Date:26 June 2008 I Comments: 0 I Views:7,077

I’ve just read an article on popular UK personal finance site with the headline ‘The House That Lost 40% in Four Months‘.

Sounds ominous doesn’t it.

The headline suggests that a house has decreased by 40% in value in just four months.

But it hasn’t!

Firstly, house prices you see in estate agents are not usually the prices buyers pay.

Estate agents will always inflate the true value of the property slightly so that after some negotiating the vendor gets the price they actually wanted and the buyer thinks they’ve got a good deal.

Someone I know recently paid £205,000 for a house that was on the market for £230,000. That’s over 10% less and surprisingly when the house was valued by the mortgage lender the figure came back as £205,000.

Reading further down the article on it is clear the original asking price of the ‘40%’ property was excessively optimistic.

I would suggest it’s possible the original asking price was 20% more than the actual value and house prices may have dropped by up to 20% in some areas which would lead to a figure 40% lower than the original asking price.

So when an established and much read website suggests such a drastic decline in the value of a London property it’s tantamount to scaremongering.

The article also mentions: ‘Dozens of other London properties have had 20 to 30% carved from their original asking prices after failing to attract interest. ‘

This does not mean they have suddenly lost 20 – 30% of their value, it just means they were overpriced and people just didn’t think they were worth the money.

What this suggests is the house prices could be moving back into the buyers playing field with vendors forced to be much more realistic with their expectations.


Category: General