The Price is Wrong: ‘Incorrect’ property valuations soar by 70% in PCL

London-based real-time resource now listing prime instructions in 'key rural locations', Pricing of residential properties in Prime Central London has been getting increasingly wayward over the last decade, argues Mayfair specialist Wetherell.


The rise of joint-agency instructions is promoting mis-pricing at the top- end of the market, argues Wetherell

Pricing of residential properties in Prime Central London has been getting increasingly wayward over the last decade, argues Mayfair specialist Wetherell, with the number of “incorrect” initial asking prices rising by 70% since 2007.

The total mismatch since then tots up to an over-valuation to the tune of more than £1.1bn, claims the estate agency, and has caused slower sales, reducing both vendor and buyer confidence in agents and the market.

Wetherell has delved into LonRes’ data vaults to review 1,047 resi sales that look place in Mayfair between 2007 and 2016. Of these, nearly a quarter – 245 – were initially valued some way off their eventual selling price – and required a price correction to ensure a deal. Most of the “incorrect” valuations tended, obviously, to inflate the initial asking price.

That £1.1bn figure comes, by the way, from taking today’s average unit value in Mayfair (£4.6m), and simply multiplying it by the 245 off-kilter initial prices…

The effect of an off-price on deal-doing is clear: when the initial valuation is on-point, LonRes data tells us that a property in Mayfair typically sells in 3-6 months; an over-valuation means that the property is likely to stick on the market for 14 months, and take a price reduction. Rare incidents of under-valuation, on the other hand, see properties shifting in just one or two weeks.

The proportion of incorrectly priced homes has risen by 70% over the last decade, according to this research. Back in 2007, just 5% of the 157 sales recorded by LonRes across Mayfair suffered a price reduction before they were sold. Wetherell estimates that in 2007 90% of homes on the market were correctly priced; 5% were incorrectly priced and had to have a price reduction to ensure an eventual sale; with the balance of 5% underpriced – and rapidly sold.

2011 saw 114 recorded sales in Mayfair – and the number of incorrectly priced homes had risen to 22%, all of which saw price reductions before selling. In 2013, there were almost 140 sales, with the number of incorrectly priced homes up to 27% of all transactions.

Mayfair deal-numbers slowed to 94 in 2015. But 40% of these started out on the market with a mis-judged price and saw a price adjustment before selling. 2016 was even more quiet; just 68 homes were sold in Mayfair – and the proportion of price adjustments was up to 45% of all sold properties.

Currently (at the end April/start May 2017), there are 160 residential properties on the Mayfair marketplace. Homes selling these days in Mayfair tend to sit in the window for an average of 281 days (10 months); a figure well above the 3-6 month historic benchmark for correctly priced properties. This has led Wetherell to estimate that just 25% of homes on the market at present are being initially priced correctly whilst over 70% are being overpriced and under 5% are being underpriced.