Property-buying panic creates gazumping with a difference as sellers hike asking prices at last minute
03-18-2014
By Matt West
Property buyers in London are being gazumped by non-existent rivals as sellers with whom they have agreed terms raise the price of the property at the last minute.
The new phenomenon of ‘ghost gazumping’ is seeing homeowners - some persuaded by unscrupulous estate agents - raise the asking price of their property days before they are due to exchange contracts in response to rapidly rising values in their area.
The trend is something that has never been widely reported even during the property bubbles of the 1980s and mid-2000s. It comes as property asking prices were revealed to have hit a record high of nearly £256,000 in March amid a ‘spring seller rush’.
Ghost gazumping: Estate agents are encouraging homeowners to walk away from agreed sales weeks before exchanging contracts as house prices continue to accelerate
Property website Rightmove said the average asking price across England and Wales were 1.6 per cent higher in March compared to February’s £255,962, surpassing a peak set last July by £2,304.
A new record was also set in London, where average asking prices have reached £552,530 - £8,298 above the capital's previous high reached last October.
Critics of government policy have for months warned of the dangers of a property bubble, which they say is being fuelled by a lack of house building and the Help to Buy scheme.
The scheme provides government backed loans up to 15 per cent of the value of a property to would be homeowners who have saved at least 5 per cent towards the property’s value themselves.
But with house prices rising, buyers are having to fork out up to six-figure sums extra just to avoid finding a new house.
In the capital, rival estate agents have been door-knocking sellers - whose properties have been under offer for more than eight weeks - and telling them the offer they have agreed is too low.
In the 1980s, property buyers would often be gazumped by rivals who would step in with a higher offer at the last minute.
But with such high demand for a small number of properties, sellers are increasing their property price despite there being no rival bidders.
Typically, ‘ghost gazumping’ occurs several weeks after an initial offer has been accepted.
Dominic Agace, chief executive of estate agents Winkworth, said: ‘It’s something that has not been around before. We obviously have had gazumping in the past but this is not something I have ever seen until now.’
He said it was an increasingly common trend in London suburbs, such as Shepherd’s Bush, Twickenham, Dulwich and Kensal Rise.
In one deal, he claimed, sellers went back on the previous deal of £1million and asked for an extra £100,000 - with the buyers agreeing to pay the higher amount.
Andrew Ince, a 45-year-old driver, told the Financial Times the price of a house he was buying in Chigwell, east London, was raised by £20,000 just before the exchange of contracts.
He said: ‘I thought it was completely unethical. I flipped and said "no way".’
Peter Rollings, chief executive of Marsh & Parsons estate agents, said: ‘It’s now very common and a depressing factor of a market with low supply and monster demand.’
Rightmove said house prices rose 1.6 per cent across the country month on month
Mark Hayward, chief executive of the National Association of Estate Agents, said the phenomenon was a symptom of a huge demand for property but not enough supply.
He said: ‘It’s not necessarily greed; if people think they can get more, they will try.’
Across England and Wales, sellers' asking prices are now 6.8 per cent, or £16,251 higher, than they were a year ago and in London they have seen annual growth of 11.3 per cent, the website whose records go back to 2002 said.
But Rightmove said that the South West and the South East, both of which had been affected by the recent severe flooding, ‘lag behind the spring seller rush’.
The North was the only region where sellers' asking prices were down year-on-year, with a 0.3 per cent annual fall taking them to £145,861 on average.
House sellers in Wales were asking 4.6 per cent more for their properties than a year ago, at around £171,359.
Miles Shipside, director of Rightmove, said: ‘With prices on the up and set to increase more, there is a greater sense of urgency among buyers.’
Supply problems: The property website said however that the number of properties available for sale was still well below the levels seen before the financial crisis
Rightmove is also seeing evidence that house price growth in London is no longer being driven by the wealthy ‘prime central’ boroughs. London's worst-performing borough in March was named as Kensington and Chelsea, where asking prices fell 2.4 per cent on the previous month.
But the average price tag for a home in the borough was still £2.1million.
The English capital's best-performing borough was Haringey, where prices had surged by 9.5 per cent month-on-month to reach £597,634 typically.
Westminster and Camden, where average asking prices were above £1million, were also among Rightmove's worst-performing areas in London in March, while Barnet and Hounslow, where prices were around £600,000-plus, were among the best.
Prime central London has been a particular attraction in recent years for wealthy overseas investors looking for a ‘safe haven’ for their cash.
Mr Shipside said the ‘slack’ caused by prime London's slowdown had been taken up by other London boroughs and surrounding areas of the South.
Asking more: Property asking prices have risen consistently in the last three months although by slightly less in March than in the two months prior
Asking more: Property asking prices have risen consistently in the last three months although by slightly less in March than in the two months prior
He said: ‘While London's top-end locations remain sought after and highly-valued, the slow-down in the pace of their rises was bound to happen after some heady increases.’
Rightmove said it was seeing signs that more home owners were being encouraged to come to market as prices rose.
A total of 114,996 new properties were advertised on Rightmove in the last four weeks, a figure which was up by 8.7 per cent on the same period last year.
Rightmove said that only the South East and South West had not seen substantial jumps in the numbers of properties coming to market on a year ago, with increases of 1.3 per cent and 2.3 per cent respectively in the volume of new sellers.
Average Asking prices in the South West were 1.9 per cent higher than last year to £258,799, while in the South East they had lifted by 5.3 per cent to reach £325,716.