The great property price cut bonanza hits a third of homes

Why are asking prices coming down? Is this the beginning of a crash?

housing market concept image...

The property market is a bargain bonanza, with almost a third of all homes for sale in major UK towns and cities slashed in price since they first hit the market. The question is why? And what next?

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The study by online estate agents found that 31% of all properties in the UK's biggest towns and cities had seen a price cut since they first went on the market. In eight of these towns, more than 40% of properties have seen the price reduced.

Stockton on Tees in County Durham has seen the most cuts - as 49% of all properties have come down in price. This is followed by Aberdeen, where 46% have seen price reductions.

Stockton on Tees 49%
Aberdeen 46%
Halifax 45%
Middlesbrough 43%
Blackburn 41%
Rotherham 41%
Darlington 40%
St Helens 40%
Grimsby 39%
Wakefield 39%
Carlisle 39%
Bradford 39%
Huddersfield 38%
Wigan 38%
Hartlepool 37%
Preston 37%
Gateshead 37%
Ipswich 37%
Blackpool 37%
Oxford 37%

There seems to be a clear north/south divide, because 17 of the 20 places with the largest proportion of price cuts are in the North of England or Scotland. Only one city in the south of England makes the top 20 - and that's Oxford at 37%. London, meanwhile, has seen 30% of property prices cut since they were listed.

What does it mean?

There are several reasons why a property price may be cut. Generally speaking, it tends to be because there are too many sellers and not enough buyers, but Alex Gosling, CEO of points out that this isn't the case at the moment, because there's a lack of stock and plenty of people looking.

What we are seeing instead is too much optimism from buyers. This has been fuelled by a history of house price rises, so when agents value the property, they build in another rise on top of what the property is currently selling for. When the heat comes out of the market locally, this leaves properties overpriced - and sellers need to cut the price.

This is coupled with the fact that buyers are getting worried. Gosling suggests economic uncertainty, sparked by Brexit, means buyers are worried about spending too much, are viewing multiple properties, and haggling prices down. After weeks of viewings without offers - or lower offers - sellers are biting the bullet and cutting the price.

The question is whether this is the beginning of more realism in the market - where smaller house price rises are built into the asking price - or whether we are seeing a turning point, and we can expect house prices to start falling.

There are some worrying signs in the market - not least because house prices fell in January by just under 1%, according to the Halifax. This was attributed to pressure on spending from inflation and low wage growth, plus weaker economic growth and concerns about the future for the country. Halifax suggested at the time that while a shortage of housing would underpin prices, there would be some 'downwards pressure' this year.

However, predictions for house price movement during 2017 still tend to sit between 1% and 4% - although falls are expected in London. The fundamental shortage of properties in this country - coupled with a culture of home ownership - means that while we may be worried about the future, and although cash is tight at the moment, we will still be prepared to stretch ourselves for the property of our dreams.

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