As the market has softened over the last year and the pendulum has swung from sellers to buyers, more people are betting that they can negotiate bigger discounts on properties. As a result, we’ve seen a rising share of buyers looking at homes beyond their initial budget.
So far this year, 13.9% of viewings that were carried out in England and Wales were of homes above the purchaser’s budget, up from 11.4% last year and 9.4% in 2021. This is nevertheless still far lower than five years ago, when 18.4% of homes viewed cost more than the buyer felt they could afford.
London and the Southeast have seen the highest share of budget-busting viewings in 2023, both at 17%. Loans here tend to be higher relative to incomes in the south of the country and house prices there have come under the most downward pressure from higher mortgage rates. By contrast, in Wales and the Northeast, which have much lower property prices, there was the lowest share of above-budget viewings, both at 11%.
Of all the buyer groups, investors are most likely to view homes above their budget. This year, 14.8% of investors looked at homes that were too expensive – by an average of 18.9%. Meanwhile, 13.4% of movers looked at properties that were an average of 12.7% over their budget.
First-time buyers tend to be less ambitious, however, with 11.9% viewing homes that were an average of 11.7% above what they can afford. Although chain-free first-time buyers are potentially in a strong position in a slower market, higher mortgage rates have hampered their ability to stretch themselves.
On paper, buyers have more room for negotiation now than did previously, especially compared to the frantic pandemic markets. There’s also greater potential for buyers to get a little more house for their money, particularly if they don’t have a house to sell. Last year, the average seller of a home in England and Wales managed to get a buyer to pay 100.4% of their final asking price, but that has dropped to 98.6% so far in 2023.
Yet, in reality, it has become a lot more expensive for anyone borrowing the same amount to buy a home as they did 18 months ago – especially for purchasers who need a big mortgage. This limits their ability to stretch to homes that previously had been well out of their reach. Unless they are heavily backed by cash of course.
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