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House prices: Why are buyers and sellers playing chicken?



The gap between London asking prices and reality needs to close - but who will move first? 

Paladian chicken house.  Photographed at Miller's Ark farm, Odiham, Hampshire

Paladian chicken house. Photographed at Miller's Ark farm, Odiham, Hampshire

Buyers and sellers in the London housing market are playing chicken - the question is, who is going to move first on price? Photo: Eleanor Bentall

By  Anna White, Property correspondent

London estate agents are gloomier than they've been all year.

New buyer demand slipped for the sixth consecutive month in October as the market became trapped in a "Mexican stand-off", analysts said.

This is the longest spell of falling demand seen by members of the Royal Institution of Chartered Surveyors (RICS) since 2008, as 62pc more property agents recorded a shrinking appetite to move house compared with September.

In London, only 41pc of homes listed on the market in October were sold, while the level of stock being registered and marketed was up.

At the same time house price growth has stagnated.

According to estate agents in the capital there is a stalemate between buyers - who think values are over-inflated - and sellers - who are not prepared to lower the asking price.

"There is a Mexican stand-off with estate agents saying that the gap between price expectations and what buyers are willing to pay needs to close," said Anthony Codling, property analyst at Jefferies.

There are two kinds of sellers, the aspirational ones who want to capitalise on the 20pc surge in house prices seen in London over the past year, and the ones who have to move if they are having another child or changing job, he explained.

"And at the moment the aspirational sellers are not moving."

The general election and talk of a mansion tax has also softened the top end of the London market, having a dampening impact on the perception of the capital.

In fact, analysis from Jefferies has showed that property prices have dropped in the period leading up to the last seven elections.

"Demand certainly cooled in the past month, especially due to tougher lending criteria, concerns about rising interest rates and mansion tax," said one agent in Finchley, North London.

"However, sellers who recognise the change and are prepared to accept realistic offers are still agreeing sales."

Outside London, buyer demand fell for the fourth consecutive month - the most prolonged period of this measure since 2012 - as 18pc more members believed the impulse to buy a new home had diminished.

"The flatter trend in the market is partly a reflection of potential buyers becoming a little more cautious about making a purchase as more stringent lending criteria has made it harder to access mortgage finance," said Simon Rubinsohn, chief economist at RICS.

"An increasing awareness of the approaching general election also appears to be contributing to the softer market..."

Mark Carney, the Governor of the Bank of England, has said he expects to see strong wage growth next year, which, following the election, should lead to house price growth.

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