The real estate recession has arrived, with a vengeance, in London and environs. While fading prospects for City employment and pay levels is no doubt part of the equation, the proximate cause is the dearth of mortgage finance, which bodes ill for the market’s prospects. Indeed, the headline item reflects a drop in asking prices, which signals new realism among sellers. But will buyers deem even this sort of concession to be adequate? From the Guardian:
Asking prices in London fell 5.3% in August, according to the Rightmove house price survey – equivalent to a £21,000 drop in a single month. Prices in some of the most sought-after suburbs are falling much lower. The average asking price in Wandsworth fell from £522,000 to £481,000 in a single month – or 7.9%. Homes in Brent, Kingston-upon-Thames, Richmond-upon-Thames and Greenwich were down more than 6.5%.
Nationwide, asking prices tumbled by a record 2.3% in August….Miles Shipside, commercial director of Rightmove, said: “The lack of mortgage finance is central to the problem…”…
The new survey adds to the mounting pile of gloomy housing market data. The Ministry of Justice said last week that the number of homeowners in England and Wales facing repossession rose to 28,568 in the three months to the end of June…That is 24% more than in the same period a year ago and the highest since the third quarter of 1992…
Property sales by Britain’s estate agents are also down 40% on a year ago, the Royal Institution of Chartered Surveyors said last week. Rightmove said the average unsold stock of property per estate agency rose for the seventh consecutive month, to a new record of 78 – up from 77 last month.
Shipside said: “The number of transactions this year is in danger of being the lowest since 1959.”
The Telegraph give another vantage on the deteriorating real estate market in “Savills: Residential building land value drops 20pc“:
Residential building land, one of the core assets of most housebuilders, plummeted in value by 20pc in the first six months of the year and could fall by up to 50pc before the current slump is over.
Research by estate agent Savills shows the value of brownfield sites, down 19.8pc, and greenfield sites, down 22.5pc, fell by roughly four times the rate of the housing market as investors deserted the sector.
Savills’ director of research, Yolande Barnes, said: “There are two ways that falling land values affect housebuilders. The first is in pushing down share prices, but the more worrying issue is for those that are heavily indebted and are under pressure from their banks to repay debt.
“At the moment you have to sell development land at fire-sale prices.”