London home price cuts spread as market stagnates

Prices drop: A file picture showing houses at Victoria Road in London’s Kensington district. Price cuts seen in prime central London in the immediate aftermath of Brexit are now filtering through to outer boroughs. – Bloomberg

Political uncertainty and high values affecting demand

LONDON: More London home sellers are having to cut the asking price of their homes, and they’re offering deeper discounts as political uncertainty and high values dampen demand.

“Price cuts seen in prime central London in the immediate aftermath of Brexit are now filtering through to outer boroughs,” said Savills Plc residential research director Lucian Cook. “Affordability issues are now a problem after a decade of house-price growth, and buyers are finding they increasingly come up against mortgage-lending limits.”

London home prices have surged about 86% since 2009, meaning it now costs buyers 14.2 times their annual gross salary to purchase a property, the highest level on record and more than double the rate for the UK as a whole, according to Hometrack.

As a result, the number of mortgages advanced to first-time buyers in London has dropped 12% in the two years through September, data compiled by the Council of Mortgage Lenders show. That’s impacting boroughs on the fringes of the UK capital as applicants need to borrow more than banks are prepared to lend under rules set out by regulators in 2014.

The percentage of sellers cutting asking prices in January rose in all but two of the capital’s 33 boroughs compared with July, the month after the UK voted to leave the European Union, according to data compiled by real estate listings website Zoopla. Barking & Dagenham and Redbridge were the exceptions to the trend.

The largest average price cut was in Kensington & Chelsea, at 8.2% in January compared with 7.8% in July, Zoopla’s data shows. Westminster was second, at 7.7%, followed by Wandsworth, which includes the Battersea district, at 7.1%.

Here are the top five boroughs across the city where prices are being cut, according to Zoopla:

> Merton: 37.1% of listings reduced

“The number is probably skewed by the five-bedroom-type properties in Wimbledon Village, which are about £3.5mil,” said John J. King, managing director at broker Andrew Scott Robertson. “There we have seen sales down about 25% in the past six months, as they were already affected by stamp duty and the referendum made things worse.”

> Bromley: 36.5%

“Over the past two years some agents have been overvaluing to win business from sellers, but given the state of the market post-Brexit, buyers are now very astute and won’t over pay, and reductions are taking place,” said Joe Mourat, a broker at Capital Estate Agents in the borough. “The British public are responsive to negative news, and we definitely saw a downturn in activity after the vote.”

> Hounslow: 36.3%

Hounslow, the borough that includes the upscale Chiswick and Turnham Green districts, rose to third place in January, from 11th place in July, after the percentage of listings that had a reduction rose to 36.3%, from 26.8%. The average reduction rose to 6.4 percent, or more than £60,000, from 5.9%.

> Kensington and Chelsea: 35.4%

“Stamp duty has dramatically cut our level of activity in this area, and Brexit exacerbated it,” said Toby Whittome, a broker at real estate agent Jackson Stops & Staff. “Applicants looking to buy are up nearly 40% in January, but that doesn’t necessarily result in sales, as people are hoping and waiting for some good news about stamp duty and clarity over the possible impact of the referendum.”

> Ealing: 35.4%

“Prices have really risen steeply over the past five or six years to the point that a two-bedroom new build in Ealing costs the same as one in Pimlico,” said Alex Jerram, a broker at Dauntons. “You cannot justify asking the same price for a property in greater London as one in central London. If sellers really need to sell, they have to reduce prices.” – Bloomberg