It seems buyers hoping for a big discount are taking a reality check. At any time, a prime property is more likely to sell at a price below its asking price. But, at the moment, the deepest discounts are being seen in the mainstream market. This is an indication of the affordability pressures facing middle and lower-income households which are likely to prevail for the rest of this year and into 2021.
The average prime property achieved 95.9% of its initial asking price in May, 1.3% below the same month of 2019. The average mainstream market London home sold for 96.0% of its asking price. This is the lowest value since May 2009.
Will this trend continue? Possibly. Some households seeking to trade up may be happy to take a lower price because they can secure a larger reduction on the home they wish to buy. But pent-up demand appears to be supporting values in the meantime, particularly those larger homes with gardens that top the summer 2020 wish-list.
But the greatest determinant of what happens next will be the damage wrought by the pandemic and the speed of the economic recovery. How soon will people’s incomes return to pre-pandemic levels? Will those who have lost jobs easily find new employment? Sadly, there are no firm answers to those questions since we have not yet seen the extent of the wider Covid-19 fall-out.