Price expectation gap risks widening

The gap between the price a seller wants and what a buyer is willing to pay is at risk of widening, Knight Frank has warned.

Tom Bill, head of UK residential research for Knight Frank said sellers can justifiably feel that the market is doing better than last year and prices are rising, but he adds that the recovery is happening in slow-motion.

He highlighted that mortgage rates have been rising again and remain high amid hopes of an interest rate cut from the Bank of England in the coming months.

Bill added that prices are also being kept down by supply now rising by more than demand.

He highlighted last week’s RICS Residential Market Survey that showed the latest net balance reading for new sales instructions was the highest since October 2020 at 21%.

Bill said: “This tallies with Knight Frank data, which shows the number of new prospective buyers flat or falling compared to the five-year average in the first two months of the year. At the same time, market appraisals and sales instructions are up.

“No doubt pent-up vendor demand from 2023 is being released as inflation calms down and spring approaches. The effect may also be temporary as renewed confidence from January fades, but the result is more downwards pressure on asking prices.”

Another reason that may increasingly unsettle buyers is political uncertainty.

Bill added: “We are not at the point of wondering if the government will survive until the end of the week yet, but rifts inside the Tory party are widening.

“Are those rifts deep and ideological to the point that some MPs would attempt to oust the Prime Minister despite how chaotic that would look months before a general election? The answer has to be yes.”

https://www.knightfrank.com/research/article/2024-03-18-price-expectation-gap-between-buyers-and-sellers-risks-widening