Gap Between Asking and Sold Property Prices Widens, Knight Frank Reports

Estate agents and property sellers are routinely setting asking prices well above the figures homes eventually achieve, with the average property selling for almost 10 per cent less than its original listing price.

Knight Frank says sellers are being forced to accept steep discounts as higher mortgage rates and an oversupply of homes create tougher conditions for the property market.

Homes where contracts were exchanged between July and September achieved an average of 90.6 per cent of their initial asking price, according to Knight Frank data.

In practical terms, a property first advertised at £300,000 would sell for about £271,800, while a home listed at £500,000 would typically change hands for £453,000.

Buying agents say they are negotiating discounts of up to 26 per cent, particularly on smaller flats, new-build properties and former buy-to-lets. These homes are proving especially attractive to bargain hunters as sellers cut prices heavily to bring buyers through the door.

Jo Eccles, founder and managing director of prime London buying agency Eccord, says some vendors are also putting their properties on the market with unrealistic price tags.

‘We achieved a discount of 26 per cent recently on a house in southwest London,’ says Eccles.

‘In overpricing to begin with and sitting on the market for some time, the seller was on the back foot and we were able to capitalise.’

The current climate is a marked departure from 2021 and 2022, when demand was boosted by the pandemic-era stamp duty holiday, the ‘race for space’ and lower mortgage costs.

During the same July-to-September period in 2022, sellers achieved 100 per cent of their initial asking prices on average, Knight Frank reported.

Expensive homes see biggest discounts

The premium end of the property market is facing particularly challenging conditions.

Homes priced at £2million or more are half as likely to sell as properties below that threshold, take twice as long to find a buyer and typically sell at a discount of nearly £250,000, according to TwentyCi data released this month.

Jonathan Hopper of buying agency Garrington Property Finders says the largest price reductions are generally being seen on prime properties, particularly in London.

Garrington’s analysis found that fewer than four in 10 London homes listed between July and September secured a buyer.

Across the capital’s £1million-plus postcodes, 3.6 properties were listed for sale for every one that sold. Only 28 per cent of homes found a buyer during the three-month period.

The analysis also showed that for every 100 sales agreed, 62 properties were withdrawn from the market. That is twice the national rate and suggests many sellers ultimately abandoned their attempts to move.

Hopper says: ‘These figures capture well just how hard things are for sellers at the premium end of the market.

‘Rather than seeing their home sit unsold, sellers often face an awkward choice between coming off the market or slashing the price.’

Hopper says buying agents are also seeing a ‘discount two-step’ emerge among sellers in southern England.

Under this approach, a seller makes an initial price cut to generate interest and increase viewings, then agrees to reduce the price again during negotiations with a prospective buyer.

Why do homes get over-valued? 

Sellers want to get the best possible price for their property. This can result in some trying their luck by listing with an overly ambitious asking price.

In some cases estate agents feel they have little choice but to agree, or risk losing the instruction.

However, some agents have been known to over-value homes in order to win over sellers, often in the hope that they can persuade them to reduce it to a more realistic level later.

Buying agent Jo Eccles says: ‘This is a really tricky market to navigate, because a discount from the asking price set by the seller or their agent isn’t necessarily a discount from the true value.

‘In some cases, sellers are setting the asking price to try and recoup what they paid for the property, plus stamp duty and any works carried out during their ownership. 

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‘In other cases, selling agents are overpricing properties to win instructions over their competitors. In both these scenarios, the asking price is not a true representation of market value today.’

How to haggle off the asking price: Top tips 

Buyers in locations where properties are struggling to sell can feel more confident in offering significantly under the asking price without offending the seller.

The seller and their estate agent are likely to be short of interest and this creates the perfect opportunity to buy at a discount.

It’s worth understanding what buyer demand and house prices are doing in a local area, rather than focusing on the county or country as a whole.

There may still be strong buyer demand or a lack of good quality homes for sale in a specific area, for example.

Buyers shouldn’t assume they can pluck a figure out of the air and expect the seller to knock it off the price, according to buying agent Jonathan Hopper.

‘Asking prices are a seller’s aspiration and a starting point for negotiations. Smart buyers will do their homework to get a handle on how realistic the asking price is, and to figure out the seller’s motivation,’ he says.

‘Understanding these two things will help you calibrate an offer the seller is likely to accept, even if it is below their asking price.’

Hopper suggests the two key tell-tales buyers should look out for are any signs of the seller being in a hurry or if they have been struggling to get serious offers. 

‘If offers have been rejected, try to find out why,’ Hopper adds. ‘If no offers have been made, especially for a while, the seller may be getting anxious and this will give you the maximum chance of success if you’re serious and have all your financial ducks in a row’.

Jo Eccles suggests buyers make sure they’re in a position where they can actually proceed before they try to negotiate.

‘Present your offer with as much detail as possible in terms of who you are and why you’re buying the property, as well as practical information such as who your solicitor and mortgage lender is, your financial position and preferred timescales for exchange and completion,’ she advises. 

Eccles thinks buyers should avoid debating with the estate agent about what they think the property is worth or bringing in examples of other sold homes to argue their point. 

She adds: ‘My advice would be to present your offer with tact and not get drawn into a potentially insulting debate about what the property is worth.

‘It erodes goodwill from the transaction and reduces it simply to facts and figures, comparables and price statistics, rather than getting across the emotion behind your offer. 

‘This reduces your likeability and the seller may also suspect you will behave badly through the purchase process or find ways to chip the price later on.

‘Sellers are very sensitive, as so many of them are selling for a loss, so coming across as an aggressive or know-it-all buyer won’t win you any favours. 

‘A seller or agent is much more likely to trust you if you say, ‘This is as far as I can stretch and I appreciate it might not be what you’re looking for, but I will be an upstanding and committed buyer.’