“While in recent stress tests, the major UK banks were assessed with declines of around 30% in commercial real estate prices, we fear that London residential could experience an even more severe downturn,” said Société Générale analysts wrote in a note to clients.
“Brexit will damage the UK economy, and some companies will almost certainly have to relocate parts of their business to retain access to the EU single market.”
Home values across the capital were already being hurt before the vote, with prices decreasing 1.4% in May, the biggest monthly decline since June 2011, according to data compiled by Acadata and LSL Property Services.
The number of prime properties sold in London in the 12 working days after the referendum fell 43% from the same period a year earlier, according to data compiled by researcher Lonres.
The number of homes under offer dropped 25%.
“We do expect the recent rebound in real estate stocks may ultimately turn out to be just a ‘dead cat bounce’,” the analysts wrote.
Commercial property values in the UK may fall 25% from their peak on rent declines and could fall further if concerns about frozen property funds spread, they forecast.
Meanwhile, London homebuilders are offering to pay sales taxes, gifts £20,000 (€23,900) of furniture, and the chance to win a free parking space.
London’s housing market faces an oversupply of apartments that Londoners can not afford and fewer landlords want after tax changes made owning real estate less attractive.
Even before the vote, values were facing a “major shock” as landlords offload properties after increases in levies and new lending rules reduced their returns to near zero.
Galliard Homes is offering a 3% discount for owner-occupiers and will pay the stamp duty tax for buy-to-let investors, according to the firm’s website.
It is also offering the chance to win two parking lots worth £25,000 each for buyers of a three-bedroom home at its Marine Wharf East development in London.
Galliard sold the project to an investor and the homes have since been effectively resold, sales director David Galman said. Just two “buyers spooked by Brexit” dropped out and purchasers have since been found for those properties, he said.
“It’s the £3m-plus market in London that’s been most slowed by Brexit and Galliard has very little exposure to this marketplace.”
Barratt Developments is offering furniture packages worth £20,000 to clients who commit to purchasing a one-bedroom apartments in Aldgate Place near the City of London financial district before the end of the month.
An apartment at the project costs more than £800,000, according to the company’s website.