Second-home owners forced to cut prices

Price reductions are becoming an increasingly common occurrence in the popular second-home market of the South West, as sellers find themselves forced to cut asking prices to achieve a sale, according to property agents.

New figures from Savills, the property agent, reveal that 75 per cent of the properties on its books in Devon have had their prices cut at least once this year, with the average reduction being 15 per cent.

These price cuts are also being seen in the Cornish market. Just over 40 per cent of this year’s stock has had its price reduced, with average price cuts of 16 per cent. However, properties that have been reduced by 20 per cent have attracted the most interest and most frequently led to a sale.

“Cornwall had become too expensive – particularly in this market – and around 40 per cent of our properties have had a price reduction this year to adjust to buyer expectations,” says Jonathan Cunliffe of Savills Truro.

He says that while there are plenty of “able buyers” out there – the agent’s viewing figures for July this year were double that of July 2010 – they are not prepared to pay last year’s prices.

While the latest Land Registry figures show that property prices in Cornwall have fallen 6.5 per cent from the peak of the market in 2007, Cunliffe believes the next few months’ data will show a sharper price fall in Cornwall than recorded to date.

His analysis of recent sales suggests that, across the market, sales are going through at between 15 to 25 per cent of the guide price. “There’s too much stock on the market and a real need to rebalance buyer and seller expectations to get things moving.”

However, if the price is right, there are still committed buyers in the market.

Savills recently became joint-sale agent for a four-bedroom waterfront property on the South Cornish coast with a guide price of £2.45m.

“I felt the price was too high and, after six weeks with little interest, I recommended a price reduction to £1,995,000,” says Cunliffe. “We received three bids of the asking price from three different cash buyers and exchanged contracts just two weeks later.”

Agents say the South West markets have been the worst hit among the traditional second home locations in the UK. These markets became extremely expensive as a result of City employees pushing up demand with bonus money at the peak of the market – so the disappearance of these buyers has impacted the market significantly.

“The South West market probably got a bit overblown,” admits Tim Dansie, director at Jackson-Stops & Staff, the estate agent.

Figures from Savills show that buyers from London and the South East now account for about 30 per cent of transactions compared with 60 per cent at the peak of the market.

Meanwhile, the Norfolk market has held up well. Agents believe this is due to the short supply of properties and the closer proximity to London.

Research of recent sale transactions show that Devon and Cornwall have seen the biggest falls in the number of London buyers this year compared to the peak of the market, while Norfolk, Canford Cliffs and Wimborne have seen rises.

“We’re still seeing a reasonable level of interest from second-home buyers,” says Dansie. “It hasn’t seen the crashes that the south-west has seen.“ He notes that properties with a view of the river or with sea views will always sell well and often over the guide price.

Ben Rivett of Savills’ Norfolk office agrees. He notes that the market is erratic and hard to generalise but in some circumstances houses can still achieve more than the guide price – and even more than prices achieved at the peak of the market.

“A manor house we sold well in excess of the guide at the peak in 2007 has just resold at £100,000 premium on the price achieved then,” says Rivett.

Average sales in Norfolk are typically within 5 per cent of the guide price, with second home sales representing 50 per cent of the market.

Miles Kevin, head of Knight Frank’s South West Residential Development office, believes the new-build sector has improved this year because developers have become more sensible on pricing.

“There’s a sense that people are still trying to get big prices in the second hand market but developers are now negotiating with buyers much more,” he explains. Kevin says he has seen an increase in demand for second-home properties at the lower level but he notes that sales above £300,000 is still “sluggish” unless it is a unique property.