London ‘sparks gold hedge’

By Eamon Quinn

Irish-based Goldcore said fears over a correction in London home prices have sparked more worries about overpriced markets, and some of its UK-based clients are buying gold to hedge as a result.

Research director at Goldcore, Mark O’Byrne, said investors were trying to juggle a number of risks across markets and were finding it difficult to justify high valuations.

It comes as property group Rightmove said London home-sellers cut their asking prices by the most since the financial crisis in 2009. Mr O’Byrne said he saw a strong probability of a correction in London home prices, although he believed a crash would only occur if international markets were to drop too. The Brexit effect was only one of the factors influencing the London property market, he added.

The once red-hot housing market in London slowed for the past year due to a double hit from higher purchase taxes on expensive homes and the June 2016 Brexit vote, which hurt demand from foreign buyers and raised fears of big job losses in the capital’s financial industry. Rightmove, Britain’s biggest property website, said the average asking price for a home in London this month was £600,926 (€675,800), 3.5% lower than a year before and the biggest drop since June 2009.

Most of the rest of Britain saw year-on-year increases in asking prices of 4%, and the average asking price in Britain was just under £300,000. “Early indicators of activity in this year’s housing market show that demand remains robust,” Rightmove said.

There have been other signs of a slowing in London’s housing market.

Lender Nationwide said this month that prices in London fell by 0.5% in 2017, their first full-year fall since 2009.

Homeownership remains out of reach for many would-be buyers in London. Initial mortgage repayments for a typical first home in the city represent more than 60% of average take-home pay, double the proportion elsewhere in Britain.

And a 10% deposit can require more than a year’s salary in savings — or help from richer family members.

Rightmove’s data showed prices fell most in inner London suburbs — where they were 7% lower than a year ago — rather than the prime central London areas favoured by many super-rich international buyers.

Prices were flat in central London and outer suburbs.

Separate data from property group LSL Property Services gave a fairly similar picture.

Additional reporting Reuters

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