Split the Difference
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A for sale board going up in a street is often a sign that change is on its way. As neighbours talk to each other and estate agents knock on doors, the first board is frequently followed by a second a few weeks later. The biggest jump in sales comes on terraced streets where it’s easiest to compare one house with all the others. And where a record price is achieved, the effect is bigger. Last year, streets where a sale set a record price there were 68% more homes sold in the next three months compared with streets with more modest sale prices.
It seems that a record price on the street affects the neighbours’ expectations of what they can achieve and encourages them to try it for themselves – quite quickly. The greatest uplift in activity is in the first three months after a record sale price nearby. The record price can reflect the increased popularity of a locality or a revival in market activity, but it also affects neighbour’s expectations of what their own home is worth. The combination gives agents and sellers greater confidence that they will secure a deal quickly.
Copycats are most prominent in the North East where price growth has been slowest since the financial crash and in some parts, have not returned to their pre-crisis peak. The number of sales on a street rose 77% in the three months after a record price was achieved in the North East in 2016. That could suggest that the neighbours were surprised at the new price and realised the growth in equity on their own home provided an opportunity to move that wasn’t previously there.
There are fewer copycats in London. As prices in the capital have risen dramatically over the last few years, expectations of future price growth have been strong, so potential sellers are less surprised by record prices. In addition, as London prices are well above their pre-crisis peak, homeowners have not been prevented from moving by a lack of equity. Looking ahead however, expectations of future price growth in London is slipping. That could mean an increase in copycats as a new record price may now be seen as a market peak, encouraging those who want to move to do so sooner rather than later.