Where have all the buyers gone?
It’s a tune sellers in many key luxury real estate markets will be singing in 2019, as political and the economic uncertainty put a damper on sales from London to Los Angeles. Would-be buyers in the U.K. will be waiting for the worst of the Brexit process to clear, while sellers in New York City will have to lure shy buyers with discounts of as much as 10%, according to analysts and real estate agents.
“It comes down to uncertainty about external forces,” both political and economic, said Jonathan Miller, chief executive of New York-based appraisal firm Miller Samuel. In the U.S. the slowdown won’t be a crisis of the likes of the Great Recession, rather a “modest reset” for many major housing markets across the country, Mr. Miller said.
“It’s not a black hole, it’s the market doing what it should do,” Mr. Miller added.
Meanwhile, Dubai, the Middle East’s luxury housing hub, will be hoping to find buyers among the city’s massive population of expatriate renters following the introduction of a 10-year residency visa for high-earners.
Here’s a look at how seven of the world’s top markets are expected to perform in the next 12 months:
British home buyers are queuing on the sidelines in wait for some political and economic clarity, as lawmakers enter the final sprint before the U.K. leaves the European Union in March, according to agents and real estate analysts.
The highly contentious Brexit decision in mid-2016, in addition to two hikes to the property purchase tax, known as stamp duty, in 2014 and 2016, have now hampered the London housing market for over three years. Prime central London home prices have slipped 10% to 12% during that time, according to data from Knight Frank. While the official breakup between the E.U. and U.K. next year is unlikely to bring a magic cure to the market malaise, real estate agents expect a bump of some degree in London transactions by the spring.
“It’s not a sort of virtuous point that come March of next year” Brexit will be over and the everything will go back to the way it was prior to 2016,” said Charlie Smith, founding partner of London Real Estate Advisors. “It is something that is going to be with us for some time.”
But at some point, would-be home buyers will have to jump back into the market, especially given the strong underlying economic fundamentals over this past year, Mr. Smith said. A very low unemployment rate, historically low interest rates, wage growth and an advantageous exchange rate for overseas buyers support the case for a resurgence in activity across the U.K. once there’s more clarity surrounding Brexit.
“The general sort of feeling is now let’s jolly well get on with it,” Mr. Smith said. “You’ve got to get on with life.”
London-based brokerage Knight Frank has reported a growth in pent-up demand for homes in prime central London in recent months. Across its branches in the city, interested buyers registering for help in their house hunt rose 7% increase in the 12 months through November compared to the same time period last year, according to its most recent prime London market report.
For those affluent house hunters who do enter the market, 2019 will be a buyer’s market with the greatest discounts and negotiability on flats priced up to £5 million (US$6.3 million), according to the latest prime London price index from Knight Frank.