak to your selling agent about additional marketing options like property sections in local newspapers or featured property options online that can help your home stand out from the crowd.
You will probably have to moderate your expectations on the price your property will attract. The average premium over the asking price that properties marketed at offers over achieving today is around 5% lower than at this time last year reflecting lower demand from buyers. In Edinburgh, for example, the average premium paid on a property sold at offers over is down from 28% to 23%.
Unlike in previous years, you will probably find it doesn’t pay to reject a bid and hold out in the hope of receiving a small percentage more as there are fewer buyers around. Ask yourself whether it is worth risking your sale falling through for the sake of an additional 2 or 3% on the selling price at a time when demand for property is much lower.
As most sellers are also looking to buy you should consider that whilst your current home may not fetch the price you might have hoped for, the likelihood is that you will be able to secure your new home for less than you had anticipated as well. This means you could find the additional finance you require to fund your move is actually less than you thought, particularly if you’re looking to move up the property ladder.
Most sellers would be well advised to buy before selling in today’s market, but you should start viewing potential new homes as soon as possible. Doing so will give you a better idea of how much you will have to spend to secure the sort of home you want and how much you would have to sell your current home for.
Once you do complete the sale of your own home you will also be in a better position to move quickly to secure the property you want at a reasonable price.
Buyers
For buyers, the number one priority today is assessing the mortgage deals available to them. While cheap credit is no longer freely available, for the majority of buyers there is still a number of mortgage products on the market. What has happened is that the cost of these mortgages has risen and of course 100% mortgage deals are no longer available.
When looking at mortgage deals though, it’s prudent to think in terms of what you can actually afford rather than the maximum amount you can borrow. Stress test your mortgage to see how you would be affected if interest rates were to change to ensure you don’t get caught out if the cost of borrowing rises in the months and years ahead.
With the wide selection of properties on the market, it’s vital that you don’t become fixated on a property you fall in love with early in your search. People often rush into emotional decisions when looking to buy a home but with so many properties available this can lead to you bidding too much when there are many other options open to you.
Once you’ve found the property you want, think very carefully about how much you want to bid for it. In most cases you will be competing against fewer bidders than you would have been in previous years so you shouldn’t need to go as high over the asking price. The table below illustrates how the average premiums paid on properties sold at offers over have dropped over the last year.
Be prepared to negotiate. Even on properties marketed at fixed price you will find many sellers are more willing to negotiate than in previous years. During the second quarter of this year, the average property sold at fixed price achieved 98.5% of the asking price, down from 99.5% during the same period last year.
Further Advice
Whatever your situation it’s important that you arm yourself with as much information as possible up front. As well as looking at how the national market is performing, try to find information on the local housing market both in the area you’re moving from and that where you want to buy. National trends don’t always reveal what’s happening locally and by doing a little extra research you’ll be much better placed to know what to expect.
Sort your finances out in advance so you know what sort of properties you will be able to bid for and remember to think in terms of what will be affordable rather than seeking out the maximum amount you can borrow. If you overstretch yourself you may encounter difficulties if interest rates rise in the future. If you’re unsure about your situation, or whether there are mortgage deals out there for you, don’t be afraid to take financial advice.
To help in the current climate, ESPC will be producing and publishing regular updates and in depth analysis on the housing market both in The ESPC Paper and online at espc.com. If you wish to receive these reports as soon as they are released, please register free by visiting www.espc.com.