House price differentials are more important than sales price
In today’s transitional market, house price differentials are more important than sales price. This is according to Iain McKenzie, CEO of The Guild of Property Professionals, who recently spoke to a few Guild Members about their local property markets and strategies they are using when speaking to clients.
Adam Mackay, from Mackay Property in Sawbridgeworth, says that the market in his local area has resorted back to a ‘normal’ market. “Last year we had exceptional high demand and an influx of buyers with certain properties attracting hundreds of viewers. Those days are gone, and we are seeing a more normal level of buyers. We are not seeing first-time buyers in the forces we have previously, and mid-level properties seem to attract less interest than the larger homes. This has caused us to shift our focus to the higher end of the market. We are still seeing people wanting to move, but it is price sensitive, so if a property was on the market for £450,000 a while ago, it would be on for around £410,000 or £420,000 today,” he adds.
Director of Parson in Diss, Kevin Parson, agrees, saying he is seeing a transition in his local market. “Three months ago, agents were valuing properties at a higher price than they are now. We are finding that we have to advise our clients about the shift in the market. I have always found that in this type of market a lot of sellers are chasing the market and are often a step behind, and we are trying to educate them to ensure are ahead of the market rather than trailing behind. We have been focused on informing our clients that the sales price of their property is less important than the differential between the home they are selling and the one they are buying,” he comments.
McKenzie says that where the market is so transitional is where you have agents that are quite blunt in their style and are still buying the instruction. “There are still agents in the market who are overvaluing properties just to get the instruction rather than giving the right advice to the customer. A good agent will be able to navigate how to deliver best advice to the customer, moving away from the word valuation and rather using terminology such as market appraisal, because it is the market the dictates the home’s value,” he notes.
Parson agrees, adding: “When talking to sellers and they think of the word ‘valuation’, whatever the valuation is, they will believe that to be gospel but that is not the case. Our job at the moment is to advise on the marketing of the property and positioning it in the market, so that it is positioned to sell because that is ultimately what the vendor wants to do. Sellers may have an idea that the values seen three months ago is what they would achieve now, so it is important to educate them on that and help them understand that the market has changed. In order to get a seller moved in the time frame they want to move, they will need to understand that their property should be correctly positioned within the market.”
McKenzie says that people often get hung up on prices, when in fact, as mentioned earlier, it is about differentials. “It is about the difference between the price you sell at and the price you buy at. What I used to tell my sellers back in the 80s and 90s, was that it doesn’t matter what your home is worth, as long as you buy your dream home with a £20,000 or £30,000 differential, because then I have done my job as an agent. As a consequence of that, every offer you get becomes a good offer, because it is a working offer, and if you accept £30,000 less for your property, but then buy a property for £30,000 less, it is same thing. In addition to that if you buy upmarket you actually make more money, by possibly getting a better deal or percentages are different,” he adds.
Mackay notes that in today’s market it is imperative have stats and data that help provide insight to sellers about what is happening in the market. He says: “We ensure that everyone within our business has access to market stats so that we all on the same page when talking to clients. Often, we will pull people back to the five- or ten-year data for them to have a look at how property prices have changed over the past decade, rather than focusing on the last two years when property price growth has not been on a normal trajectory.”
According to McKenzie, many sellers may feel as if prices are going backwards but that may not necessary be the case. Expanding on that he adds: “If a neighbour sells their property for £800,000, and the vendor lists their property at £850,000 on the advice of the agent, if they then dropped to £825,000 or £815,000, they would feel like their house is going down in value. However, the reality is it isn’t, because if the neighbour’s home sold for a similar value this year, there is a lot of leeway in between in terms of marketing price, which is not the real price. Because of this, the market will feel like it is dropping more than it actually is. And again, a good agent will be able to explain that to a customer,” he concludes.
