Can We Get Real About U.K. Real Estate?

A recent report about real estate in the U.K., especially properties located in or near London, contends that flat local real estate prices and a depressed market is at least in part due to the fact that sellers as well as real estate agents may have unrealistic expectations regarding the selling price of their properties. Sales are down near 50% which means the price of homes for sale is falling. Sellers are rejecting a lot of offers, which further fuels the situation. There's often a 30% difference between the value expected by the seller and the price the buyer is willing to pay. A seller who’s asking £100,000 for a UK real estate property and receives offers in the range of £70,000 is highly likely to reject them.

Sellers Are A Major Part of the Problem

Owners aren't listening when real estate brokers tell them their property value has fallen. In fact, property values in the present market can decline as much as 20% annually. One expert in real estate services places the blame firmly on the sellers: “As a result they [sellers] are unwilling to accept agent advice on appropriate asking prices or offers. Consequently, many properties are withdrawn from the market or remain unsold for long periods, producing an unprecedented low number of transactions. Unless their [sellers] properties are absolutely outstanding it is essential that they [sellers] adopt a realistic attitude and listen to advice if they want to achieve a sale.”

Costly Real Estate is Suffering Too

Another shocking aspect of this trend of UK real estate is that even high-end properties designated as “super prime” are not immune. Super prime properties are those valued at over 10 million pounds. Foreign investment helps slow this process, but any real estate agent will tell you values are still moving lower. Rental prices are also dropping as more and more super prime properties flood the rental market.

Lenders Are Partially to Blame

Mortgage rates continue to move up even though many banks have requested bail outs from the government. Also, when interest rates drop, the lower rates are not being passed in to consumers, such as when the Bank of England recently their rates from 0.2% to 0.5%. The banks justify raising their rates in the face of lowering national rates by saying that all the banks are doing it. Despite this, lenders like Lloyd’s TSB and Barclays’ in fact raised the Bank of England’s new lower rate. Whether or not this is true, it’s still bad news for real estate in the U.K. And it’s even hurting news for consumers who are seriously looking to buy UK real estate.