
London house prices are having a relatively bad December - JumpCrisscross
https://www.bloomberg.com/news/articles/2016-12-12/christmas-joy-eludes-london-housing-as-asking-prices-plunge
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DenisM
And by worst they really mean best. Lower housing cost means better life for
more people.

~~~
CountSessine
Agreed - I can understand why there would be concern over lower equities or
bond prices - but how are lower real estate prices really a bad thing? Young
families are killing themselves trying to earn enough to subsidize the
retirement of older homeowners through high real estate prices, mostly because
our cites are so badly managed and zoned. Or well managed and cunningly zoned,
if you're a Hollywood villain and what you're interested in is destroying a
whole generation with debt.

~~~
simonh
> but how are lower real estate prices really a bad thing?

It depends why they are lower. If they are lower because more houses are being
built that could be a good thing because relieving the chronic shortage in
affordable housing will help more people get on the property ladder, increase
the available labour pool for businesses, if they live closer to work it will
ease transport congestion, etc, etc. Good all round.

However if house prices are falling because wages are getting depressed so
people can't afford higher prices, the jobs market is slowing, inward
investment is petering out, etc then it's not so much that lower house prices
themselves are bad, but it's a really bad sign for the economy.

Apart from anything else, falling house prices due to economic factors is
going to reduce investment in new housing, which we really do need in the
medium to long term.

~~~
dx034
It seems that the recent price development is due to higher taxes on second
homes (and expensive purchases) which deter capital investors. This could be a
good thing as it means that a higher share of houses will be owned by people
living only in London, instead of second homes.

And even though it only directly effects the most expensive property, it
ultimately lowers prices for a lot of houses due to the inelastic nature of
housing demand.

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nicktelford
I fully expect this trend to continue, and even possibly accelerate in to
2017.

London has a real problem with wealthy foreign investors parking money in
London property; often, they don't even rent these out, leaving them empty.
The new mayor, Sadiq Khan, has ordered the LSE (London School of Economics) to
conduct a review in to this problem. I expect this to hit the confidence of
investors (both foreign and domestic) using London property as a place to park
money, and if it's as widespread as I think it is, prices will continue to
decline as this "investment" disappears.

This is fantastic news for young people who live and work in London and want
to get on the property ladder; not so great news for the property developers
who've been exclusively building luxury apartments that nobody can
realistically afford - but I have trouble sympathising with them.

~~~
fredley
It's affecting the top end of the market, but there's still a huge disparity
between supply/demand at the lower end of the market that won't go away unless
demand subsides (everyone leaves post-Brexit) or much more cheaper
accommodation is built.

~~~
nicktelford
I'm no economist, but prices in the top end of the market come down, making it
more affordable, wouldn't this ease demand at the lower end of the market (as
more people will be able to afford the higher-end properties)?

I'm not convinced that Brexit will see the reduction in immigration that
people seem to be hoping for; a "soft" Brexit is looking more and more likely.

~~~
alva
From my analysis of London super prime ( I use two groupings £5-10m, £10m+ ),
it appears that there is such a disconnect between this group and the "normal"
London housing market, that they may as well be different countries.

In some sections of the housing market, lets say £1m, a devaluation appears to
have a significant effect on properties beneath that valuation. The
correlation is extremely high. In this bracket of buyers you have (well off)
working professionals, lawyers, finance etc. Rich by almost everyones
standards. Lots of them around means lots of competition for a certain stock
of housing.

What you also have is high thousands of extremely rich people from around the
world (particularly Russia, Saudi and other ME). London is a refuge for super
high net worth individuals for a variety of reasons, culture, relative
freedom, history, availability of beautiful mansions. The most important
reasons probably being national stability (financial and security) as well as
a comprehensive and enforced legal system. Not to mention, a subset of these
buyers are parking money stolen from the people of their country. Try
physically confiscating a 250 year old Mayfair townhouse! UK legal protections
means a seizure of the property is unlikely/very difficult.

The property desired by this group as so disconnected from usual London
housing that it is unlikely to have knock on effects if prices decline. This
type of person is not going to downsize to 'normal' housing.

This is just something to bear in mind when reading reports on London property
prices declining. The last year saw a single digit percentage drop in asking
prices, except the majority of this was in the £10m+ plus range.

~~~
fredley
£1m is the price of what would elsewhere be considered a normal sized 'house'.
You can't get anything with two bedrooms for less than £500,000. £1m is a good
metric for London property.

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alva
Agree with the last two points. The first however is an understatement.
Outside London ( and commute belt ), £1m buys you a seriously luxurious house.
Even in major, desirable cities like Edinburgh, £1m buys you a 6 bed, granite,
Georgian townhouse in the absolute best spot in the city.

London prices are seriously crazy.

~~~
fredley
Sorry, I should have qualified, £1m is for an average house _inside London_.
Outside of course it's barmy money.

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moomin
I live in Zone 2, on what was a really hot road until June. There's a guy down
the road having real trouble shifting his house, but he voted for Brexit so I
can't feel too bad for him.

~~~
rwmj
Two houses on our street (outer London) were up for sale. The first sold for
an astronomical amount of money just before Brexit. The second was under offer
at the same time, also for silly money, but the sale didn't complete before
Brexit. The offer was withdrawn by the buyer, and the second house is now (6
months later) still on the market.

The lesson I take from this anecdata is that the market has slowed right down,
but sellers haven't yet needed to accept lower prices.

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rahrahrah
Anecdata. I.... don't know how to feel about that.

~~~
moomin
Yeah, you can't read too much into it, but consider the following: to buy a
Zone 2 house in London right now requires a fair bit of money. We're talking
typically more than $1m US. Even a flat on my street is upwards of 600,000 US.
So who can buy this kind of property? That mostly means successful
professionals. A fair few of this category are either foreign-born themselves
or have spent significant time overseas. Nearly all of them work in extremely
international offices. This category skews Remain extremely strongly.
Remainers are, for the most part, pretty chary about England's prospects right
now.

The broader data shows Outer London still going up, but Outer London's a huge
place. Areas like Sidcup and Plumstead skew Leave and I'm sure property prices
are still doing fine right now. Longer term, it'll depend on what happens, but
I do think property prices are literally skewing on the basis of the political
views of the prospective buyers right now.

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Chris2048
I'm a professional, and work in a fairly mixed office. I still voted exit, and
considered those without the mobility I have when I did so.

Why would "spent[ing] significant time overseas" or "work[ing] in extremely
international offices" affect which way you vote?

~~~
moomin
Well, an awful lot of Brexit appears to be anti-immigration. And the anti-
immigration stance is principally values-driven. The kind of people who choose
to spend their time around immigrants or being an immigrant themselves seem
unlikely to be the kind of people who object to immigration.

There are other arguments, but this was a big one, and it's one that has less
traction in those categories.

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rahimnathwani
The headline is overblown. The article claims prices in London are flat over
the past year, and that prices in the UK has a whole rose 3.1%.

"average prices in inner London are down 2.6 percent over the past year,
whereas outer areas are up 2.7 percent. That left average prices across the
capital little changed."

~~~
dang
Ok, we de-overblew (?) the title for you.

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wjossey
Great article by the telegraph documenting the rising housing prices:

[http://www.telegraph.co.uk/property/house-prices/the-
state-o...](http://www.telegraph.co.uk/property/house-prices/the-state-of-the-
uk-housing-market-in-five-charts/)

Price vs. wages is a great measure of day-to-day strain on the average
Londoner.

On Housing in General: It will be interesting to read about the outcome of
these last two housing booms on retirement and inequality. Have home owners
who entered the market late inadvertently been forced to save? Will inequality
spread so wide, that we permanently lock out a portion of the population from
urban areas?

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jonatron
The average London home now costs £526,000 - 16 times the average Londoner’s
salary of £33,000 a year. Long term I have no future in London, despite living
there almost all my life. Source: [https://www.housing.org.uk/resource-
library/browse/home-trut...](https://www.housing.org.uk/resource-
library/browse/home-truths-2015-2016-the-housing-market-in-london/)

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gbuk2013
I would be overjoyed if house prices in London came down, and I say that as
someone who bought a house a few years ago and should be interested in the
value going up. London house prices are beyond stupid and the situation where
foreign investors are allowed to come in and buy out entire towers of flats
(no kidding) and take them out of the local market is just criminal.

However, I just don't see it happening based on the data provided. Yes, the
luxury central London properties may come down in price but they are still so
far outside the price range of almost anyone that it doesn't make a
difference. And the article specifically mentiones that the target market for
those are foreign investors, not normal people.

Anecdotal evidence, but when my parents bought a house in SW London many years
ago we asked the estate agent and apparently even during the crash in the 80s
the price dropped by maximum 25% in that area (compared with 200% for example
in other parts of the country).

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macca321
My (London) mortgage is up for renewal next month. Would it be a good idea to
free up some equity while valuations are high in order to invest in the next
year or two?

~~~
bboreham
What is it you are proposing to invest in?

Regardless of the answer to that, your question appears to boil down to "what
will be the future value of asset X, compared to asset Y". And not many people
can accurately answer that question.

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alexc05
At this rate they'll go from costing several lifetimes' salary to a single
lifetime's salary ... by roughly the end of my own lifetime.

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nulldereference
The UK with Brexit has signaled that its not interested in trade or
immigration. Why would I as a knowledge worker choose to even remotely
consider London? Demand falls, ECON 101.

~~~
bottled_poe
> not interested in trade

Could you elaborate? This statement is very broad and seems unlikely to be
true.

~~~
moomin
I'll elaborate (and take advantage of the fact I'm not the original poster).
Britain currently thinks it wants trade, but doesn't really understand what
modern trade looks like. This is evident both from talking to people in my
street and from reading the latest pronouncements of Brexit ministers. A
couple of things that they all seem to be missing:

1\. Non-tariff barriers are much more onerous than tariff barriers. 2\. If
poorer country A enters into a deal that gives richer country B jobs, there's
a good chance they might want access to those jobs. 3\. Britain principally
trading with Canada and Australia is a recipe for ruin. 4\. A great deal of
the UK's attractiveness to non-EU countries is its membership of the EU.

3, especially, sounds like I'm straw-manning. I'm not.

I should add there are Leavers who appear to get these issues. One is Phil
Hammond, but it's unclear he'll win and

5\. The EU can walk away from any deal at any time and probably will if we
don't offer them something good on their terms.

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tonyedgecombe
Point 5 is really significant, there has been a lot of noise from politicians
on both sides and the media about the negotiations, in reality we have such a
weak hand it looks like the negotiation is going to be rather one sided.

~~~
mikeyouse
Especially since the EU has every motivation to make sure that they get the
much better end of the bargain. If it looks like the UK has 'won' in any way
by Brexiting, other countries are more likely to follow suit. Crushing them at
the negotiating table likely makes the rest of the EU more stable, and
probably wealthier.

~~~
moomin
Agreed, BMW have said that, much as they don't want to lose Britain as a
target market, they value their Europe-wide integrated supply-chain more.

