Sales of homes under construction in London slumped 14 percent year-over-year in the quarter that followed the Brexit, according to a report by research firm Molior London.
London’s housing market, already affected by rising taxes and regulations, has seen a significant slowdown as uncertainty surrounding Britain’s future — compounded by the pound’s 18 percent fall since the June 23rd Brexit vote — hurts demand.
Real estate transactions dropped 78 percent in the five months from April through August compared to a year earlier, according to Land Registry data. Shares in Berkeley Group Holdings, London’s biggest homebuilder, have fallen 25 percent, Bloomberg reported.
A Bloomberg analyst said the data should be a warning for homebuilders who might be coasting off previous sales.
“They’re still in their comfort zone because they’re sitting on good order books. But that can change in the next 18 months to two years, depending if there’s a hard or soft Brexit,’ said analyst Sonia Baldeira.
Home presales increased by 9 percent in the third quarter compared to the previous three months, but those numbers were flattered by reservations made before the Brexit turmoil, as well as by block purchases by corporate investors.
Residential real estate throughout the U.K. showed signs of strengthening in September, but in London, UK’s priciest market, value is expected to drop for the first time since 2009, according to Countrywide Plc, the country’s largest real estate broker.
Foreign investors looking for bargains have not shown as much interest as expected, Faisal Durrani, head researcher at broker Cluttons LLP told Bloomberg. “There are still too many unknowns about where the market is going,” he said, “Many overseas buyers are waiting on the fence.”
The Real Deal predicted that a shaky real estate market in London could shift foreign capital from London to New York, and a Knight Frank report bears that out. According to the report, foreign commercial real estate investment fell by 35 percent in London over a 12-month period ending in June to under $25 billion, while foreign investment in New York reached $25 billion. The report also notes that about 10 percent of all global investment on income-producing real estate now goes to New York. [Bloomberg] — Chava Gourarie