It looks like it has begun. We have been telling you here for rather too long that the huge rise in the supply of new-build flats in London would eventually lead to a glut in the supply.
In the wake of the financial crisis, when the pound was weak, commodity prices were riding high and Asia looked to be booming, it made sense for every resident of every mildly corrupt regime in the world to head for the UK to stash their cash in one of the most legally secure safety deposit boxes the world has ever seen (London property).
Supply was limited, so prices rose and the first great London bubble created almost entirely with international capital kicked off. But things have started to change.
The pound has soared (so London property is more expensive when bought by those who make their livings in other currencies). Commodity prices have plummeted – something that gives anyone skimming cash from a commodity economy a little less to spend than before.
China has stepped up its campaign against corruption, with the obvious result that sales of all luxury goods exported to China have tanked (what is a brand new rabbit hutch in Battersea bought by a Chinese bureaucrat but an exported luxury good?).
And, of course, supply isn’t exactly as limited as it was. In this post we counted the developments on the way – in January it came to 54,000 units. The result? A new report from Lonres, compiled for Bloomberg, tells us that almost 30% of the properties on the market in London’s Nine Elms district have been on the market for more than a year (it is 12% in super-prime London), says Neil Callanan on Bloomberg.com.
That’s a bigger problem than you might think for their owners. A lot of them put down deposits on new build properties two or three years ago, planning to flip them before they had to come up with the remainder of the sale price – that way they both avoid stamp duty and (in theory) turn a quick profit. Now coming up with the remainder is tough (the Malaysian ringgit, for example, is down 30% against the pound in the last three years)* and flipping at the original price in pounds is turning out to be all but impossible.
So how bad is it? The average sale price of all apartments in the SW8 postcode has fallen by about 16% to £818,000 in the last year alone, says Foxtons. So there you have it. Nothing goes up for ever. Not even London house prices.
* Malaysian investors, bought almost third of the 866 homes in the first phase of the Battersea Power Station project, says Callanan