July 27, 2016

Item from Ian: Falling Down in London – 2

From The Guardian:
London 3
The first real signs of distress in the market for luxury London apartments are starting to emerge, as investors who agreed to buy homes off-plan are starting to sell them on for less than they agreed to pay for them. …

George Shishkovsky, managing director of LondonDom, insisted the sales were not a result of the UK’s Brexit vote or a fall in confidence in the market. “It’s all about people’s circumstances,” he said. “Usually people buying off-plan do so two or three years before completion and in that time circumstances can change.” …
Henry Pryor, who buys homes in London for wealthy clients, said he believed that the top end of the market had peaked and that currency gains wouldn’t make up for the fact that many flats had simply been overpriced: “Sterling-based property may be 10% cheaper for foreign buyers but much of it was 30% overpriced.” He added: “Expect to see more of this as the post-Brexit [vote] reality bites.” …
Reports suggest there has been a sharp slowdown in the number of sales in London’s new-build market. According to research by consultancy firm Molior London, developers sold 4,600 new-build homes in the April to June period including off-plan sales, a 23% fall from the figure of just under 6,000 in the first quarter of the year.  …
Durrani said the prime central London market had been slowing for more than a year, but had been “amplified” by the referendum result. “We are at the stage where a slight correction was inevitable and may actually be positive for the market. It will help with affordability issues and may in fact help with the long stalled natural recycling times of property on the market, resulting in a more regular level of transactions,” he said. …
The French bank Société Générale said last week that prices in London’s most expensive boroughs could slump by as much as 50% in the wake of the vote for Brexit.
Full story here.

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  1. Russians and Saudis that used to make up a large proportion of London’s foreign buyers are not so flush anymore with oil sub $50. Plus a 15% tax on high end properties. Plus hugely inflated prices utterly disconnected to reality. Plus more border controls now with Brexit keeps quite a few Europeans away too.
    At some point every party ends. Similar in Vancouver. Still very desirable, but $3-4M for a teardown on a 30 x 125 lot on a busy street ? Or a tiny 1BR of less than 500 sq ft with no view for over $1000/sq ft ? People will realize better value with more upside can be had elsewhere, say Victoria, V Island, Sunshine Coast or Okanagan.

  2. Pardon my ignorance, but what does “off-plan” mean? That they bought based only on looking at the plans? Or is it a Britishism for “unlisted”? Or…?

    1. off-plan means buying something where you can only see plans … the building doesn’t exist yet (or doesn’t exist sufficiently to see the unit) … it isn’t intended to distunguish from ‘on plan’ but rather ‘you are basing your decision off of looking at a plan’

    2. OK, thanks. It’s a new term to me, which may say something about how long it’s been since I’ve paid much attention to real estate.

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