A Boom Town Is Seeing A Housing Market Reversal
A report from the Herald Scotland. “The stark impact of the plummeting oil price on the economy in the north east of Scotland has been revealed by new research showing soaring numbers claiming benefits and a drop in house sales and planning applications. But Faisal Choudhry, director of Scottish research at estate agent Savills, said that while the housing market in the north east was facing turbulent times, not everyone was losing out. ‘We must remember that this comes after seven years of phenomenal growth in house prices, so prices are still well above the Scottish average. We are beginning to see price reductions, but that opens up opportunities for people who may have been priced out of the market before.’ He added: ‘If you have job security, it is quite a good time to buy a home as the prices are being adjusted down the way in your favour.’”
The Week UK. “Once a boom town, Aberdeen, home to the companies and workers of the North Sea oil sector, is seeing a housing market reversal. After seven years of rapid growth – The Times notes that two years ago, the city was registering annual house price inflation of 14.4 per cent, nearly double the UK average – valuations for properties sold in the city fell 4.1 per cent through 2015, according to data from Hometrack. At £186,200, the average house in Aberdeen is now worth less than the nationwide average.”
“Hometrack’s Richard Donnell says Aberdeen could, if fears of an economic crash prove accurate, be a sign of the future for London, where prices rose 13 per cent last year. ‘This is an example of how housing markets are only as strong as their local economies. The bigger the industry for an area, the bigger the impact it’s going to be,’ he said. ‘You really need economic problems to get prices to fall. Aberdeen is a microcosm of what could happen in London if you had a big economic impact on the London economy, given how much prices have gone up.’”
From Bloomberg. “Home prices in the best areas of central London fell by the most since June 2009 in the six months through February as turmoil in financial markets and higher taxes deterred buyers. In Knightsbridge, home to the Harrods department store, values dropped by 7 percent in the 12 months through February, while there was a 3.3 percent fall in South Kensington and a 2 percent drop in Chelsea.”
“Vendors lowered asking prices on 39 percent of homes in central London since they were first offered for sale, according to data compiled by researcher Lonres in January. ‘A combination of higher levels of stamp duty and volatility in the financial markets means demand for prime central London property has been subdued in the first two months of 2016,’ Tom Bill, head of London residential research at Knight Frank, said in the report. ‘In particular, the start of the year has been overshadowed by fears surrounding the impotence of central banks.’”
The International Business Times. “There has been a spate of asking price slashes on luxury properties put up for re-sale in the Battersea Power Station development in south London’s Nine Elms area. The project, funded and developed by a Malaysian consortium, is mired in concerns about a potential oversupply of luxury new-build properties in prime London areas as overseas demand wanes due to a weakening global economy and tax hikes.”
“Propcision, a property-focused search engine, said its algorithm noted 89 price cuts to Battersea Power Station homes listed for re-sale since January 2016 alone. One four-bedroom town house first listed for re-sale in July 2015 for £6.5 million was cut on 12 February to £4m, a 38% reduction. Another one-bedroom flat was first listed in April 2015 at £800,000 and has been reduced four times since. Now the asking price is £600,000 as of 25 February.”
“‘The data is simply pointing to a downward direction,’ Michelle Ricci, co-founder of Propcision, told IBTimes UK. ‘Does it mean that these are now under market value? No, it doesn’t mean that just yet.’”
“Many of the Battersea Power Station properties were sold off-plan to Chinese investors who only had to lay down a relatively small deposit. The full balance is due when construction work is completed. But several reports suggest some early investors are walking away from their deposits because, seeing the slowdown in the prime London market and higher taxes, they no longer want to stump up the full amount and would rather cut their losses.”
“Ricci said this flurry of re-sale asking price cuts since the start of 2016 ‘definitely indicates that something is happening. These things [gather] momentum sometimes… One person starts slashing and another person gets nervous and thinks I’ve got to slash too. So it does have its own self-fulfilling prophecy which can get out of hand… We’ve seen people getting nervous, is how I would interpret it. People just needing to shift these properties. They probably put it on a bit high and now everything’s starting to tighten a bit more. They’ve got to loosen something and it’s going to be the pricing first.’”
The National Post. “You can find walking tours of historic ruins, mudlarking tours of the Thames, museum tours and outdoor-market tours. London has an endless variety of ways to gawp at its goods. Now, a new and unusual type has surfaced. Kleptocracy Tours of London (yep, that’s the name) tour streets where mansions are allegedly bought with ‘dirty money’ coming out of Russia, Ukraine and Kazakhstan. London has become home to the international uber-wealthy set, and not everyone is comfortable about where the funds for those mansions have come from.”
“‘More than 35,000 London properties have offshore owners, with no one knowing who they belong to or where the money came from,’ writes anti-corruption activist Roman Borisovich in the Guardian. Fully ten per cent of the homes in Westminster are said to have unknown ownership. Research has shown that not only do many of these homes sit empty, making housing unavailable in an already overburdened market, the prices paid for them have affected the higher-end real estate market in the city. The more the buyers pay, the more funds they can park.”
“The tour guides — prominent investigative journalists and money-laundering experts — explain during the bus tour how questionable money makes it way into the luxury London property market. They tell ticket-holders about the bankers, lawyers and agents who facilitate these purchases. ‘The ease with which this can be done,’ Borisovich says, ‘has turned many London properties into the reserve currency of international crime.’”
