– London property market tumbles as glut of luxury apartments grows to 3,000
– Property crisis in London as over half of 1,900 luxury apartments built 2017 fail to sell
– London’s still high priced property causes companies to locate offices elsewhere
– At current rates, glut of London properties will take three years to sell
– Leading London-based estate agents Foxtons’ sees 42% drop in earnings, yoy
– UK’s largest estate agent issues second profit warning in three months
– Number of homes sold in December fell to 99,100, lowest level since Nov 2016
– The ‘Shard disaster’ – Ten apartments at top of London’s largest skyscraper, all priced over £50m and in five years not a single one has sold
– Property gold? Diversify and own the physical property of real gold
Editor: Mark O’Byrne
There is much talk of bubbles bursting of late. Bitcoin, bonds have been considered in this regard but so far very little consideration of the property bubbles in London, Sydney, Toronto, Vancouver, Hong Long and other major cities.
London’s property market is another market to consider when looking for evidence that the party is over when it comes to frothy, record-high asset prices.
On average, UK properties take around six weeks to sell. London properties have been consistently below average, with many taking less than a day to go from ‘For Sale’ to ‘Under Offer’. However, in recent months, three London regions – West, North-West and South-West – appeared in the slowest 10 postcode areas for property sales.
According to this research by the Homeowners Alliance, West London has taken the very bottom spot after properties spent an average of 107.9 days on the market as of last month.
This is in line with other data that shows property prices in the capital have fallen for the first time since 2009.
Delicate buyers: London becomes price-sensitive
One of the first things someone outside of London says about the city is how expensive it is. They often say it as if those of us who are from there have never noticed.
Arguably, this has been the case for the last eight years or so when it comes to London’s luxury properties. But it seems many buyers are waking up to the sheer madness of paying millions for a tiny shoe box small apartment, that is in the no man’s land of Brexit and majorly exposed to the vulnerable indebted UK economy and a further devaluation of the pound.
The Guardian reports that more than half of the 1,900 ultra-luxury apartments built in London last year failed to shift. There are now an estimated 3,000 unsold luxury properties, such as these, in the capital. These are the apartments that are priced above £1,500 per square-foot.
For the slightly cheaper apartments, priced at between £1,000-£1,500 per sq ft, there are 14,000 unsold properties. The average price per sq ft across the country is £211.
In the West of London (the worst performing area in the UK in terms of days sold) Savills is marketing a two-bedroom duplex penthouse for £7.25m, a ridiculous amount. But, this is not as eye watering when you consider it has already had a discount of 39.6 per cent off its original launch price of £12m.
“76 per cent of properties have been on the market for more than six months [In St. James’s]” says Tim Macpherson, head of London residential sales at Carter Jonas, and “almost half – 45.7 per cent – have been reduced in price”.
The problem really is very serious in the West of London. The Guardian reports:
The steepest discounts are currently to be found in St James’s and Victoria, where the average prime property price has been reduced by 14.1% (£766,000) and where more than three-quarters of homes have been on the market for more than six months. In Knightsbridge, prices have been reduced by 12.1% on average, followed by Mayfair (11.4%) and Temple and the City (10.5%).
Gluttonous property developers of London
In any other industry a glut of supply would require the manufacturers to take stock of what was going on and likely hold off on producing any more goods until the glut had shifted or a new strategy had been taken. This would be forced to happen in any industry where the environmental and social disruption was so great, thanks to the production process.
But not in London. No authority has stepped in and demanded building firms halt works. Instead, there are a further 420 residential towers (each at least 20 storeys high) in the pipeline, according to New London Architecture and GL Hearn.
The Coutts London Prime Property Index Q4 2017, warns of the risk of ‘over supply’:
Londoners have grown used to the sight of cranes and construction sites dotted across the capital. More than 26,000 new units are currently under construction or have received permission to start building in post codes covered by the Coutts London Prime Property Index as at December 2017.
New developments are cropping up throughout the 15 areas we cover, but it’s Central and West & South West London that are leading the charge. While this reflects the degree of demand in these sought-after areas, there is a risk of a potential over-supply of luxury new builds leading to an increase in listing times for them and higher discounts than on existing homes.
The government love this. They believe that this promotes confidence in the capital. They are happy with this – especially at a time when financial companies are threatening to pull out jobs and offices in the City, in the face of Brexit. For some reason, building more residential apartments means we don’t need to worry about it. But who is going to buy them?
Not the foreigners we have so long relied on, it seems. Property buying agent Henry Pryor told the Guardian:
“We’re going to have loads of empty and part-built posh ghost towers,” he says. “They were built as gambling chips for rich overseas investors, but they are no longer interested in the London casino and have moved on.”
So the Lond