A shortage of homes for sale in London’s more affordable districts — combined with an increase in demand — means many buyers are being forced to offer above the asking price in 18 of the capital’s 33 boroughs, according to exclusive new figures from Hamptons International.
Johnny Morris, the company’s head of research, says: “There has been a 10 per cent fall in the number of homes coming on to the market across the capital.
“But levels have fallen further and faster in more affordable outer London, where buyers are routinely offering well over the asking price to outbid the competition.
“A third of homes sold outside Zone 2 went for more than their asking price in the past three months.”
He adds that while existing owners in cheaper areas are choosing to stay put and improve their homes rather than face the costs of moving, which can include increased stamp duty, buyers are being driven to the same areas, possibly encouraged by the Government’s Help to Buy scheme.
Sutton in south London is the hottest market of all. The average home in the borough now sells for five per cent over its asking price.
Since the average price for the borough is £341,571, according to December’s Land Registry House Price Index, that means a windfall of just more than £17,000 for vendors.
Other boroughs showing particularly strong prices include Tower Hamlets, where homes are selling at 4.3 per cent above the average asking price of £516,467, a bonus of more than £22,000.
The majority of boroughs where competition is forcing buyers to pay above the odds are generally lower-cost locations, such as Barking & Dagenham, Lewisham, Bexley and Greenwich, but sales in Camden, Wandsworth and the City of London are also exceeding asking prices.
Chris Rosindale, area director of Barnard Marcus, agrees that in the middle market sellers are currently in a really strong position.
“On average there are about seven buyers for every property, but we have been seeing upwards of 45 viewings for one property in some areas, and that competition between buyers is really pushing prices up,” he says.
This bidding war is concentrated in south and east London.
Simon Tollit, sales director of Sotheby’s International Realty, says: “Like all cyclical markets, growth tends to start with homes that are most affordable nearest to the centre and slowly move out — this is the ripple effect.
“As one area becomes unaffordable, people look to the next area offering affordability. It seems that the outer London suburbs — such as Tower Hamlets and Newham in the east, and Merton and Sutton in the south — are still considered relatively affordable. But with everyone looking in the same places, competition is created.”
Buyers looking for room to negotiate should head to popular and higher-priced areas, such as Westminster and Kensington, where homes are selling at 4.4 per cent below the asking price. With average prices standing at £1,015,417, this could mean a saving of almost £45,000.
In inner London, two years of rapid price growth and an increased stamp duty burden have led some buyers to turn away from the high prices being asked.
Meanwhile, the majority of home owners are staying put.
“Second-hand homes remain in short supply as owners are put off by the high cost of moving. They do the maths, and increased stamp duty at the upper levels makes it cheaper to stay and make space-creating improvements,” explains David Williams, head of sales at Jackson-Stops & Staff.