This is Money Blog

How much of a property's asking price should you pay?

If you’re buying a property, how low below the asking price should you expect to pay?

This is the ever present dilemma facing any potential homebuyer and despite an almost two-year long property slump, the asking prices people put their homes on the market for regularly astound me.

As a general rule my mind works on the knock off 10% and you’ll get a fair selling price principle.

However, this so often leaves me at the point of thinking something is still overpriced that I figure many sellers take their most hopeful expectation and then add at least an extra 10%.

New figures from the Royal Institution of Chartered Surveyors show its members reporting that the average home is currently selling at 11% below asking price.

It said that the gap between asking and selling prices was narrowing. In Scotland there is the smallest room for manoeuvre, with homes typically fetching 97% of the asking price, while in the North there is a gulf between expectation and reality, with homes going for 74% of the asking price. London properties go for 93% of the asking price.

So, in theory an average buyer should be hoping for at least an 11% discount on a property and the 10% principle is reasonably accurate.

Unfortunately, it’s never that clear cut though and you need to factor in everything from whether the estate agent is greedy or desperate, to whether the seller is a glass half full or half empty kind of person.

My tip would be to go in 10% below what you consider a fair price – but be realistic and don’t make it offensive – and then work up in small steps while letting the seller know you are serious.

And just to spell this out, I mean 10% below what you think is a fair price. So, not the asking price, or even what the seller considers a fair price, but what you consider to be the fair price. If a property is on the market at £330,000 and you think £300,000 is a fair price then you go in 10% below that, so £270,000.

Any form of optimist/pessimist test you can subtly carry out on the buyer and check on what the estate agent is driving (to measure their confidence) could also prove useful.

- Simon Lambert, assistant editor, This is Money

- Interest rates: What next - news and analysis

- Property prices: What next - news and analysis

 

'5p razors for £2.43': Brand rip-offs, part III

Another brand 'rip-off' is named and shamed today. The razor industry apparently makes replacement blades for as little as 5p and sells them for up to £2.43 a piece.

Presumably, the gap is a bit of profit, and a lot of marketing and advertising spending. The likes of Roger Federer, Thierry Henry and Tiger Woods - who have been fronting a campaign for Gillette don't come cheap.

Annual accountsfor Gillette-maker Proctor & Gamble show that in 2008 it spent 31% of its £83bn sales on the cost of selling and admin, which includes marketing.

So on average, for every P&G product you buy, up to a third of the price is the cost of convincing you to buy it.

Now the figure is only an average as P&G makes all sorts: Pampers, Ariel, Pantene, Pringles, Crest, Duracell, Head & Shoulders, to name but a few.

The opportunity to spend on advertising to increase margins depends on how emotive or aspirational the product is. So as a rule of thumb, the stuff that makes us look and smell nice gets the biggest ad budgets.

I began ranting last year about how the economic crisis would stymie big business on brand. With consumers feeling the pinch, why would they want to carry on bankrolling big ad budgets. Quality rather than brand is now a more important factor in consumer decisions. 

As for me, I've been buying Boots replacement razors for more than decade (£1.07 for 10), having decided there was no worthwhile difference in the quality of my shave but a huge difference in price.

I enjoyed this observation recently in marketing trade publication MediaBuyerPlanner...

'P&G is struggling against value brands as consumers become more focused on pricing due to the recession...'

Great - so time to cut the price or dramatically improve the product quality? Er, no...

'...Deutsche Bank analyst Bill Schmitz says P&G likely understands that halting the slide in its tracks, now, is less expensive than trying to regain it later, a fact which will lead to increased spending.'

Please help me keep the brand rip-off revolution rolling by buying value-for-money products. [Previously in the brand rip-off revolution: Part one - Hoorary for Tesco Discount brands | Part two: 20p bottles of perfume]

- Andrew Oxlade, Editor, This is Money

Deflation: we could do with some real falling prices

The latest inflation figures have prompted yet more warnings of deflation from economists.

The Retail Prices Index' fall to -1.2% has delivered inevitable deflation headlines. Except of course, this isn't strictly deflation.

Deflation would be if the official measure of inflation the consumer prices index (CPI) went negative and that is still above the 2% target, at 2.3%.

But would a good bout of deflation really be that bad?

The criticisms are that it increases borrowing in real terms, leads to wage freezes and slows the economy. But, on the flip side, it's lower mortgage borrowing costs driving deflation, while people's wages are already being frozen, the Government has promised a pensions rise, and aren't lower prices generally used to attract customers?

A look at the inflation data shows why deflation would help the man in the street, despite the economic arguments otherwise.

What is driving RPI deflation is falling housing costs - but this is down to the base rate being slashed to 0.5%, compared to 5% a year ago. Further major factors are cheaper clothing and footwear, as stores desperately discount to sell off goods, and lower motoring costs, but that is compared to exceptionally high petrol costs a year ago.

The vast majority of things are still getting more expensive and that is from a point last year when they were already rising in price.

RPI deflation is being skewed by mortgages and petrol at the moment: and these will drop away within a year, leaving the figures looking very different.

Arguably we could do with the items on the right of the graphs below heading left. Who doesn't want cheaper food, fuel and light (energy bills), household goods, fares and other travel costs? At least it would make up for the pay freezes, inevitable tax rises, and rising unemployment we're already dealing with.

And you never know, we might actually spend more if people stopped ripping us off.

- Simon Lambert, assistant editor, This is Money

Here's the RPI figures:

And here's the CPI figures, the official measure of inflation which is still above the 2% target:

 

- Interest rates: What next - news and analysis

- Property prices: What next - news and analysis

 

'UK vehicle car scrappage incentive scheme - the latest and best deals and offers'

A fine round-up - with links to manufacturers' websites - of current car scrappage deals can be found on the MSN site. Check out...

Car scrappage latest and best deals (MSN)

They say: 'Here are the latest up-to-date scrappage deals on the market. All are subject to change. Where a deal has been confirmed by the manufacturer, then your local dealer should know about it. If they don't send them the URL to this webpage, or better still, print it off and take it down there.

'There is no obligation for car makers to join this scheme, so if they haven't there is no point badgering them about it. Having said that, in these difficult times they can still be expected to do you a good deal if you have cash waiting to be spent...'

Related

Find a low-cost car loan

Cash to scrap old cars (archive)

How the scrapping scheme works (guide)

Deflation: exactly what is getting cheaper?

Deflation (of a sort) has arrived but what exactly is getting cheaper?

In the dismal science of economics, it should come as no surprise that even a measure that theoretically shows life getting less expensive doesn’t arrive with the feeling that things are in anyway better value than a year ago.

My wallet tells me that life is still pretty expensive, even by the Retail Prices Index’s barely noticeable 0.4% fall in the cost of living.

Of course, this isn’t official deflation – that would be the Consumer Prices Index falling to below 0% and CPI is still well above target at 2.9%.

No, this deflation, which will be used to freeze our wages and generally not help us out much at all, is only really of any benefit to you if you got lucky enough to take out a tracker mortgage or ended up on a friendly lender’s SVR.

Tumbling property costs including mortgage repayments, house prices and renting a home have been the biggest factor in dragging RPI into negative territory.

This has been helped by petrol prices coming down from their extortionate and extraordinary high levels of a year ago (although by nowhere near as much as they should have done compared to the oil price) and no one being able to sell any cars – thus their price falling too.

In fact, a swift glance at the Office of National Statistics inflation report shows that most things are considerably more expensive than a year ago.

I’m not sure if this is what the economists mean when they tell us deflation is a bad thing, but the cost of most stuff going up substantially while the figure used to set our pay goes down sounds pretty rubbish in my book.

- Simon Lambert, assistant editor, This is Money

Sign up Wayne Rooney as a money-saving star

Every so often you read something in a bit of celebrity news that makes you smile and remember for all their millions of pounds, the famous are people too.

Today's comes from a story about how Wayne Rooney has lost a £1m Mercedes contract that will see him have to forgo his free car.

There are all kinds of snippets in here that remind you that Rooney, despite his fame and fortune, appears to remain resolutely down-to-earth.

There's the bit that makes you imagine him grinning like a schoolboy on getting his motor: 'He was thrilled to be endorsing Mercedes because he is a total car fanatic and is a huge fan of Mercedes. He bought one for Coleen for her birthday. He loves them, so of course he's disappointed.'

Then there's the bit where some snob seems to forget that perhaps he might be a good ambassador because he's an exceptionally talented footballer not a bling encrusted clothes horse: 'Ordinarily you'd expect Mercedes to choose someone aspirational and classy to advertise its cars, and it's fair to say that Wayne Rooney doesn't fit into that category'.

But my favourite is actually nothing to do with the car. It's from an interview by his wife Coleen that's tagged on. She says: 'If I go shopping with Wayne I'll say, 'Look at that handbag! Isn't it lovely?" And he'll say, 'You don't need any more handbags'

So that's Wayne Rooney multi-millionaire footballer, set up financially for life before he was out of his teens, reminding his wife she doesn't need to buy something, as she doesn't need anymore handbags.

As the Government appears to be spending our cash on increasingly inexplicable public information campaigns at the moment, can we have another?

Let's find out if Wayne is serious about this money-saving thing and sign him up to remind kids that however rich you are, sometimes you don't need another handbag and if you aren't rich you also might want to lay off the mobile phones, trainers and flat screen TVs.

And while we're at it, give him a Jaguar to make up for losing that Mercedes.

- Simon Lambert, assistant editor, This is Money

How to write a (credit crunch) book

Richard Browning is the author of How to Survive the Credit Crunch: 101 top tips to beat the credit crisis. Here's how the book came about...

A few years ago, at the height of Britain's spending binge, I popped in to one of half-a-dozen High Street hairdressers in town with my daughter, who needed a quick trim. The bill for a few minutes' work came to £35. My daughter was six years old.

A delighted receptionist explained that the £5 offer posted in the window was only available at certain times of the day, mostly during school hours. I’d not read the small print. They’d won, I’d lost.
 
Well not exactly.
 
Small print, or Satan's get-out clause, is a burial ground for bad news and rip-offs. But almost nobody reads it. Often because it's impossible.

If you want to play the National Lottery online, the terms and conditions that players have to read run to more than 39,000 words. Some of Shakespeare's plays aren’t much longer than that and he was really good with words. But you wouldn’t want to read a whole play just to gamble a quid or two.

Luckily, when banks tweak their small print they are obliged to tell you. Luckier still, the journalists on This is Money and our sister newspapers are on hand to read it for you. They've often met the leading figures responsible for the misery we are now facing and have, within the laws of the land, been reporting on the warning signs for years.

At the heart of the credit crunch - or the total collapse of trust in the financial services industry – was deception, greed and stupidity all screened by incomprehensible small print or spin.

My experience at the hairdressers was simply a reflection of how that arrogance filtered down to everyday life. It was one of many experiences over the years that have earned me the right to write a money-saving book on How to Survive the Credit Crunch. I don’t just preach this stuff. I do it. And so does my family.

You see, for two and a half years following the infamous £35 trim, I cut my own hair.
 
Never mind that towards the end I resembled some kind of experimental hedgerow - that's not the point. By seeking cheaper alternatives and by taking the DIY route, we'd saved hundreds of pounds.

Another experiment we tried as a family was to see how long we could survive without setting foot into a shop. I hate shopping. And the shops, I don't doubt, hate me back. I rarely buy what I don't need and I certainly don't buy anything if the price isn't right. But supermarkets have an almost magical hold over the subconscious and the temptation to buy extra is often too much to resist.
 
Arranging online shopping facilities with the supermarkets was surprisingly easy and with a bit of planning you only order exactly what you need. It meant suddenly we were making no impulse buys and were generating little waste. The average British family throws away more than £600 worth of food every year. By any measure this is a ridiculous state of affairs.
 
After about three months, we had squirrelled away enough cash to pay for a long weekend including flights, accommodation and spending money in Bergen, Norway - one of the most expensive places in the world. Not bad for not doing anything.
 
Our shopping experiment came to an end when the light bulbs began popping. You can’t buy a light bulb online in an emergency. But again, we'd proved a point. You can save money with almost no effort and it can be fun. It's easy when you get your head around it. These days we shop at the local market and other local shops on a need-to-buy basis. It still saves plenty of money over the filling-the-giant-trolley-experience at the out-of-town supermarkets.
 
A saving of a mere £10 a week adds up to a whopping £520 a year. And £50 a week is more than £600 in three months. I know people who spend that on mobile phone calls.
 
Now, I'm not suggesting for a minute that everyone should start hacking chunks off their own heads or not go shopping. We’d soon become a terribly scruffy nation with an economy on death row. And we wouldn’t want that to happen, ahem.

Since the book, How to survive the credit crunch: 101 top tips to beat the credit crisis, was published towards the end of last year I have been asked many times the same two questions.

First: How long did it take to write?

And second: Why do I think it is acceptable to treat such a serious subject in a light-hearted and sometimes funny way?

The answer to the first question is a week. It took five days to write the main body of the book – the 101 tips, about 25,000 words - and two more days to write the introduction, most of which I wrote on the London's tottering underground system, the Tube.

The introduction was about the descent from carefree spending binge to black hole of financial mismanagement and debt. It needed to be compiled as close to publication as possible and I wrote 7,000 words en route to the England v Azerbaijan World Cup qualifier at Wembley and finished it on the same journey to see Oasis in concert the following week. It is amazing what you can achieve if you make the most of your spare time. It's one of my top tips.

But such time scales do myself something of an injustice. Not just because I’ve been writing most days as a journalist for more than 20 years - and writing lots of words in more or less the right order is what I do - but because for even longer, I’ve led a money-saving lifestyle. And it is really quite easy to write about what you know. It’s all about simplicity.

'Simplicity,' said that well-known artist, inventor, musician and mathematician Leonardo da Vinci, 'is the ultimate sophistication'. And he had a point. In financial terms, it means if you borrow money, you pay it back. If you have money, you manage it in the simplest way possible. To complicate it is to fall prey to the perpetrators and the causes of the credit crunch.

One of my most important tips about saving money is to take a step back from your daily life and see if there are any patterns of waste that you’re not aware of, such as regular trips to a shop that has become a habit rather than a need. Bank statements are a reliable source of that information. Similarly, if you can find a hobby or develop an interest and meet like-minded people, you will soon find that you’ll not only stop spending on the frivolous but you could form friendships that last for a lifetime, which in turn can save you a fortune as you share skills, contacts and equipment.

In answer to the second question I say, well, for at least the last eight years so many people I have spoken to laughed in my face when I questioned the dangerous levels of credit card debt they were racking up that the best way to cope now is maybe to take a light-hearted view of the consequences and the solutions. We’re British, it’s what we do. But a frightening number of people have been really stupid.

In fact, the stupidest advice I think I have ever heard is the idea that (unless you're a financial wizard) you can manage your debt by taking out more credit cards. It is a theory regularly espoused but anyone, such as me, who has struggled with plastic debts in the past, will know that the card companies are not stupid and will do everything within their power to make you spend more, take on more debt and pay their punitive interest rates.

If you have debts, you have to pay them off. It’s not clever, or stupid or funny. It’s really simple.

And if you want to write a book, that's simple too. Just do it. It may take longer than a week but if you write about what you know. Anything is possible.

Buy How to survive the Credit Crunch (rrp £6.99) for just £4.50+p&p from This is Money's bookshop

...or from Amazon (price fluctuates, free delivery)
 

...and from all good High Street, airport and railway station stores. Find out more>> 

Richard Browning

More This is Money authors explain their craft

How the commodities super-cycle means my book was worth writing, I hope - by Philip Scott

How to get your book published (from the author of Fantasy Island)

Bring your own booze, mis-spelling and walking: Money saving tips

It’s Friday. It’s the end of February. The headlines may be doom and gloom but you probably just got paid, so here are three weekend money-saving tips to help put a smile on your face between now and when Monday rolls round again.

 Go out to dinner and take your own booze
 
Supporting your local restaurant is vital in a recession. Otherwise it will shut – and that will make life much less rich.

One way to still eat out but cut the cost is to find those little money saving gems – the bring your own booze restaurant.

The excellent list filed under food on www.winepages.co.uk has BYO restaurants near you. Take a look, book a table and read their advice on which bottle to take with you.

Spell something badly
 
A great way to find a bargain on eBay is to simply spell what you want wrongly. Haste, an inability to read or just plain simple fat fingers mean loads of listings go on spelt badly. They rarely attract as many customers. Use this to your advantage and bag a bargain pair of Ugh boots, Addas trainers or a Sonny TV.

Go for a walk
 
Walking is the ultimate money saving activity. It gets you places, gives you exercise and done right provides entertainment.

Get a new perspective by deciding to take the scenic route, visit a new place or just look up instead of on the ground.

It’s also a brilliant excuse to go to a pub – a good pub has only ever made a walk better.

Have a good weekend

- Simon Lambert, assistant editor, This is Money

- 50 more ways to save money

The future’s bright… the future’s pizza?

 Orange Wednesday: Free cinema and Pizza Express deal 

Mobile phone provider Orange have added another 2 for 1 deal for their customers

Currently every Wednesday Orange mobile phone customers can get 2 for 1 deals on Odeon cinema tickets by texting ‘film’ to 241.

Now customers can also get a 2 for 1 meal voucher at PizzaExpress by going to the Orange website. The deal includes a 2 for 1 voucher on mail meals, plus two servings of either free garlic bread or dough balls, every Wednesday.

The deal is open Orange to pay monthly, pay as you go and broadband customers.

Tara Evans, journalist, This is Money

- Do you have a money saving tip? Share it on our message board.

Where to snowboard and ski in England: Money-saving winter trips

Fancy taking advantage of this week’s decent dump of snow, then head for the best spots for skiing and snowboarding in England and Wales.

The eight inches of snow that hit London yesterday was brilliant. Forget the transport chaos, I love snow and it is the vital ingredient for one of my favourite things - snowboarding.

It’s not often we get a decent fall of snow in the south of England, and especially in London, so yesterday night I seized the opportunity to go snowboarding in London and headed to the biggest hill I could think of near my home, the park that runs down from Alexandra Palace.

Once we got up the hill it was worth the odd glances on the train there.

Through the dark you could make out the city stretching out below and the hill - which stretches across about 500 metres and is about 200 metres long - was still covered in snow.

The beauty of urban snowboarding is it works at night, so my wife and I spent the next two hours riding down and hiking up, joining a handful of other snowboarders and a bloke on skis.

There was also a healthy contingent of night time sledgers with classic modern day makeshift sleds – including recycling bin lids, a lilo and the credit crunch downhill option, stolen estate agents’ boards.

Unfortunately, Mount Ally Pally won’t be staying open for long this winter. I suspect conditions will already have deteriorated badly and there are no snow cannons to supplement the dwindling snow.

Still you take what you can get. Snowboarders and skiers in England and Wales are not blessed with ideal conditions for hitting the slopes. Our cousins up in Scotland may have to battle some notorious conditions but they are blessed by comparison with mountains and permanent resorts.

The scene in England and Wales instead revolves around dry ski slopes and indoor snow slopes.

But snowboarding or skiing on the hills of England is possible with surprising regularity. Run by enthusiasts and open to the public, there are hills in the Lake District, Northumberland, County Durham and Wales that have simple lifts and runs many times the size of an artificial slope. Some even have small ski lodge buildings.

The best guide to these I’ve come across was written by Chris Moran for the Guardian .

Here you can find out how to go skiing or snowboarding at Yad Moss, Allenheads, Swinhope and even about the legendary rope tows at Pen Y Fan in Wales.

It’s not the Alps, it’s not even Scotland. But if you fancy a day’s snowboarding or skiing for a fraction of the cost of heading to France, Austria or Switzerland, and a great story to tell, then the hills of England are waiting for you. Maybe I’ll see you there.

- Simon Lambert, assistant editor, This is Money

- FT.com: Skiing in County Durham

- Hittingkickers.com: Snowboarding at Yad Moss

- SkiClub.co.uk: British skiers and boarders hit the snow

- Snowboardclub.co.uk: Snowboarding in the UK

PS. After more snow at the end of last week, the English ski areas listed above have enjoyed magnificent conditions and for those wanting a money saving ski or snowboard trip Scotland is also looking great.

We couldn't make it up north to try out any of the English, or even Scottish, areas, instead we headed to the nearest big hills I could think of - Dunstable Downs. On Saturday, as you can see below, the snow and weather was perfect and best of all it was free.