By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
In some places, in particular prime markets in London and the south-east, house prices have been tumbling. According to London-based estate agency LonRes, average “achieved” prices:
- In Prime Central London: -6% in Q4 2018; and -14% from their 2014 peak.
- In slightly cheaper Prime London districts: -5% in 2018.
- In Prime Fringe districts, i.e. prime sectors further removed from the city center: -7% in 2018.
In a survey by LonRes, 63% of the agents said they had seen prices in their market plummet by 10% or more from peak levels as sales ground to a standstill. In London transactions slumped by 9% between 2017-2018 for properties under 1 million, by 25% for properties between £1 million and £2 million and by 12% for properties between £2 million and £5 million.
Another indicator flashing red is the Royal Institution of Chartered Surveyors’ house prices balance, which measures the gap between the number of estate agents and property surveyors expecting increases and those anticipating decreases. It crashed to -22% in January, its lowest level since March 2009. The sales expectations balance for the next three months reached its lowest level since the survey began in 1999, dropping from -28% to -32%. Here are some more standouts from Rics’ report:
- Agreed sales dropped further in January, with the pace of decline “seemingly gathering momentum compared to December results.”
- The average time taken to sell a property, from listing to completion, reached 19.4 weeks.
- Northern Ireland and Scotland enjoyed the strongest price expectations for the next twelve months, followed by the North West of England and Wales.
- Contributors in London still see house prices falling over the next year.
Acute uncertainty over Brexit and the UK’s political future is taking its toll on an already weak market sentiment, putting many prospective buyers off taking the plunge and leaving frustrated sellers facing three unappetizing choices: drop the price, sit tight in the hope the general mood will soon change, or take the house off the market altogether. With many opting for the latter, more homes were removed from the London market due to a withdrawal than a sale in 2018, according to LonRes.
Market sentiment is likely to deteriorate even further in the next six weeks as Brexit talks go right down to the wire. “If you are looking to buy a house in Q1 you will have the market to yourself,” says Henry Pryor, an independent luxury property buying agent. “I suspect if you ring up an estate agent and ask them if you can go and see one of their properties they will probably send a stretched limousine to pick you up.”
For the first time in quite some time, the UK property market is now a buyer’s market, but with very few buyers left out there. Yet for those who do choose to transact there are some juicy opportunities on offer, LonRes points out:
Find a vendor keen to sell, and buyers could be paying significantly less than at the peak of the market four years ago. Buyers of homes in prime central London paid 14% less in Q4 2018 compared with the 2014 peak. Even for those with something to sell, the cost to trade up has fallen. For overseas buyers there are opportunities too. Those buying in US$ are paying on average 36% less in Q4 2018 than at the peak of the market in 2014.
The housing-market downturn in London and the south-east could be spreading to other regions, a report released this week by the UK’s Office for National Statistics (ONS) suggested. The worst performing markets were the North East, where prices fell by 1% over the year to December 2018, down from an increase of 1.7% to November 2018.
Thanks to some strength in other regions, on a national basis house prices rose by 2.5% in 2018, the lowest annual rate since July 2013 when the economy was beginning to recover from the Financial Crisis.
And there could soon be a nasty surprise in store for foreign buyers of UK property. As part of a Treasury consultation, the Government has proposedthat non-UK residents, firms, or trusts should pay an extra 1% charge on newly purchased properties. The surcharge will be levied on top of the standard rates of stamp duty and the higher levels of stamp duty imposed on second homes and buy-to-let purchases in April 2016. Stamp duty can reach as high as 15% on second properties worth over £1.5 million, which still doesn’t go very far in London these days.
These tax hikes were designed to tamp down on activity particularly by non-resident buyers and investors in a market that had long gone haywire. And they appear to be doing their job, so much so that the Bank of England warned this week that the recent hikes in stamp had slammed the brakes on the housing market by putting off potential buyers, particularly in London. Yet even as house prices across London, the south east and elsewhere tumble, they’re still not nearly low enough to fall within the reach of most first-time buyers. By Don Quijones.
Related Posts:We truly are under attack. We need user support now more than ever! For as little as $10, you can support the IWB directly – and it only takes a minute. Thank you. 966 views