Merryn's Blog

London property: expect further price falls

The gap between London property sellers’ hope and reality is widening, says Merryn Somerset Webb, as property sellers wake up to a market slowdown.

161027-london-property-b

It is with a small sense of relief that I offer you this link to EstateAgentToday.co.uk. It tells the story of the central London property market in 2016 a story of fast falling prices that we have been predicting for a little too long.

According to data consultancy Lonres, the average gap between hope and reality (asking price and selling price) on a prime central London house today is over £100,000. Look to Mayfair, Kensington and Knightsbridge and that number rises to £170,000. And for some it's rather worse than that: Jamie Oliver has reduced the price of his house in Primrose Hill by £2m to a mere £10m.

Subscribe to MoneyWeek

Become a smarter, better informed investor with MoneyWeek.

Overall, Savills expects prices to fall around 9% in London this year (after falls of 0.4% in 2104 and 3.3% last year). So what's going on? All the things we have been talking about.

The change in the buy-to-let tax rules is putting off investors who would be buying with a mortgage. The whopping stamp duty bills on high-priced property means that no one buys unless they are sure they are settling in for the long term. Note that Oliver's house at £10m would still stick the buyer with a £1.1m stamp duty bill: even in Knightsbridge that's going to pay your rent for a while.

Advertisement
Advertisement - Article continues below

The prices themselves were getting just too high (however cheap money gets, there is still a price at which the number of real buyers is too low to absorb all the stock above a certain price level). The rise in luxury new-build supply across London means that buyers have enough choice that they might as well bargain as they clearly are.

And finally there is Brexit and the uncertainty that brings to financial folk. It's a perfect storm for London sellers. It also isn't anywhere near over yet: there are currently 14,031 £1m-plus houses for sale in London, says buying agent Henry Pryor. Last month 297 sold. That's quite a supply overhang: expect further price falls.

Advertisement

Recommended

Visit/516758/beyond-the-brexit-talk-the-british-economy-isnt-doing-too-badly
Economy

Beyond the Brexit talk, the British economy isn’t doing too badly

The political Brexit pantomime aside, Britain is in pretty good shape. With near-record employment, strong wage growth and modest inflation, there is …
17 Oct 2019
Visit/investments/property/house-prices/600727/like-it-or-not-uk-house-prices-appear-to-be-rallying
House prices

Like it or not, UK house prices appear to be rallying

The UK housing market seems to be perking up. But that may not be a good thing, says John Stepek.
29 Jan 2020
Visit/economy/uk-economy/600700/the-coming-crisis-at-the-bbc
UK Economy

The coming crisis at the BBC

The BBC’s chief has quit ahead of what promises to be years of turmoil and conflict with a hostile government. Will the licence fee survive?
25 Jan 2020
Visit/economy/uk-economy/600710/the-boris-bounce-might-stop-the-bank-of-england-from-cutting-rates
UK Economy

The Boris Bounce might stop the Bank of England from cutting rates

The latest snapshot of UK economic activity has sparked a bout of inflationary talk, with both manufacturing and service sectors in ruder health than …
24 Jan 2020

Most Popular

Visit/personal-finance/pensions/600676/thousands-of-pensioners-are-set-to-lose-ps3500-a-year
Pensions

Thousands of pensioners are set to lose £3,500 a year

Around 11,000 pensioners in receipt of the “adult dependants’ addition” will lose up to £70 a week from their state pension.
27 Jan 2020
Visit/investments/investment-strategy/600709/the-coronavirus-is-scary-but-its-irrelevant-to-your
Investment strategy

The coronavirus is scary – but it's irrelevant to your investments

The spread of the coronavirus is causing alarm around the world. And, while it could be a serious short-term threat to human health, it’s not somethin…
24 Jan 2020
Visit/investments/stockmarkets/600714/how-long-before-financial-markets-stop-fearing-the-coronavirus
Stockmarkets

How long before financial markets stop fearing the coronavirus?

Markets have tanked as fears about the coronavirus spread. Some sectors will certainly take a hit. But long-term investors shouldn't bee too worried, …
28 Jan 2020
Visit/economy/600712/money-minute-tuesday-28-january-a-busy-day-in-the-corporate-calendar
Economy

Money Minute Tuesday 28 January: a busy day in the corporate calendar

In today's Money Minute, the corporate calendar is busy with trading updates from companies on both sides of the Atlantic, including AG Barr and Apple…
28 Jan 2020