A Russian home-buyer pulled out of a "agreed offer" of £6.95m for a six bedroom Kensington flat, now it's listed for £6.75m; a three-bedroom in Swiss Cottage is down to £1.05m from £1.5m; a £1.1m 2-bedroom in Whitechapel is now £720,000; a 2bm maisonette in Notting Hill fell from £1.59m to £1.35mk; a £1.3m 5br in St. Reatham is down to £850,000 and estate agents have mutually agreed to go back to calling it Streatham.
The Evening Standard's reporting on London's overheated property bubble is thin on stats, long on individual cases, leading me to wonder about cherry-picking, but they do quote an estate agent who sounds near-suicidal ("There’s no end to how far prices could fall") and cite unnamed "foreigners" who have stopped bidding on London property because they're afraid of mounting xenophobia and racism.
They do cite one plausible sounding stat: 1 in 6 listings of the "reduced" listings on Zoopla were cut since the Brexit vote (it's not clear whether this is unusual, though). There's also the undeniable fact that a lot of City bankers will be leaving the country, relocated at employer expense, and their houses will go on the market.
Even without a sound statistical footing, these stories are important, because the London property market is one of the most overinflated bubbles in real-estate history, and like all bubbles, it is liable to panicked stampedes. Everyone who lauded their own financial brilliance for having bought into the market (or took out second and third mortgages to buy rental property) has also heard a nervous voice in the back of their heads, asking how long it could all last, and whether it would have a "soft landing" when it was over, or explode like Mr Creosote. If even a few speculators decide to cut their losses and list their properties now, it will increase supply, suppress prices, and cause more people to sell.
Then there are the new investors who were vital to keeping the Ponzi scheme going. The story of the London property market was that it was special because the crazy demand imparted a never-seen liquidity to real-estate, giving you the best of both worlds: an investment with intrinsic value and solidity ("safe as houses, they're not making more London you know, ho ho ho") but that you could turn into cash virtually overnight just by calling up a smarm-merchant from Foxton's and instructing it to summon Prince Lucifer, kill a goat, and magically flog your "investment" to some other wise offshore millionaire by morning.
But London has the highest ratio of bedrooms to residents in the city's 2,000+ year history, and half the bedrooms in the southeast are empty on any given night. The "demand" for London property isn't driven by the density of people seeking to live there, it's driven by the hordes who want to treat shelter as a tradeable asset class. When housing is optimised for financialisation, it is de-optimised for use as shelter.
A case of collywobbles by those financialising investors could tip the market, eliminate the liquidity that makes it viable, and turn London property into something you buy to live in, rather than something you park your money in. Given that 40% of the UK's national wealth is in the form of southeastern property, this will take a massive bite out of the country's economy.
As ever, this crash will be more of a hardship for regular people than for 1 percenters, who will take steps to cushion themselves (if you live in Vancouver, New York, LA or Seattle, get ready for an all-out assault on your housing stock!). But it will be an especially hard landing, thanks to all the special measures and conjuring tricks pulled by successive governments to keep the bubble inflating: cheap capital gains tax, no disclosure requirement for beneficial owners of properties, cash subsidies to "get on the housing ladder," the virtual elimination of tenant protections, inheritance holidays for property bequests, and so on.
Stuart Law, chief executive of investment company Assetz Property [ed: seriously, that's what the company is called] said “We still expect prime London prices to continue falling and many of the tens of thousands of luxury homes in the pipeline to be mothballed as demand from all over the world fails to meet that potential level of supply.
"The rest of London will definitely be hit by a perfect storm of several factors hitting house prices which is great news for house-buyers but not for investors and homeowners.
“We know that the City is going to relocate large numbers of highly paid bankers to Paris, Dublin and the rest of Europe and the loss of these highly paid house buyers and renters can only have a negative effect.”
Louisa Brodie, head of search & acquisitions at Banda Property, said: “Finally sellers are accepting they need to absorb higher buying costs and stop holding out for prices last seen 12 months ago.
"I expect to see more price reductions over the coming weeks and months, which will undoubtedly drive up transaction levels.”
London house prices slashed after Brexit vote
[Jonathan Prynn and Tom Powell/Evening Standard]
