There's little doubt that we are now facing a property slowdown, and in all likelihood a crash. House prices fell in the final three months of last year, Halifax figures show, and are likely to continue doing so in 2008. But while renting is probably the best thing you could be doing right now, there will always be those who need to sell their house and others willing to buy, even in the worst market conditions. So how can sellers market their homes in a downturn, and how can buyers take advantage as confidence falls?
Can freebies sell your home?
One option for sellers is to offer incentives, but it's not something to do lightly. The trouble with freebies is that they make it clear to buyers that a property has been on the market a while, the vendor is keen to sell and the sale price is probably unrealistic. And "the worst way to sell anything is to make yourself look desperate", as Andrew Scott of Strutt & Parker Lane Fox tells The Sunday Times.
But it isn't always a bad idea. If you're keen to sell and your price is fair there are certain incentives that work. One seller is offering a first-class season train ticket between Grantham and King's Cross free with their four-bedroom home. This may seem a strange incentive surely any sensible buyer would just ask for the money off instead but the agent has found that it has worked in the past because it draws attention to the fact that Grantham is a commutable distance from London.
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Another couple have come up with a more promising offer, guaranteed to spark the interest of London parents. Their six-bedroom home in Putney, at £2.75m, comes with the offer of a place at local private prep school, Hurlingham, which they own. But you only get to skip the waiting list (full to 2011) you still have to pay the £3,200 fees every term.
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How buyers can get a good deal
If you are buying, don't assume the same trick will work for you. When a home in Kensington went up for sale, one hopeful sent the vendors a case of champagne with a note saying, "I do hope you'll accept our bid". The vendor didn't, leaving the buyers with no home and a bill for a case of champagne. But, of course, that was in the boom times.
Now buyers can forget bribery and get ready for hard bargaining. This doesn't mean you should wade in and offer 25% below the asking price at least, not at this stage of the slump. "The British public can be quite stubborn when it comes to selling their main asset, and many will still prefer to sit tight rather than sell a home for less than they think it is worth," says Ross Clark in The Daily Telegraph. Offers of less than 90% will rarely be taken seriously. But if you think a property is vastly overvalued, let the estate agent know you'd be interested if the price was cut so they can tell you if the vendor drops their price.
A good way of getting a discount on new-build property is to negotiate what is included in the selling price. After all, "the last thing developers want to do is to admit that sales prices of their properties are falling", says Clark. Asking for the garden to be turfed or for them to pay a part of your deposit can save you money while the sale price remains the same, saving developers from having to report falling sales revenue to their shareholders.
Asking for anything from carpets and fittings, to the seller paying the stamp duty, are popular ways of getting a discount already regularly used by builders and developers, which will now become more common in the private resale market. Clever negotiation on these issues can save you as much as 10%-15% of the asking price. As developers have no emotional attachment to the house, you can be cheekier about what you ask for without the risk of them taking offence.
Sunderland: "negative equity capital of the UK"
Sunderland has won the dubious distinction of being home to the most mortgaged street in Britain. Research by Experian for The Mail on Sunday has found that the average mortgage on Frederick Street is £107,604, while the average house costs £108,674 so the typical owner has borrowed 99% of the value of their home. That means property prices only have to drop by 1% for homeowners to fall into negative equity, something that could soon be on the cards.
Many properties have been "overvalued for mortgage purposes", estate agent Thomas Watson tells Ross Clark in the Daily Mail, as investors bought up city-centre flats, hoping to profit from buy-to-let. But over-building is pushing down prices. The rate of development has proved "too fast in a region where the population is still shrinking", says Clark. Many blocks are half-empty as buy-to-let investors struggle to find tenants, and as landlords sell out, prices are falling. The only comfort for Frederick Street's residents is that they aren't the only homeowners in the region to face this problem. Anyone still complaining of a British housing shortage clearly hasn't poked their nose north of the Watford Gap. Since 2001, 70% of new homes in central Manchester have been sold to landlords, says The Daily Telegraph, with similar figures for the likes of Sheffield, Leeds, Liverpool and Newcastle. It may not be long before they're competing with Sunderland for the title: "negative equity capital of the UK".
