Are London prices finally stabilising?

Prices in London apartments may finally have turned the corner. For far too long rather  there has been a huge rise in the supply of new-build flats in London and this would eventually lead to a glut in the supply.

In the wake of the financial crisis, when the pound was weak, commodity prices were riding high and Asia was booming. It made sense for those in certain parts of the world such as Russians, Chinese and those from the Middle East to head for the UK to stash their cash in one of the most legally secure safety deposit boxes the world has ever seen (London property). The UK was stable , secure and in demand.

Where else would the Chinese invest their trillions ?

Supply was limited, so prices rose and the first great London bubble created almost entirely with international capital kicked off. But things have started to change.

The pound has soared. Appreciating more than 15% over the past months alone. The Chinese authorities have been concerned with money laundering, the Russian economy faltering with sanctions and trouble brewing in the Middle East has all destabilised the market. So, London property is more expensive when bought by those who make their livings in other currencies. Commodity prices have plummeted – something that gives anyone skimming cash from a commodity economy a little less to spend than before.

China has stepped up its campaign against corruption, with the obvious result that sales of high end flats are now to be frowned upon.

But where is the supply? Well, there were over 54,000 units being developed, in progress or completed in London since January. The effect of this clear. A new report from Lonres, compiled for Bloomberg, tells us that almost 30% of the properties on the market in London’s Nine Elms district have been on the market for more than a year (it is 12% in super-prime London), says Neil Callanan on Bloomberg.com.

This could be a  bigger problem than you might think for some owners. Most have had to put down deposits on new build properties two or three years ago at fixed prices, planning to flick them before they settle for the balance on completion –  In this way they both avoid stamp duty which could be substantial and at the same time make a tidy profit. Now coming up with the remainder is  going to be tough. With the changing exchange rate this could mean at least 15% more to pay. For example ,the Malaysian ringgit is down 43% against the pound in the last three years(from 4.5 to 6.6) and so this the investment extremely expensive.

So how bad is it? The average sale price of all apartments in the SW8 postcode has fallen by about 16% to £818,000 in the last year alone according to Foxtons. Nothing goes up for ever. Not even London house prices.

Malaysian investors, bought almost third of the 866 homes in the first phase of the Battersea Power Station project, says Callanan. They will be hurting now with the strong pound.