London homes drop as funds bet against builders

London house prices are falling at the fastest pace since the depths of the recession a decade ago. The biggest declines are in the city’s most expensive areas.

And hedge funds are again raising their shorts against homebuilders, as sentiment changes. Firms, including Millennium and Marshall Wace, have increased wagers against companies such as Bovis Homes, Taylor Wimpey, and Berkeley Group.

Average prices fell to £593,396 (€667,540) in January, an annual decline of 2.6%, according to a report published by Acadata. That’s the most since August 2009. The city will be the weakest performing market in Britain over the next five years, said Lucian Cook, head of residential research at broker Savills, as a decade of soaring prices means London is more exposed to political and economic uncertainty, the prospect of interest rate increases, and mortgage loan limits. Weakness in prime property in the UK capital in recent years — partly due to tax changes — is rippling out to other locations in the city and around the south-east. London prices fell 0.8% in January alone, according to Acadata, which publishes detailed regional data with a one-month lag. That shows the weakness that was present for much of last year continued into 2018. Business has been slow in “a lot” of offices since the start of the year, though there are more deals being done in some central outlets, Simon Aldous, a director at Savills, said in a survey published last week by the Royal Institution of Chartered Surveyors (Rics).

Offers for homes are often more than 10% below asking prices, James Gubbins, a partner at Dauntons, said in the poll. “Uncertainty over Brexit is the issue,” Mr Gubbins said. London’s highest-priced boroughs were the biggest losers over the last year, while the largest single drop was recorded in Wandsworth, down almost 15%. The borough has seen a sharp surge in the number of expensive apartments being built there, which Londoners don’t want or can’t afford. Increased taxes on landlords, and loan limits in Singapore, have also helped to dampen demand from overseas. Media coverage of the slowdown, including headlines about falling house prices, is making consumers nervous and holding back demand.

Bloomberg


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