Real Estate

Elaine He oversees Bloomberg Gadfly's data visualization work in Europe and also pursues her own columns combining business and markets coverage. Before joining Bloomberg, she was a graphics editor at the Wall Street Journal and the New York Times.

Londoners are optimists, at least judging by what they think their houses are worth.

Asking prices for homes in the capital have held up remarkably despite Brexit and an increase in purchase tax, or stamp duty. In London, the average rose 1.4 percent in January from the year-earlier period, according to data released by property website Rightmove this week.

Slowing Growth
Asking prices in London are only moderating their rate of growth
Source: Rightmove

That rosy outlook may be misplaced. While prices are holding up, the number of transactions in the capital are tumbling. The number of sales completed fell 39 percent in September in London, outpacing the 18 percent national decline, according to data compiled by the U.K.'s land registry. This chart shows the extent of the drop.

London Bleeding
The number of homes sold has fallen as much as 47 percent since a sales tax on second homes came into effect in April, and volume remained dismal in the wake of Brexit
Source: U.K. Land Registry

Such a steep decline (or absence of liquidity) would normally suggest sellers will have to adjust their asking prices downwards. But London isn't a normal market: there's a chronic shortage of housing stock, thanks to its arcane zoning restrictions. The big unknown is to what extent that could moderate any decline.

In the meantime, the people feeling the most pain from the nosedive in activity are the estate agents, who are paid by the sale. Look at Foxtons Group Plc, the capital's largest estate agent. Revenue from home sales in the fourth quarter was 40 percent down on the year-earlier period. That may be a sign of things to come.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

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Elaine He in London at

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Edward Evans at