Overview: Bargain-hunters should beware

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The Independent Online

Tim Henman showed some nifty footwork a few weeks ago when he outbid eight other buyers for a house in Oxfordshire. It goes without saying that the house must be out of the ordinary to attract so much competition, but in the current climate, deciding just how special a house may be is baffling even the experts.

The upmarket buying agents Property Vision, whose whole purpose is to seek out gems, reckon that Henman's new home sold for 20 per cent more than they thought likely. Not only that, but they admit to feeling rather bruised by the experience of having just been gazumped on an outstanding flat in London by a hefty £500,000. Even five months of negotiation and a premium of 30 per cent did not secure it. And all this at a time when prices in Kensington and Chelsea are deemed to have fallen by 11.5 per cent in the past year, according to a survey by Rightmove, the property website. So what is going on?

One thing that certainly never changes is the difference between the best and rest. The only problem is that so many people imagine they do indeed live in the best. Charlie Ellingworth of Property Vision explains that the headline-grabbing figures in areas such as Chelsea can be explained by their particular exposure to the City's misfortunes. High prices always have further to fall. "But the idea that everyone benefits from rising prices is an illusion," he says. "Most buyers are concurrent sellers where the phrase 'zero-sum game' comes to mind."

There are still sellers who are asking stratospheric prices he points out, and gives the example of someone in central London who last year asked 20 per cent too much for his house, which remains unsold. Now, in order to sell, he will have to reduce it by 35 per cent in total.

Taken at face value, this sort of thing sends out shock signals, even though it is far from the whole story. It also leads buyers to put in ridiculously low offers and all we are left with is a stalemate. Linda Beaney of Beaney Pearce, the South Kensington estate agents, says it is a mistake to imagine there are rich pickings. "People are not being put in the position of having to sell and they would rather wait than accept an unreasonably low offer." She says there may be big bargains, but only a few, and these are unlikely to be exactly what the buyer wants. The purchaser who was able to push a vendor to accept £2.15m for a property valued at £2.85m six months ago is the exception.

However, even as more of London sees price falls, there are signs of a recovery in confidence as buyers make the most of the good supply of stock. Where supply cannot meet demand, notably in the country, the Henman factor applies. But this should not be read as a ripple effect from London, believes Richard Donnell, of FPDSavills Research, but rather confirmation that confidence is weaker at the top of the market, wherever that may be. It may appear to be a ripple, he says, but really it is because the London commuter belt now reaches well into strong local economies like Oxford and Cambridge. A healthy bonus from the courts at SW19 must always help.