Britons completing on a property purchase in some areas of the UK market will have seen the value of their property fall by as much as £195,000 before they have even been handed the keys, according to data by Moverly.
The digital upfront property pack provider examined how house prices have changed over the past four months - the average time in which it has taken from transaction to completion after accepting an offer.
In terms of the change in property values seen across the UK market over the past four months - approximately 150 days - homebuyers are out of pocket in Scotland and Northern Ireland with house prices falling by £4,756 in Scotland and £904 in Northern Ireland over that time.
Although the rate of house price increases has started to slow down, the average UK house price has still climbed by £5,323 to £294,329 over the last four months.
Unless they plan to move in the very short term, negative equity is probably not an issue. Jane King, Ash Ridge Private FinanceBut this national average obscures what is happening when you drill down into local authority data, according to Moverly.
Its data has revealed that in 36 areas across the UK market, buyers are finding that they are already out of pocket on their purchase by the time they complete, with house prices falling since they originally agreed an offer.
In some areas this decline is substantial, to say the least, and according to the data, nowhere more so than in Kensington and Chelsea, where a buyer completing today will have already seen the value of their home fall by an eye watering £194,806 - that’s a drop of £1,299 for every day it took for them to complete.
Table: Areas of the UK where house prices have fallen the most between accepting an offer and completing on a sale
| Location | House Price - Offer Accepted (Jul 22) | House Price - Sale Completed (Dec 22) | Total Change in House Price | Change in House Price per Day |
| Kensington and Chelsea | £1,472,982 | £1,278,176 | -£194,806 | -£1,299 |
| Hammersmith and Fulham | £789,644 | £725,829 | -£63,815 | -£425 |
| City of Westminster | £956,176 | £910,287 | -£45,890 | -£306 |
| Islington | £710,934 | £683,288 | -£27,646 | -£184 |
| South Lakeland | £308,620 | £286,976 | -£21,644 | -£144 |
| Stratford-upon-Avon | £394,595 | £384,095 | -£10,499 | -£70 |
| Guildford | £530,875 | £520,484 | -£10,391 | -£69 |
| Camden | £851,867 | £842,167 | -£9,700 | -£65 |
| North Norfolk | £329,050 | £319,406 | -£9,644 | -£64 |
| City of Aberdeen | £147,942 | £139,347 | -£8,595 | Sou |
Source: Moverly
Moverly co-founder Ed Molyneux commented: “Anyone who has had the pleasure of moving home in the UK will know that regardless of how quickly you agree an offer, the time taken between this point and actually completing on a sale can drag on for what seems like forever.
"So much so that when a sale does finally complete, the value of the home in question has often shifted by thousands of pounds.
"All too often this delay is down to the inadequate supply of upfront property information which not only slows the offer negotiation process, but it can also considerably increase the chance of a transaction falling through.”
Even so, mortgage adviser Jane King of Ash Ridge Private Finance, says buyers should not be worried about negative equity or a complete destruction of property value.
Responding to the figures, she said: "Most of the areas mentioned are pretty expensive parts of London and the Home counties so any small percentage dip in prices will be reflected as large in monetary terms.
"I doubt you can buy much in Kensington and Chelsea for less than £2mn - although I agree a £196,000 drop is substantial. If you can afford property at these prices and need a mortgage, one would assume the borrowers are very high earners, and unless they plan to move in the very short term, negative equity is probably not an issue."
'Not much we can do'
She commented on the other areas, which have smaller reductions. According to King, technically there would be a risk of negative equity although the figures are only theoretical, as no one has actually bought and sold the property again within four months.
"A similar thing happens with New Builds when they lose around 5 per cent in value the minute you put the key in the door and the property becomes 'second hand', she said.
King added: "We have to remember that people purchase property as a home first and an investment second and so if you are planning to stay in your home for several years, I don’t really see anyone being bothered by this information.
"In other areas of the country, prices are holding up well or are even increasing.
"As advisers there is not much that we can do, as we are not valuers and so can only go by the valuation of the property on the day the valuer visits.
"If the borrower wants to then have the property valued again four months later and maybe revising their offer, then that is their prerogative but I just cannot see this happening."
simoney.kyriakou@ft.com
