London Home Presales Slump 14% as Brexit Compounds Tax Woesby
Sales figures flattered by transactions agreed a year earlier
Home sales across wider market down 78% year-on-year
Sales of London homes under construction dropped 14 percent in the third quarter as uncertainty surrounding the terms of Britain’s exit from the European Union hurt demand already dented by higher taxes.
The number of residences sold before completion in the period fell to 4,830 units from 5,636 a year earlier, according to report by researcher Molior London seen by Bloomberg News. A spokesman for Molior declined to comment.
London’s residential real estate market is grinding to a halt, with transactions falling 78 percent in the five months from April through August compared with the same period a year earlier, preliminary Land Registry data shows. Political and economic turmoil, with the pound dropping 18 percent since the June 23 Brexit vote, is discouraging buyers affected by rising taxes.
“The data we’ve seen since Brexit raises a flag of caution for homebuilders for the future,’’ said Bloomberg Intelligence analyst Sonia Baldeira. “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.’’
There was a “modest” 9 percent increase in third-quarter home presales compared with the previous three months, according to Molior, although the numbers were flattered by reservations made a year ago as well as block purchases by corporate investors.
The slide in the pound hasn’t sparked as much interest as expected from overseas investors looking for bargains, according to Faisal Durrani, head of research at broker Cluttons LLP. “There are still too many unknowns about where the market is going and many overseas buyers are waiting on the fence,” he said.
Shares in Berkeley Group Holdings Plc, London’s biggest homebuilder, have fallen more than 25 percent percent since the June 23 vote, compared with an 18 percent decline for the ten-member Bloomberg U.K. Homebuilder Index.
A record 6,864 homes were completed during the third quarter, the most since data was first collected in 2009, the Molior report shows. Values in the capital will fall by 1.25 percent next year, the first decline since 2009, because of the turmoil caused by Brexit negotiations, according to Countrywide Plc, the nation’s largest real estate broker.
There was a 3 percentage-point increase in the stamp-duty sales tax for landlords and second-home owners in April, which followed an increase in charges for all luxury-home purchasers in 2014. That hike means that a 12 percent tax rate is paid on portions above 1.5 million pounds ($1.8 million).
The Royal Institution of Chartered Surveyors said its U.K. house-price gauge rose to 17 from 13 in August as an increasing number of real estate agents reported appreciating prices. Values continued to decline in central London, which has the priciest properties in the country.