Britain is a topsy-turvy place right now. The strong and stable government is weak and wobbly, a previously unelectable socialist is leading in the polls, Brexit may not mean Brexit and the only certainty is uncertainty. As in politics, so in property.
The country market has been stagnant for years, London has been stalling for 18 months and we’ve been warned that a wider crash is imminent. Yet gazumping — that harbinger of white-hot markets that reached its frenzied peak in the new Labour era — is back again. What is going on?
New research from Countrywide estate agency shows that gazumping is at a six-year high in Britain. In the east of England, 5.7% of offers accepted by a seller in 2017 have subsequently been rejected in favour of a higher one from a different buyer, 30 or more days later. In the East Midlands, the figure is 4% — double the rate seen in 2011. And while a rate of 3.9% in the northeast of England might not sound high, that’s four times what it was in 2011. The rate in the northwest has more than doubled since 2011, to 2.9%; the West Midlands and Yorkshire have also recorded six-year highs, as has Britain as a whole (3.6%, compared to 2.4% in 2011).
The gazumping rates came out even higher in the latest survey by emoov.co.uk. The online estate agency found that a whopping 36% of respondents had been gazumped on a recent purchase, up from just 13% a year ago. It also revealed that 35% of buyers in London had been gazumped, 27% in Manchester, 26% in Birmingham, 23% in Leeds and 20% in Cardiff. Admittedly, its research was based on a survey of just 1,000 purchasers.
So it seems gazumping and bidding wars are on the rise in the regions. Why are people splashing the cash and playing dirty in such a moribund market? “What these numbers are showing is that we have a lack of stock across Britain, and that’s become an issue,” says Fionnuala Earley, chief economist at Countrywide, who attributes the dearth of supply to homeowners staying put. “People just aren’t moving. They aren’t confident enough to put their house on the market.
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“It could be that they can’t afford to move because of the higher stamp duty, it could be the squeeze on household incomes due to inflation, but mostly it’s just uncertainty. We’re now down to the crux level of people who really need to move. There’s not enough property around to sell, there’s less choice and there’s a lot of competition for the nice houses.”
Indeed, in the areas where gazumping has risen most, the choice of housing stock has narrowed drastically: in the east of England, there are 57% fewer houses on the market in 2017 than there were in 2011, according to Countrywide; in the northeast and northwest, there are 61% fewer; in the East and West Midlands, stock is down 57% and 53% respectively. In Britain as a whole, it’s down 52% compared to 2011 and 14% year on year.
These findings are backed up by the latest monthly survey from the Royal Institution of Chartered Surveyors, which found that new instructions in June had dropped for the 16th month in a row, with 19% more respondents seeing a fall rather than a rise in the amount of property coming onto the market. Against this backdrop, average stock levels have slipped to a record low.
“It’s also about expectations of price growth,” Earley says. “In 2007, everyone in London wanted to get in because they were likely to make gains. They could afford to make a higher offer. Now expectations are weaker in the capital, and there’s more to choose from, so there’s more likely to be negotiation.”
Try telling that to Dhaval Shah, a technology consultant who had a £580,000 offer on a two-bedroom maisonette in Finchley, north London, accepted in October. Shah, 32, and his then pregnant wife, Tatianna Rodrigues, spent £2,500 on solicitors and admin fees and bought new furniture, only to be gazumped by £30,000 the day before they were due to exchange contracts.
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The agent had taken the property off the market, but it was a multiple listing, so another firm had kept it live on its website. “It’s the second time in three years I’ve been gazumped,” Shah says. “I’d advise people to take out insurance. You can buy it for £50 and get your professional costs refunded if you get gazumped.
“With the property we ended up buying, we drew up a legal agreement and paid a £5,000 deposit so the property was taken off the market and we were legally bound to exchange in an agreed time period.”
Like many potential purchasers who feel cheated by the system, the couple want change. Indeed, before the election, the government had promised to look into the buying process and eradicate the practice of gazumping. “It needs fixing,” Shah says. “It rarely happens in Scotland and never in America, where my wife is from.”
Yet it frequently happens with the most unlikely houses: properties that need fixing up. Annette Smith [not her real name] admits that she recently gazumped a doer-upper in Twickenham, southwest London. The five-bedroom Edwardian semi had been in the same family for 60 years and was ripe for renovating and extending. It was marketed for £900,000. The first buyer’s offer of £800,000 was accepted — and Smith jumped in with a bid for £815,000.
“I didn’t feel guilty,” says the market researcher, 25. “The other buyer was a developer who wanted to turn it into a house in multiple occupation, and had been messing the agent and vendor around. We were proceedable, we want it to be our home for 15 years, and we love the house — it’s a blank canvas.
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“The developer has since come back and offered £865,000, but I’ve been told our offer of £815,000 still stands, as we are in a better position to complete.”
Knight Frank’s residential market update for July fleshes out the story behind these bidding wars. “Despite the easing in residential property price growth over the past 12 months, low mortgage rates and a lack of homes coming onto the market for sale are acting as firm anchors for pricing,” says Grainne Gilmore, the estate agency’s head of UK research. “And in recent months, the traditional picture of house-price growth in the south of England outpacing that in the north has reversed. Prices in the north and Midlands are now showing greater growth than southern regions.”
Hotspots aside, overall market activity is now substantially below the 1.2m-1.3m annual sales common before the financial crash, according to research by Lloyds. Places as diverse as Westminster and Hull have seen falls in sales of 55% or more over the past decade, while every local authority in England and Wales had fewer sales in 2016 than in 2006.
Yet there has been “a surge in demand” in north Essex over the past two years, says Carl Eastwood, director of Nicholas Percival estate agency, near Colchester. “We’ve seen gazumping happen twice recently. It most often occurs on properties with the potential to extend and refurbish. There are fewer and fewer of these around, so when they come on, we tend to get a bit of a frenzy. It happened on a couple of houses in villages outside Colchester in the £300,000-£400,000 range.
“Once we’ve agreed the sale, people ring up wanting to view it. I tell them that it’s under offer and they say they want to put in a higher offer. I don’t like gazumping — there’s a problem with the system in this country — but we are legally obliged to report all offers.”
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The practice is occurring in pockets across England and Wales. “We have gone from absolutely no gazumping to some,” says Sam Gibson, head of Strutt & Parker estate agency’s office in Morpeth, Northumberland. “Why? There is a shortage of supply of nice houses. When you have something special, like a house on the beach, gazumping can happen.”
It can even be a strategy for the vendor from the outset. “We are seeing gazumping happening more and more in 2017,” says Jamie Carter, head of Strutt & Parker’s Chester office. “If a vendor is willing to be bold and price attractively from the outset, it will generate the levels of interest necessary to obtain multiple buyers.
“We recently had a property agreed at just below the guide price, but a week later a buyer who had previously viewed the property came back and offered 10% above the guide. In another case they offered 25% in excess. We obviously have to report all offers to our client.”
Gazumping tends to happen when a property hasn’t been on the market for long enough to have maximum exposure. “If a seller accepts the first offer on the table, rather than leaving it on the market for a longer period, this is when people who feel they missed out might come back with an attempt to gazump,” explains Bruce King, director of Cheffins estate agency in the popular Essex town of Saffron Walden. “We tend to mitigate the levels of gazumping by dealing with sealed bids or best and final offers.”
Indeed, most agents try to distance themselves from the g-word. Philip Jackson, director of Maguire Jackson estate agency in Birmingham, says he has seen a rise this year in the number of transactions going to “best offers” on loft apartments in the city’s hip Jewellery Quarter, where buyers will pay 2%-3% above guide price to secure a flat.
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Yet even the “best and final offers” approach doesn’t always deter the most determined gazumpers, who won’t take no for an answer, says Chris Stonock, an estate agent at Your Move in Durham. “At that stage, someone who didn’t get it sometimes still comes back wanting to make a higher offer, but in our experience most sellers say ‘They had their chance’ — and there’s a lot of wisdom in that.
“Often, people who want a house at any price get cold feet later on. Three weeks down the line, their solicitor asks, ‘How much did you offer?’ They reply, ‘I got carried away, I will reduce my offer now.’ Then they try to wriggle out of it and renegotiate. Our advice is to go with the people who have honoured the process.”
Indeed, the gazumper who snatched Shah’s dream house ended up pulling out of the deal, leaving the vendor in the lurch. Sellers beware.
One of these houses had 50 viewings and a bidding war. The other has only had 10 and is still on sale after a price cut
Gateshead
This three-bedroom semi in Low Fell came onto the market in May for £239,950 with your-move.co.uk. After 50 viewings and several offers, it was sold subject to contract on June 6 for 17% more than the asking price
London N1
On Harecourt Road, in Canonbury, this three-bedroom house was put on sale in March for £1.6m. The price has since been reduced to £1.5m (brickworkslondon.com)
Top tips to avoid being gazumped
• Prove you’re serious
Show that you are committed to buying by getting a survey booked as soon as possible. Once that’s complete, and before you get solicitors to do local searches and act on your behalf, ask the vendor to take the property off the market.
• Get to know the sellers
Try to be in regular contact with the vendors throughout the buying process: hopefully, this will make them less inclined to accept another offer from a stranger.
• Take control
The quicker you get to exchanging contracts, the better. Devote as much time as possible to this, keeping in touch with your mortgage broker, your solicitor and the estate agent, and making regular progress checks.
• Protect yourself
Home buyers’ protection insurance will cover your costs if you are gazumped — well worth the £50 fee.
• Embrace technology
Take advantage of hi-tech property platforms such as View My Chain (viewmychain.com), which tracks the entire conveyancing process, and Gazeal (gazeal.co.uk), which locks buyers and sellers into a deal and prevents them pulling out.
Home Owners Alliance; hoa.org.uk