London House Prices "Battered From All Sides"

Tyler Durden's picture

This week we discussed Algebris Investments’ ranking of the world’s largest financial bubbles. London property ranked second on the list, behind Australian property (see here). There is growing evidence the former is bursting. In its October 2017 survey, the Royal Institute of Chartered Surveyors (RICS) reported the largest proportion of respondents seeing a drop in London house prices versus the previous month since 2009. The net balance at nearly two thirds (-63%) in the capital contrasted sharply with a national average which was marginally in positive territory (+1%). The RICS data corroborated yesterday’s Bank of England’s regional agents’ report which highlighted “signs of excess supply in London and the South, but some excess demand in most other parts of the United Kingdom”.


According to Bloomberg.

London’s housing market is being battered from all sides. A survey by the Royal Institution of Chartered Surveyors showed a price gauge at its lowest level for seven years, and far below the national average.

 

Real-estate agents are more pessimistic about the market in the capital than any other region, with contributors flagging a potent mix of concerns, including Brexit uncertainty, the Bank of England’s interest-rate hike and the government’s budget later this month.

Speaking to the FT, RICS’ chief economist gave his take on what’s causing the weakness, surprisingly only referring to Brexit indirectly.

Simon Rubinsohn, RICS chief economist, said various factors - including higher cost of moving, a lack of fresh listings and political uncertainty - seemed to be taking their toll on market activity, with first-time buyers focused on Help to Buy properties rather than the existing housing stock.

 

“With both buyer enquiries slipping and sales expectations also subdued, the sense is that homeowners are staying put,” he said. “A stagnant second-hand market is bad news for the wider economy.”

Besides London, the RICS survey showed that house prices are declining in three other regions, two of them being “commuter-able” to London – the South East and East Anglia – as well as the North East.

As far as the outlook is concerned, the RICS survey painted a negative picture with the majority of respondents expecting further price falls in London. Furthermore, the price weakness is expected to spread beyond London and the three other regions to include the South West and the West Midlands. On a national basis, the balance of respondents expecting house prices to fall was -10%.

Bloomberg listed some of the respondents’ comments about the London market.

Buyer Interest Collapse

“We usually have buyers registering, keen to move before Christmas, said Alan Fuller of Allan Fuller Estate Agents in Putney. “So far we are registering 80 percent less than normal during October. Vendors more receptive to price drops and some are agreeing to 10 percent reductions, which are then attracting interest.”

 

Limited Transactions

“October saw buyers more prepared to make offers, many at levels that vendors (who are under no pressure) are not willing to accept, limiting the value of transactions,” said Robert Green of John D Wood & Co. in Chelsea.

 

Brexit Uncertainty

“The market is slowly adapting to higher” stamp duty, said Christopher Ames of Ames Belgravia, “but still not coping with the Brexit uncertainty.”

 

10% Below

“Market remains active up to 1.5 million pounds, whereas above 2 million pounds offers are coming in around 10 percent below asking,” said JJ King at Andrew Scott Robertson in the Merton borough. “Instruction levels are slowing although valuations are up.”

 

Luxury Homes

“The prime London market shows signs of regaining momentum,” James Crawford of Knight Frank said. Simon Aldous of Savills disagreed, saying prices across the best districts are continuing to soften with the greatest falls at the top end of the market.

 

Suppressed Demand

“Brexit uncertainty and stamp duty continue to suppress market activity,” said James Gubbins of Dauntons in Pimlico.  Terry Osborne of Tuckerman Residential in the SW1 post code was even more succinct with his one-word summary of the market: “Brexit.”

The comment which caught our eye more than the others concerned the E2 post code. Not only does it border the City of London, but parts of it have become very “trendy” in recent years.

East London Crash?

“The sales market has dramatically changed and technically crashed across the board,” said valuer Josh Homans. “In E2, the difference between asking and sale price is a staggering 20 percent.”
 

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TheRideNeverEnds's picture

People don’t want to pay 1,000£/sqft to live in Pakistan 2.0?

Racists.

Manthong's picture

 

Geezus..

Just give me a lousy 100 square feet in Soho with heat for less than 1000 pounds per month and I will be a happy camper.

 

PT's picture

Oh noes,  Now peoples will has to rely on income streams and real production insted of phony revaluations and "Capital Gains"!!!  The tragedy of it all!

Kprime's picture

pakistany tents on main street going for 100K,  palm tree to piss on an extra 10K

TheSilentMajority's picture

According to the mayor of london, “this is normal in a big city”.

Panic Mode's picture

Don't worry, gov will make up some home starter schemes as an excuse to prop up house price.

San Pedro's picture

Didn't they end the home mortgage deduction in 1999?? 

 

 

quadraspleen's picture

Bollocks are house prices in London being affected by brexit uncertainty. They are massively overpriced. Ppl are starting to realise it.

Fewer Saudi princes in the offing too. Snigger.

Kprime's picture

about a half dozen Saudi Estate sales in progress.

DosZap's picture

That and more immigrant Mooslims/Rags, spreading like an STD,who the hell wants to live in LON_DON proper anymore?.

So your wife,daughters can get raped and their throats slashed.

css1971's picture

The "economy" As measured by "economists" is just growth in debt.

Bloody Fkn Muppet's picture

A decade late, the bust will be speactacular.

Ghordius's picture

meh

Boris Johnson is involved in a scandal about careless remarks that might cost a British journalist four more years in a Iranian jail

Priti Patel just resigned after a scandal involving non-disclosed meetings with Israeli officials about aid for the Golan Heights

the Tory party is still infighting about the definition of "Hard" Brexit, and if it's good or bad for the UK

senior Tory officials say that they are willing to pay for "Reste a liquider", i.e. past commitments to the EU... IF the payment can be sold to the British Public as a fee for future access to the EU markets (utterly deceitful)

the Irish Border Question is still unanswered. though actually, it is, by PM May's statement that the UK will leave both the SM and the CU. but who is going to explain it in Ireland?

Remainers and Leavers are starting to call each other Traitors ( and this in a country where in a poll before the referendum only 10% stated that they regard EU membership as the most important issue)

conspiracy theories on the Left point to a powerful cabal of superrich that want to exploit a Hard Brexit

Labour's leader is actually fine with Brexit, hoping that it would mean him in power and Nationalisation of great chunks of the British economy, starting with railroads

the NHS, a "holy cow" of politics, is painted as a takeover target for privatisation by US Healthcare biz

the UK is at multiple crossroads. politically, it feels like a kind of nervous breakdown. all polarization, all extreme options, radically differing from each other. I blame the lack of a center in politics, and the lack of a factual consensus in face of 40 years of lies, half-truths and BS

hold tight, Blighty. wish you all the best

Righttoarmbears's picture

When it was the first 8 nations i thought the EU was a good idea with similar socio-political ideas and economies, but was on the leave camp and still am because of things like TTIP, but thanks to the spineless incompetent fucktard May who is more worried about protecting her chinless chums in the city than the rest of the population, she is making a complete fucking mess of it.

This is just helping to focus attention on what are already unsustainable house prices, there is a young lad at work, early 30"s bought a 3 bed end terrace victorian house in Wembley area £780k = 420K mortgage on 35 year term!! but on a 1.9% rate and only earns about £60k Pa, i am old enough sadly to remember the last 3 times the economy/housing market in the UK has gone pop and it was not pretty, the number of unfinished house renovations and foreclosure properties coming on to the market is increasing already, but at auction the sale percentage has been going down all year here in the SE, thankfully  i realised all my assets some time ago.

the scariest bit is if Brexit does become a complete disorganised clusterfuck and the young & imprisonable think that there only hope is the Corbinister, then we will get nationalisation, 14% interest rates and Land tax, a full Trotskyite idea http://www.labourland.org/

then retiring to some quite backwater country is going to look a whole lot more attractive.

Ghordius's picture

"was on the leave camp and still am because of things like TTIP"

update: TTIP was rejected

further update: key items of it might pop up in a future US-UK trade deal... for the UK only

Righttoarmbears's picture

But the only reason TTIP died ws because of brexit, if you remember there was no vote on TTIP or any country by country consultation, no one could vote on it in any way other than the bureaucrats and industry involved!!

the EU would not even publish alll the details of the TTIP because they knew how much controversy it would cause so was all done under the table, its the only reason Obozo cam to the UK to tell us to stay in the EU Cunt.

Yes i am aware that a very unpopular US/UK deal was being put forward but at least the British parliament and house of commons can vote on this.

Ghordius's picture

"But the only reason TTIP died ws because of brexit..."

eh? is this a new EuroMyth?

"...if you remember there was no vote on TTIP or any country by country consultation, no one could vote on it in any way other than the bureaucrats and industry involved!!"

TTIP "died" before we even went to the stage of country consultation

which we did. for CETA. remember how the Walloon Parliament blocked the deal for a while?

and that was exactly this: country consultation, down to regional parliaments

note in this: a Parliament has to want to be consulted. note, for example, how Cameron, as PM, blocked many Westminster Parliament consultations on EU related matters

my point: governments trump parliaments... if the elected parliaments don't care to be consulted

note, in this, how the May Cabinet was trying to issue the Art. 50 consultation without consulting Parliament. note, in this, that Parliament... went with it. until one citizen made a constitutional court case and forced a parliamentary vote with it's judgement

Sandmann's picture

I think the Walloon Exception (cows or something of that ilke) is included in the Verfassungsgericht Ruling on the matter for the German Government to be contingent only in approval

Sandmann's picture

Actually Ghordius the term "holy cow" would only be relevant in a Hindu society. It is wholly inappropriate in the context you used it. The Americans would call it "a third rail".

May's Government will implode thankfully. She has botched a very simple exercise by not joining EEA and letting things wind down over time. There is no way she can get legislation through Parliament.

Kprime's picture

isn't there a "Cash for Real Estate Trash" program in the offing?

Expat's picture

Prices went up about a gagillion percent in London over the past thirty years.  Now, when they don't go up at least a trillion percent a day, people start panicking.

In any case, the agents are talking about bid vs offer.  They are not talking about sales prices.  So, if Johnny Wanker bought his Kinghtsbridge flat six months ago for five million quid, was asking eight for it a month ago but will now, with a heavy heart, let it go for a mere seven, does this mean the London upper end is collapsing?

Fuck real estate and the assholes who turned it into one huge speculative bubble.  Real estate is not an investment.  It's a place to live. 

wonger's picture

Central London property prices were -20% months ago, that market topped 30 months ago, its spreading out rapid now, i expect 70% falls, I live in London

Righttoarmbears's picture

some areas were still buoyant until quite recently, but yes i do think there may be a very blunt correction of prices, not sure about 70% but don't think 30-45% is unrealistic over the next few years going on previous form, as you have to take into account the devaluation of currency=hard assets because of QE.

HRH Feant2's picture

Sand niggers do the same thing to property values that niggers do to property values in the US: devalue the property.

No one wants to live near feral niggers or feral sand niggers. Not worth it.

idontcare's picture

I just had a family of these move next door to my rural location.  Thank god for fences & high hedges + a few acres.  They put up plywood on the windows at the beginning of hurricane season & it seems the plywood is permanent, the rest of the house is in disrepair w/ obvious roof decay on one side of the home, they have no furnishings but a few floor cushions in the LR & mattresses on the floor in the bedrooms (yep, I was given a tour when I came by to discuss a "common problem" along our lotline), and all day, they sit in plastic chairs in their garage with the door open with relatives talking up a storm (but no work).  Looks as if all manner of government benefits are plentiful here too from what my nosey postal worker tells me (want to know what's up in a neighborhood, ask the postman).  OTOH, they are nice enough, but.... 

It's happening everywhere.  I guess that I should be happy that my farm isn't in the upper Midwest.  I have friends in Wisconsin & Minnesota whose entire towns have been taken over by hoardes of benefit backed "refugees" dropped there by our ever loving federal government and after much push back by residents it seems that as US citizens my friends have two choices: suck it up or move since every protest & lawsuit falls on deaf ears.

World Cash Day's picture

LOL.

This is just a bump in the road. Once Brexit is out of the way Europeans will be flocking to London and bidding up prices to escape the imploding EU.

London house prices are a bargain right now but will be in this lull for another 18-24 months before refining steady upward growth in 2019-20 onwards.

Mustahattu's picture

Only if they offer offshore companies to be based out of London with near zero tax. Then it'll boom again. UK will have to go "rogue" to remain in business just like Gib, Malta, Cyprus.

css1971's picture

Good.

A property is a place to live, not an investment. We need lower prices. Drastically lower prices, not higher.

;-)

medium giraffe's picture

I've been waiting to see this one.  Waiting for a loooooong time.

Son of Captain Nemo's picture

Couldn't happen to "NICER" greediest FUCKS!!!