Monday, 29 February 2016
Top of the UK property market cycle finally reached
Even the Financial Times has caught onto the fact that the London property market has hit a peak.
There are huge amounts, over 56,000 of £1 million+ flats being completed by the end of next year and yet sales for last year for this kind of apartment were 3,600.
Any fule can see this huge mismatch is going to cause a crash of sorts.
I can't quite decide how crashy it will be and whether it will also extend majorly into commercial property.
On the one hand, huge over-supply at this level should be enough to casue problems. Hedge funds has big short positions in luxury housebuilders which tells us what they think as to the future market direction.
On the other hand, the fall in the value of the Pound of late will act as a rally, given most of the properties are paid for overseas, this will balance some of the impact as it did in 2008-10 when the market fell less than 20% overall and was fully receoved within 2 years. Also though this time there are huge lumps of property (Battersea Power Station is the epitome) where 10% down local currency deposits were used to raise funds and show the property was sellable off plan. These 'investors' (what do you call people in Jakarta who turn up with bags of cash to a hotel event to buy London property?) are not going to complete on their purchases and will try to sell them on - this phenomonen will cause a big ripple in the market as London discovers that many of its 'sold' properties are no such thing in reality.
Of course, at the bottom of the market for the real people who live in London as opposed to overseas investors, demand is huge; the wave of demand is only increasing but it has to be for properties £500,000 and less, even half, of that for the rental sector to make sense. This puts a firm underpinning to the market that will stop a real rout.
So it is still a mixed picture unless you ust paid £5,000 a square foot for a speculative opportunity in Mayfair...