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Price Reductions – When? How? Why?

Posted on by prateek

Did you know that 1 in 10 Home Sellers in Bath Lower Their Asking Price Every Month?

As the property market continues to evolve here in the city of Bath, it is important for estate agents such as ourselves to better understand the complexities of the market. For readers, it is also important you keep up-to-date with all the going on in our property market. This can be easily achieved by following our blog, and our social media channels.

Recently, homeowners in Bath who have found themselves on the market for a long period of time are navigating the complex decision of how and when to reduce their asking prices to better attract a buyer.

With an increasing number of properties coming to the market here in Bath (1,217 on the market in August 2024) the competition is becoming increasingly competitive meaning strategic price adjustments are more crucial than ever.

MASTERING PROPERTY PORTAL PRICE BANDS FOR OPTIMAL EXPOSURE

Understanding and utilising property price bands on the ‘portals’ (Rightmove, Zoopla, OnTheMarket) can significantly enhance the visibility of your property listing. These bands are predefined price ranges buyers often use to filter their search results. Positioning your property’s asking price in one of these bands will strategically draw in more views and therefore there will be more interest in your property, which in turn will lead to more viewings and ultimately increase your chance of selling your property.

For instance, pricing at £300,000 instead of £295,950 will place your property in a filtered search of properties between £280,000 – £300,000 & £300,000-£320,000 so you will have a chance at attracting a broader audience.

THE IMPORTANCE OF RIGHTMOVE ALERTS

A critical factor in the timing of price reductions is their impact on buyer visibility. Homeowners need to reduce their asking price by at least 2% to ensure their property reappears in Rightmove and OnTheMarket’s email alerts, while for Zoopla it is 3%, capturing the attention of active buyers.

THE CURRENT STATE OF PLAY IN THE BATH PROPERTY MARKET

In 2022, there were an average of 77 price reductions a month in the Bath area, today it’s 116 per month. The average Bath price reduction in the last 3 months was 7.1%. So, the statistics show that whilst the number of properties coming to the market is on the rise the number of price reductions has increased. In fact, the percentage of Bath properties undergoing price reductions has remained roughly consistent in recent years, with an average of 1 in 10.1 Bath homes (9.9%) reducing their asking price each month over the last five and a half years.

THE IDEAL PRICING STRATEGY FOR HOMES IN BATH

The initial pricing strategy plays a pivotal role in the speed and success of your property sale. Bath properties that get priced too high at the onset tend to stay on the market for longer and eventually require a more significant price reduction to generate new interest. By contrast, homes are priced realistically from the beginning (Click Here to find out more about the importance of pricing correctly), are far more likely to attract offers quicker and reduce the need for substantial price cuts.

For Bath sellers wanting to initially start at a ‘cheeky’ higher price, you need to be prepared to reduce this price if there is little to no initial interest. In these cases, a reduction within the first 2-4 weeks of being on the market is advisable and will help prevent stagnation in the market.

SIX THINGS TO CONSIDER FOR A PRICE REDUCTION

So, your property is on the market. It has been a few weeks and you’re wondering if you should be reducing the price. Well, here are six tips to look out for as signs you should be thinking about reducing that asking price:

  • A LACK OF VIEWINGS

If you haven’t received many viewings in the initial few weeks since listing your property, then it is advisable that you go and first look at your property listing and check that the marketing photos are up to standard for the area and are making your property stand out, maybe even check if your agent is willing to offer a virtual tour on your listing page (we certainly do). If you feel that the marketing material for your property is up to standard, then maybe it is time to consider a price reduction to attract new interest and boost your property on the portals.

  • VIEWINGS…BUT NO OFFERS

The current ratio in the UK property market of viewings to offers is around 8:10. If your property has not received any offers within the first 30 days of being on the market with your estate agent, despite there being plenty of viewings, then it could be that the price is a sticking point for potential applicants. If this is also the feedback your agent is getting then maybe it is also time to consider reducing the price closer to your bottom line.

  • LOW OFFERS

Homebuyers will often make low-ball offers primarily to secure the best deal possible they can for the budget they can afford. However, there can be numerous reasons. One key factor is the current market conditions – In a Buyer’s Market (more homes available than buyers) the purchaser feels that they have more power to make a low offer as the seller will be fighting other sellers to sell their house first (To find out more about Bath being a buyers or a sellers’ market, click here). Another reason for low offers is the condition a property presents itself. If a buyer feels they will need to be spending a fair amount of cash on renovations and decorative work to get it up to a standard they deem fit, then they are far more likely to take this cost into account and offer low. If you are getting low offers, remember it is not worth the value YOU think it is worth, or what your agent thinks it is worth, it is worth the value someone is willing to pay.

  • MARKET SATURATION

Look at the number of Bath homes that are on the market similar to your property, and check to see if you stand out from the other listings. Check on those properties similar to yours that sold too. Adjusting your price in line with the level of saturation in the market and how those properties that sold is crucial for selling your own.

  • SEASONAL ADJUSTMENT

Be mindful of seasonal trends within your local property market. Periods of high market activity require different strategies from the slower months of say November and December.

  • FEEDBACK FROM VIEWINGS

If there is consistent feedback from viewings that your property requires some work in the majority of people’s eyes, or that the price is just too high for what’s on offer, then you need to be looking at adjusting your asking price.

LEVERAGING EXPERT ADVICE

Given the Bath property market is full of many complexities, seeking out a second opinion and advice is nothing to be worried about. Experts such as ourselves are happy to help you out and offer you advice, it is what we are here for. So, if you just want another valuation or you want some advice about switching agents and lowering the asking price, then do not hesitate to get in touch with our team.

To view our latest Sales Properties in Bath, click here – Properties for Sale in Bath (residebath.co.uk)

To view our latest Rental Properties in Bath, click here – Properties – Reside Bath

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Where are the cash buyers? – A look into Baths Property Market.

Posted on by prateek

The UK property market has undergone significant shifts since the summer of 2020. This has been driven primarily by the post-lockdown ‘rush to move’ after everyone who’d been stuck inside for 3 months felt they had ‘outgrown’ their homes and were further incentivised by the stamp-duty levy.

Following this rush to move, there have been significant interest rate hikes aimed at curbing inflation in 2022 & 2023. These changes have had far-reaching implications across the property market and have had a significant impact on both house prices and the overall volume of property transactions.

INTEREST RATE SURGE AND ITS IMPACT:

The initial wave of interest rate hikes began in November 2021, as the Bank of England (BoE) sought to counter the ever-rising inflation post-lockdown, and this continued until the summer of 2023.

There were 14 rises in interest rates during this period – the culmination of which was a peak rate of 5.25%. The Bank of England’s decision to implement such a rigorous monetary policy stemmed from concerns about the rapidly escalating cost of living (now dubbed the ‘cost of living crisis’), the consequence of both domestic and global pressures.

However, the tide began to turn this August as the BoE cut rates slightly to 5% in response to the improvement of the nation’s inflation rates. This reduction was coupled with signs that further cuts could be on the horizon, something that has brought about a sense of cautious optimism in the market. There is, for the first time in many months, a slight glimmer of hope that the worst of the economic fallout may be behind us.

HOW HAS THIS AFFECTED THE LOCAL PROPERTY MARKET HERE IN BATH?

Let us first look at the house prices locally between 2020 and 2024.

The average value of a property in Bath in July 2020 was £347,652. Today, that figure has risen to £432,528 – a rise of 24.42%, significant. So despite predictions that there would be a property market crash of sorts, there hasn’t been. So with prices not dropping, surely it is cash buyers that are keeping the property market afloat? Especially considering the hike in interest rates over the last 4 years.

CASH BUYERS: NOT THE GAME CHANGER WE EXPECTED:

In analysing the performance of the different segments of the British property market during this tumultuous period, one of the more surprising findings is the limited role that cash buyers have played in keeping the Bath property market alive. Traditionally, cash buyers have been perceived as having a significant advantage in house buying when there are periods of high interest. This is due to the lack of financing needed which in turn allows them to be protected from the direct effects of higher borrowing costs. So in theory, this should allow them to dominate the market when mortgage rates soar. So, did the number of cash buyers rise when interest rates began to rise in 2022?

THE PROPORTION OF UK HOME BUYERS WITH CASH HAS INDEED RISEN FROM 20%+ IN 2020/21 TO 30%+ IN 2023/24:

So as the above statement says, there has indeed been an increase in cash buyers, but this has not been the expected avalanche. Despite significant financial advantages, cash buyers did not dramatically alter the market dynamics. Instead, the dictators of the pace of the market turned out to be those who were reliant on mortgages. So, even as the cost of borrowing increased, there continued to be many mortgage-backed buyers and the cash buyers didn’t dictate the market as expected. This trend truly underlines the critical role mortgage buyers play in shaping market conditions.

Locally here are the figures:

  • In 2020, 27.57% of UK home buyers were cash buyers, whilst in Bath and North East Somerset, 28.6% of buyers were cash buyers.
  • In 2021, 28.06% of UK home buyers were cash buyers, whilst in Bath and North East Somerset, 31.2% of buyers were cash buyers.
  • In 2022, 27.79% of UK home buyers were cash buyers, whilst in Bath and North East Somerset, 32.1% of buyers were cash buyers.
  • In 2023, 32.94% of UK home buyers were cash buyers, whilst in Bath and North East Somerset, 38.9% of buyers were cash buyers.
  • In 2024 YTD, 31.15% of UK home buyers were cash buyers, whilst in Bath and North East Somerset, 35.0% of buyers were cash buyers.

Locally in Bath and Northeast Somerset, we also saw a growth in cash buyers – yet again, nothing groundbreaking!

MORTGAGE STRESS-TESTING AND MARKET STABILITY:

So, why were those who predicted a significant crash in the market so wrong, despite the increased mortgage rates? Well, mostly it was down to the effectiveness of the mortgage market review stress testing rules introduced in 2014 for borrowers after the global financial crisis of 2008. These rules, designed to ensure that borrowers could withstand higher interest rates, have been instrumental in maintaining stability in the property market. Even as mortgage rates more than quadrupled from their lows, over three quarters of UK’s local authorities saw house prices increase between the spring of 2022 and the spring of 2024.

This stability is further evidenced by the relatively low levels of repossessions compared to the aftermath of the 08/09 financial crisis. In the 4 years following the global market crash of 2008, 113,374 homes were repossessed in the UK. In the Covid years of 2020-2023, that number was 7,379.

Alongside this, strong wage growth (up from £31k a year to £35k) during this period and lender forbearance, have also played a pivotal role in supporting those who borrowed during the challenging period.

These factors collectively prevented the kind of widespread distress that many feared would occur as rates climbed.

AFFORDABILITY AND THE SHIFT IN BUYER PREFERENCES:

While house prices have held sturdy in most places, affordability has continued to be a significant concern for buyers, particularly in more expensive markets such as London. The term ‘race-for-space’ came about from the pandemic where buyers, held up in their smaller more confined homes in the big cities, sought to move further afield and gain more space for their money given many were working remotely and no longer needed to be held up in a commutable location. This rush in migration from urban areas to suburban or even rural areas has been a defining characteristic of the property market over the last few years. As rates have continued to rise, this trend has continued and even gained further momentum.

In the more expensive locations, where the cost of living and property prices were already high, the increase in mortgage rates has made buying a home even more challenging for many. As a result, these sorts of areas have seen a shift in the buyer demographic. Those less affected by higher rates—such as wealthier individuals or those moving from more affordable regions—continue to purchase, while others have been priced out.

SALES VOLUMES VS. PRICES: A COMPLEX RELATIONSHIP:

As we evaluate the performance of the UK housing market – it is evident that whilst prices have remained strong, the volume of sales has decreased in 2023 when compared to the surge that we witnessed in 2021.

Back in 2021, sales transactions peaked at approximately 1.4million, a significant increase when compared to the previous year. However, by the time 2023 rolled around, this figure had decreased to around 1.02million.

Despite the rise in interest rates during 2023, the transaction levels remained in line with long-term trends (1.06 million transactions on average per year between 2008 to 2019), highlighting the current resilience of the housing market. Current projections for the 2024 housing market are suggesting we may reach 1.15 million sales, indicating that the property market continues to be stable and aligns closely with historical norms.

The persistence of strong prices, despite lower volumes of transactions, suggests a degree of pent-up demand. If Bath buyers perceive that interest rates have stabilised or are beginning to decline, we could see a significant increase in transaction activity. This potential recovery is likely to be the most pronounced in regions where affordability remains a key factor, and where the desire for more space continues to drive buyer behaviour.

LOOKING AHEAD – A PIVOTAL MOMENT FOR THE BATH MARKET:

As we move forward, the property market in the UK looks to be held at a crucial juncture. The market is currently showing positive signs as we get to the latter end of 2024. Listings are up by 7.2% YTD compared to pre-pandemic levels and gross sales, 22% higher than the same time in 2023. Net sales have also been surging, a 28% increase compared to the same period from last year. Additionally, the 2.6% rise in sales price/sq.ft since January indicates a steady increase in demand.

Coupled with the recent rate cut and better-than-expected inflation figures, this may signal the beginning of a more stable period for the UK housing market. If the financial markets prediction of another cut by the end of the year to interest rates, then we may see renewed confidence among buyers.

However, it’s essential to recognise that the landscape has changed. The experience of the past four years has reinforced the importance of affordability, the resilience of stress-tested borrowers, and the critical role of mortgage buyers in setting market dynamics. As estate agents, understanding these shifts is crucial in navigating the evolving market and advising clients effectively.

As a Bath homeowner looking to sell, it’s crucial to approach the market with a realistic mindset. With only 53% of properties that come onto the market successfully reaching a completed house sale and move, the odds of selling can feel like a flip of a coin, (12 months to 23rd August 2024, of the 1,420,486 homes that left UK estate agents books, 798,886 homes exchanged and completed, and 710,620 homes withdrew unsold).

To ensure you’re on the right side of that coin, it’s vital to set a competitive price and present your property in the best possible light as this can significantly increase your chances of securing a sale and achieving your moving goals.

In Bath and similar towns and cities, where affordability and the search for space are particularly relevant, the insights gained from this period of upheaval will be invaluable. By staying attuned to these trends and anticipating the needs of our Bath clients, we can offer informed guidance in a time of change.

In conclusion, while the past four years have been challenging for the Bath and UK property market, they have also demonstrated its underlying strength and adaptability. As we potentially enter a more stable period, there is cause for cautious optimism. By understanding the factors that have shaped recent performance, we can better navigate the road ahead and continue to support our clients through whatever challenges and opportunities the future may hold.

If you would like to discuss anything about the Bath property market, please do not hesitate to call us at the office.

The Average Bath Homeowner Pocketed £354k in the Last 20 Years

Posted on by prateek

  • The average house price in Bath has increased by 195.9% to £535,700 in the last 20 years, a profit of £354,650
  • That means, when adjusted for inflation in those two decades, Bath house prices have risen in real terms by 123.8%
  • What does this mean for existing Bath homeowners and first-time buyers trying to get on the Bath property ladder?

Since 2001, average UK house prices have risen by an astonishing 187.2% across the UK, while in London the figure is 247.6%.

Looking back at the people that bought in those first few years of the new Millennium, few of those buying or selling property in 2001 could have forecast the massive financial impact that their decision then would have on the rest of their lives.

In those years, there have been winners and losers, where some Bath buyers have made hundreds of thousands of pounds and Bath renters have paid out tens of thousands of pounds and yet been unable to buy their first home – but life is often not as simple as that, so in this article I wanted to discuss the matter further.

The average house price in Bath has increased by 195.9% to £535,700 in the last 20 years, a profit of £354,650.

Now of course these are average prices and don’t take inflation into consideration.

Yet even when adjusted for inflation, Bath house prices have still risen by 123.8% in the last 20 years.

Characteristically, the longer a homeowner has owned their property, the larger the gain when they sell. Yet most of these profits are never seen by Bath homeowners. It has never been money in the bank unless you sell up and downsize or move somewhere cheaper. Instead, these gains are re-invested back into the housing market when they buy their next home.

So, whether the gains are banked or tied up in their bricks and mortar, it looks like all the Bath homeowners are in the driving seat.

What about all the first-time buyers, priced out of the market and unable to get on to the property ladder?

Are the young of Bath losing out again?

Reading the newspapers you would think so, yet nothing could be further from the truth. In fact…

It’s 26.8% cheaper today to buy a house in Bath compared to 2007

(That isn’t a typo!)

In 2002, 28.3% of a first-time buyer’s household income went on the mortgage payments. Today, that figure stands at 37.3%, yet in 2007, it was 51%… hence why it’s cheaper today!

Of course, for most young potential first-time buyers, the other largest barrier to home ownership is the matter of raising an adequate deposit.

Rising rents (and future energy prices) won’t help and will in fact make this problem worse, giving ambitious first-time buyers not much left at the end of the month to save a deposit for their first home.

With soaring Bath house prices, this means the amount Bath renters need to save for their deposit is growing year on year.

For these annoyed renters, there is the unpleasant irony that if they could only get on the Bath housing ladder, they would find themselves better off. They would spend a lower proportion of their monthly take home pay on keeping a roof over their heads.

Some people in the press have suggested the older generation, with all the equity tied up in their homes over the last 20 years, should release some of the money and give it to their children or grandchildren to help them on the ladder.

Reports in the press have also said that many homeowners aged 60+ have changed their plans to move home. Many were planning to downsize to release the tied-up equity in their home. That equity would either be used to invest in the bank to produce an income for them and/or to help their children (sometimes even grandchildren) on to the property ladder.

Yet with the interest paid by banks and building societies on any lump sum being very low, to many mature homeowners it hardly seems worthwhile making the move to downsize. This means many younger would-be first-time buyers are missing out on help from the Bank of Mum and Dad (or the Bank of Grandma and Grandpa) with their deposit.

However, the problems caused by low interest rates could also be their saviour.

Many older homeowners have turned to Equity Release, thus allowing them to get hold of a share of the equity amassed in their property, in exchange for a tax-free lump sum of cash.

Cash that could be used to help with deposits for their children/grandchildren?

The mature homeowner then stays in their larger family home and helps their family buy a property.

Whilst I am not a mortgage adviser (and you must take proper advice from a qualified mortgage broker), equity release mortgages don’t have end dates and the interest payments are rolled up (until you pass away). This means that there aren’t any monthly payments.

The interest rate you pay is normally fixed for the mortgage and because interest rates are so low, that means the debt shouldn’t balloon up. And should you decide to sell in a few years’ time, you just pay back the capital, redemption fee and the small amount of interest accrued.

Now of course, that does mean there will be less for your offspring to inherit when you pass away.

Equity release mortgages though have had some bad press recently. In the past they were unregulated and pricey. Yet today, there is more protection for borrowers.

One answer to the growing interest debt is to pay part or all of the monthly mortgage interest charged, yet you must have the income for that.

You also need to take advice on how the equity release will affect your liability for nursing home fees and inheritance tax. Also, if only one person in your home is the owner of the property, if that homeowner dies, the partner who is not on the mortgage (because only owners can go on a mortgage) won’t have any rights to stay in the family home.

Finally, if you are planning to move, don’t just compare the interest rate, but the redemption charge for early repayment – some of them can be very high.

My advice – take professional advice and speak to your family and involve them. Yes, we have all built up some amazing equity in our Bath homes, and yes, there is potential to help the younger generations with that wealth. Just go in with eyes open and know all the facts, all the pros and all the cons – then decide what is best for you with all that information to hand.

What are your thoughts, as a mature Bath homeowner or a first-time buyer, on this? It would be good to hear from you.

Reside is an award-winning independent letting agent in Bath. Please get in touch if you would like to discuss any aspect of letting or managing your property; we would love to hear from you.