London House Prices post Brexit

[SarfEast1cated]

our flat was UO for £475 until after Brexit when the buyer pulled out. we then got a new buyer who offered £460 but then pulled out when a cheaper place became available. Now we have an offer of £437k. Should we just accept that prices have dropped that much, and try to persuade the seller of the house we want to drop that much?
The market it really confusing me!

I think at the moment, most people are holding tight. And the people that aren't, are making very low offers.

UBS has put out London house price estimates of flat in 2016 and down 7% in 2017. See their recent broker notes on Foxtons.

So personally, I wouldn''t accept a 437k offer.

However, what was the 475 based on? Recent sold prices, or recent sold prices plus a 20% premium just cos you thought it would get that? Look and see what genuinely comparable flats have gone for and price at that.

Also depends how much you want/need to move. And depends how much your vendors want/need to move.

interesting thanks yello

Do you mind me asking, what is the asking price for your flat? I am interested, because we are considering putting in an offer for a flat, but don't know what level of offers people are starting at, post Brexit.

I am not sure whether this is all Brexit related, or due to the Stamp Duty changes etc. The flat we are looking at went on the market on the day of the Referendum, so I am assuming the price had not factored in the Brexit effect...

That seems like a big drop. Do you have to sell at the moment or can you wait?

Agreed prices are falling in central locations, however asking prices set at peak 2014 levels tend to slide more slowly for mainly emotional reasons. Realistic 2016 sellers pre-Brexit were asking roughly 2012 level- prices, and even those chains have become stuck, with Brexit as the excuse. Frankly they're unlikely to progress unless some cash- or FTB cracks.

I would ask myself honestly why one might agree a price at post 2008 levels. This applies to buyers and sellers trading up. FTBs who understandably have been frustrated over the last few years will be tempted to stretch themselves, in which case they'll be willingly paying for gains at the other end of the chain, and must bear the consequences of negative equity with similar good will. Sellers who wait will not lose out unless they are cashing in, and, if they are hoping to cash in, may find some FTBs less than willing to fund them.

One easy solution for stuck chains is for the top end of the chain (that is cashing in) to buy the bottom end. If that prospect seems unreasonable or risky, then the entire chain is probably over-priced and would do well to cut say 30-50% off each price in more central London locations. Everyone will be much better off and even the top end may find that acceptable. The alternative is as much patience as it takes... while checking what inflation is doing globally. Take a look at Japan and see what low interest rates and deflation do to real lives and brace yourselves...

The flat was put on the market at £475 the price our EA's had sold other similar flats of on our road - some had gone for £485 but ours needs a bit of tarting up really. Our sale stagnated a bit because the house we were buying's house fell through (they were getting a divorce and it got a bit acrimonious). Anyway. Our buyer pulled out a few days after Brexit citing uncertainty at work (she must be a high earner to afford our flat on her own). We then got a new buyer who offered £460 which we accepted and found another house. They have since been offered another place for cheaper and pulled out. The EA's recommended we dropped our price to £450k and the only offer we have had has been £437k despite lots of viewings. Things seem to have changed very rapidly, and now it's a buyers market. We do have to sell now as I am about to retrain to lower paying job and need to move beforehand.
all very bamboozling. I am minded to take the offer and say that no more discounts will be made and that they try to complete quickly. In an ideal world we would spend some money on new kitchen worksurface/floor and regrouting tiles etc, but we don't really have the time.

One easy solution for stuck chains is for the top end of the chain (that is cashing in) to buy the bottom end. If that prospect seems unreasonable or risky, then the entire chain is probably over-priced and would do well to cut say 30-50% off each price in more central London locations.

Are you seriously saying that you have seen people reduce price by 30% to 50% post Brexit? Really? That is not what the group of surveyors I spoke to last week had observed.

No reputable source is forecasting anything like a drop of 50%.

It would take a serious shift in the London housing market i.e. a fucking awful global crash (which we may well be heading towards) a huge tightening of lending criteria back down to something like a 30% deposit minimum plus max 3.5x lending, higher interest rates (BOE has indicated 5% is the max they are thinking about in the medium term) PLUS building a shit ton more hoes in London, oh, and also a restriction on foreign capital.

Apart from the global recession (and potential world war if you take it further) I can't see the other things happening.

So, the offer you currently have is 97% of your new, reduced, asking price (or 92% of your original asking price). That doesn't seem too bad as a percentage, although I appreciate for you as a seller it is disappointing - have the agents given you any indication as to whether, in the current climate, they think that is a reasonable offer?

I think if I were you as I had to move, I'd take it. The market is very odd.

DH tried to sell a London flat twice in auctions before Brexit where it failed to sell. He has sold it in the auction after Brexit at a price he wanted, third time lucky. So all a bit strange. Very few people at the auction - I'd say about a quarter of pre Brexit numbers - but the people there were buying but prices weren't 'frothy'

I think it will only get more uncertain for the moment, so I'd bite the bullet and take it if you can afford to.

If you need the money, I'd take it. If not, I'd shelve the plan to sell for at least a few years.

Op, couple of recent news features that might help you.

www.cityam.com/246712/brexit-doom-mongers-wrong-london-house-prices-arent-going

www.homesandproperty.co.uk/property-news/postbrexit-london-house-prices-property-market-expected-to-slow-but-not-plummet-with-growth-a103281.html

And on the more doom and gloom side:
www.cnbc.com/2016/07/19/brexit-whats-happened-to-london-house-prices-since-the-vote.html

You can look at Foxtons and Countrywide as a proxy for the London housing market. Note they are impacted by transaction volume AND pricing, and you also need to look at sales and lettings separately.

Foxtons trading statement

Comments from broker notes:
UBS, Foxtons Group, 13 July 2016

• "We forecast London housing transactions down -6% in 2016 and -10% in 2017"
• "We forecast [ ] London house prices flat in 2016 and -7% in 2017."

Credit Suisse, Foxtons Group, 29 July 2016

• "We now forecast FY16 market transactions down 15% YoY"
• CS downgraded their Foxtons sales division revenue forecasts for 2016 and 2017 from £60m (2016) and £62m (2017) to £59m and £60m respectively.

Similar comments for Countrywide as the same brokers cover them also.

You can also look at the listed UK house builders, although you get general UK view rather than London specific mainly.

UK listed housebuilder shares are down some 21% to 32% post Brexit against the FTSE All Share and 25% to 45% below their 2014 to 2016 peaks. This indicates the market is expecting a downturn in the property market, again transactions volume and pricing.

Most uk housebuilders are due to release trading updates or interim late august so it is a 'to be watched' segment right now.

Barratt's is keeping quiet on cancellation rates, and has said they will come back to the market in September with an update. This will be really important actually.

Help to Buy has been extended to 2021 - this is propping up new build values. Barratt's quoted in their analyst call on 13 July that 32% of their wholly owned completions for the YTD used Help to Buy v 31% the prior year. When looking at London Help to Buy - 25% of Barratt's reservations were London H2B in H1 but that went up to 40% in H2.

Barratt's also stated their plan is to match build to sell rates, so if there is a slow down in sales, they slow their building down.

Mirabaud notes in their Bellway Plc broker note 27/July 2016 that they expect a downturn to be softened by:

• Strength of underlying pent up demand for new homes.
• Interest rates remaining low and could go lower.
• Continuing availability of mortgage finance with no signs of stress in the banking sector.
• Government support like Help to Buy.

luxury London and buy to let markets expected to be more vulnerable.

I just tried to sell my flat in NW London zone 2 and had it on the market for about 5 weeks before withdrawing it yesterday. In that time there were 21 viewings but no offers despite my asking price being at the lower end of the range suggested by 3 independent agents. Agent's advice was that only flats priced around 8-10% below asking prices from 6 months ago are moving and that only highly motivated sellers should really be selling into the current market as buyers are negotiating discounts on purchases agreed pre-Brexit and are then happy to sell their existing place at a discount. That type of discounting should wash through the market within 6 months and conditions should return to normal supported by lower interest rates and the gradual realisation that the British economy is too important to Europe to be dealt with punitively. So the overall advice if you are a seller is to wait if possible but that you won't have to wait for very long. On the flip side, buyers should get in now while there's temporary downward pressure on prices.

prices are officially starting to drop

www.theguardian.com/business/2016/aug/05/uk-house-prices-fall-1-after-brexit-vote-says-halifax

richafra that's interesting - what was the feedback on your place from the viewers? I think most FTB are biding their time for a bargain and expecting a show home at the same time. They are stumping up huge deposits though, so I guess we can't blame them.

Hi SarfEast1cated, the feedback was generally that for the asking price buyers expected a full refurb to be thrown in - my flat is in average decorative condition and I would rather leave the refurb work to the new owner. So your comment that people expect a show home rings true. More generally I think prospective buyers are hesitant to pull the trigger before they see how long the downward trend lasts - they don't want to catch a falling knife. If you remember what happened to the London market in 2009 in what were far more serious market conditions, London market sentiment tends to turn on a dime. My best guess would be for 6 months of gradual reductions followed by a big bounce next spring.

"So, the offer you currently have is 97% of your new, reduced, asking price (or 92% of your original asking price)."

The average London asking price to attained price in this price range is 92% and that was pre-Brexit.

lonres.com/show_newsletter.php?id=48&mkt_tok=eyJpIjoiWlRjMk1X%20%20WmpaVGRsWm1OaCIsInQiOiJuTnRHeitqRXBxaUkzdUlpaSt6em%20%20xTZzd2SXBkUW5XeHRERFVBbkdOOE5SMUlSejZDaldpcFdPTElP%20%20OHg5WW01NFlNM3g2ejVGaXRPT3lRK1o2YXJIZXk0ZjJBcDFCUW%20%20c4QWhYXC9wblRiWEU9In0%3D

"My best guess would be for 6 months of gradual reductions followed by a big bounce next spring"

Based on what? Until the trading/business relationship with Europe is decided, hundreds of thousands of London jobs are under direct threat.It will take at least two years to exit, probably more like 5 years. The crazies are still debating exiting the Single Market as if means nothing.
www.telegraph.co.uk/business/2016/08/06/treasury-looks-at-quitting-the-single-market-as-city-rejects-nor/

That sort of economic uncertainty is going to be very damaging.

Depends how urgent it is for you to sell and how resilient your place is to drops in housing market. Which borough? How far to transport links? If you have a first time buyer suitable place within easy commuting distance to the City / Westminster / Canary Wharf etc then there will still be a shortage of those places and still be a strong market for them. Investment may fall but I think higher value / further up the ladder places are more likely to be significantly affected.

If you are within decent commuting distance, if feasible, I would wait a few months for things to settle down. If you are on the outskirts maybe just cut your losses and get things done and dusted now.

Are you seriously saying that you have seen people reduce price by 30% to 50% post Brexit? Really? That is not what the group of surveyors I spoke to last week had observed.

No reputable source is forecasting anything like a drop of 50%.

SocieteGenerale are thought of as doing marginally better reputation-wise at the moment than UBS and Credit Suisse, who you seem happy to quote...

It would take a serious shift in the London housing market i.e. a fucking awful global crash (which we may well be heading towards) a huge tightening of lending criteria back down to something like a 30% deposit minimum plus max 3.5x lending, higher interest rates (BOE has indicated 5% is the max they are thinking about in the medium term) PLUS building a shit ton more hoes in London, oh, and also a restriction on foreign capital.

Apart from the global recession (and potential world war if you take it further) I can't see the other things happening.

If Japan's prolonged economic (and related social) issues, and its fiscal and monetary actions (that are now being copied here) do not help inform you, perhaps the obvious near-halt in £5m+ sales in central London may? It is obvious that, even before Brexit, the SDLT changes since 2014 had already cut prime central activity by 25%. Ripple ripple... how long do you think it will take for FTBs to say, why buy in zone 2 when I can get the same or better and walk to work,... repeat for zones 3,4,5,6,... ? PCL asking prices of mostly £1.5-3.5k psf have been unrealistic for over a year, and more than 2/3 of selling, let alone buying, estate agents agree.

More to the point, none of us can speak for the market, and I would not presume to do so. I merely say that if the top of the chain cashing in cannot stomach the bottom end prices, they are trying it on and any sane buyer along any part of the chain would cut cut cut. Because actually that would make them much much better off if they have mortgages and are buying real homes. 2014 prices are more that twice 2008 ones, and half over 2012 ones, so 30-50% is an entirely fair cut. Most PCL owners rarely sell anyway, so it is of little consequence to them, especially compared with the 90% cut in interest rates and associated income they have stomached over the past eight or so years.