A pattern of price drops is establishing itself

A friend of mine put his apartment on the market some months ago. The agent said that during the boom he would have got well over €400,000 for it, but as things were he should put it on at €370,000, which he did. A few months later when no one had been to even see the property, the agent suggested dropping to €340,000 which my friend agreed to without hesitation. A few people came to view it at that price but no offers came in. My friend contacted the agent the next month and suggested a further drop to under €300,000, which the agent did happily. In the end, the apartment sold for just shy of that.

We all know this phenomenon is making a bad situation much worse. Vendors' expectations are still too high. Agents are still keen to take instructions and so are being over-optimistic about what they can achieve - overpromising at the start knowing they can then talk the price down when the vendor sees no offers coming in. Buyers are responding predictably to the signs. They see loads of price drops, and even see that nearly every property that comes on the market is now having its price brought down after a short time. So they're waiting before they even arrange a viewing. And with the number of successive price drops they're seeing on individual properties around them, they're expecting the pattern to be repeated across the board, and so a new pattern is created irrespective of how realistic the starting price was: if you haven't dropped the price on your home a couple of times at least, buyers aren't recognising value for money.

Pricing has become a nightmare for both agents and vendors. Commentators have been saying for some time now that agents need to manage vendor expectations and make sure they list their properties at realistic levels. They seem to have failed to do so for a long time and compounded that by competing with other agents for instructions on the basis of fantasy list prices rather than on actual service and sales skill. Vendors' greed is certainly a big factor too, but now even if both are curtailed, it seems you NEED to overprice at the start of the marketing in order to allow for the inevitable price drops that suggest the price is value for money.