By Ruth Bloomfield
The number of deals falling through is rising
Moving house is said to be one of the most stressful life experiences, right up there with bereavement and divorce. But what about the stress of not moving? Amid the upheavals of the past few months increasing numbers have seen their property ladder dreams collapse around their ears.According to market analyst TwentyCi there has been a ‘sharp increase’ in the number of deals falling through. More than 90,000 agreed sales disintegrated between July and September, an 18 per cent increase on the same period in 2019.
Wendy and William Waterton know exactly what it feels like to be on the sharp end of a collapsing sale. In the past two years it has happened to them twice. The couple bought their one-bedroom starter flat in Woolwich, south-east London, for £320,000 in 2017. By November 2020, with a young family, they were ready for a larger home closer to family in north London.
They put the flat on the market for £325,000, but small flats without outside space were a hard sell during the pandemic. It was not until December 2021 that they accepted an offer of £315,000.
The couple packed their bags, planning to move in with relatives and start house-hunting once the flat was sold. They hoped to complete in March this year. ‘Then in February our buyers said they had found a property which suited their needs better – we had no idea they were still looking – and pulled out,’ said William, 30, a management accountant. ‘It was devastating.’
In May he and Wendy, also 30, who runs an online cosmetics store, steeled themselves for another attempt to sell and put the property back on the market. The couple and their two children also went ahead and moved in with William’s parents so the flat would be vacant.
Over the summer they accepted an offer of £312,000 and, once more, everything seemed to be progressing nicely. Then came the mini-Budget. By the end of that week, with the mortgage markets in turmoil, their buyer had pulled out.
To make matters worse the couple had used the Help to Buy scheme when they bought the flat, which means renting it out for a while is not an option. All they have been able to do is drop the price, to £305,000, and hope for a case of third time lucky.
‘Our fear is that it has now been on the market for so long that people will think there is something wrong with it,’ said William. ‘In reality it has just been a series of events – the pandemic, the war in Ukraine and the cost of living crisis – happening around us.’
Given the likelihood that interest rate rises will continue, and amid forecasts of substantial house price drops in 2023, it is likely that Wendy and William’s experience is going to become more commonplace, afflicting all sectors of the market.
In the north London suburbs veteran agent Jeremy Leaf, of Jeremy Leaf & Co estate agents, said his team have had to do some ‘severe arm-twisting’ to keep deals on track, particularly when dealing with anxious first-time buyers confronted with the prospect of higher monthly repayments. He agrees things could get worse before they get better, with the number of completed sales dropping off next year. ‘Buyer enquiries have reduced substantially since the mini-Budget and are only slowly starting to improve,’ he said.
Agents have started to hear whispers of the return of gazundering – the practice of attempting to renegotiate a lower price on the verge of exchange
Another breed of buyer, meanwhile, is keen to use the faltering economic situation as an excuse to try their luck. Camilla Dell, managing partner of buying agency Black Brick, has started to hear whispers of the return of gazundering – the practice of attempting to renegotiate a lower price after an offer has been accepted and a deal is on the verge of exchange.
In prime central London, she said, this approach tends to fail because few owners are so desperate to sell that they will take a last-minute lowball offer. ‘What has happened is that not only have the vendors said no, but they have also decided not to sell their property to that buyer, so it is not a strategy which is working,’ she said.
Beyond London, locations which were red-hot during the pandemic are now seeing a wave of deals fall through. Carol Peett, managing director of West Wales Property Finders, has noticed a string of properties ‘reappearing’ on the market a couple of months after going under offer. She blames the surveyors who carry out valuations on behalf of mortgage lenders who, she feels, have a habit of undervaluing properties.
‘In many cases, they send valuers from outside the area who do not understand the nuances of the local market,’ she said. ‘A property with a sea view may be three times more valuable than one in the same postcode without a sea view or slightly inland and down value accordingly. Unless people have a substantial deposit to cover the shortfall, the transaction falls through.’
In Cornwall, another lockdown property hotspot, Josephine Ashby, a director of John Bray Estates, said many discretionary second-home owners simply change their minds and withdraw property offers – and the way the UK buying system is designed can do so without penalty. Unfortunately, their decision can break lengthy chains of buyers and sellers, sending everyone back to square one.
‘Reservation deposits prior to exchange is an interesting idea,’ she said. ‘We see them frequently with new-build properties, but they could be used more for existing properties. This would make buyers think twice before withdrawing from a transaction they entered into.’
Jeremy Leaf thinks that vendors should have to produce an information pack giving details on their property upfront, to avoid would-be buyers discovering late in the game that a home suffers from subsidence or has a Japanese knotweed issue. He would also like local councils and managing agents to be encouraged to respond to queries faster; the more time spent chasing up information during the conveyancing process, the more time there is for buyer or seller to get cold feet or mortgage deals to expire.
Whatever happens over the next year or two, buying agent Nina Harrison, London specialist at Haringtons, who has been buying and selling property for 30 years, has comforting words for younger buyers shocked by the sudden deflation of the property market. ‘In 2023 I think we will see a dip which is something that Gen Zs have never experienced before – but as with all roller-coasters there will be a climb again,’ she said.