Luxury London Home Sales Plunge 26% – Has this Mega Real Estate Bubble Finally Burst?

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It appears the music may have finally stopped for one of the world’s largest luxury real estate bubbles: London.

It’s well known that foreign oligarchs love London real estate as a means to launder funds, typically “earned” by soaking their host countries dry via corruption and fraud. This has caused absurd and irrational spikes in high-end residential real estate in the English capital, as well as a flood of new construction.

With emerging markets now completely collapsing, the seemingly endless flood of foreign money is drying up, and with it, London real estate.

So has the London real estate bubble popped? Probably.

From Bloomberg:

Investors betting on making a quick profit on luxury apartments in south London’s Nine Elms district, Europe’s largest project for prime new homes, are facing long waits for buyers.

Almost 30 percent of new properties in the district have languished on the market for more than a year, according to real estate data provider Lonres, who didn’t include sales by developers. That compares with 12 percent in London’s best districts.

High prices and an increase in sales tax are deterring international investors who bought half of all new homes in central London in 2013. Currency turmoil in emerging markets is also weighing on sales. Malaysian investors, who purchased almost a third of the 866 homes in the first phase of the district’s $12 billion Battersea Power Station project, saw costs surge as much as 30 percent as the pound strengthened against the ringgit.

Homebuilders in Nine Elms, where 18,000 homes are planned including 4,000 at the Power Station development, went on roadshows from Singapore to China selling properties costing from 495,000 pounds ($762,000) for a studio to 30 million pounds for a penthouse, before construction commenced.

About half the homes under construction or newly completed in Nine Elms were reduced in price before they were sold this year, according to Lonres, which defines Nine Elms as the SW8 postcode, which stretches from Battersea to Vauxhall. The average sales value of all apartments in the district dropped by almost 132,000 pounds to about 818,800 pounds this year from 2014, according to broker Foxtons Plc.

Residential sales fell 26 percent in London in May from a year earlier as demand was damped by affordability tests for U.K.-based buyers, an increase in stamp duty in December and a stronger pound. Chancellor of the Exchequer George Osborne introduced a capital gains tax for overseas homebuyers this year and is reducing interest relief on rentals for the wealthiest landlords from April 2017.

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More than 670 properties are being offered for sale for 1 million pounds or more in the SW8 postcode district, according to real estate website Zoopla, though some may be dual listings by brokers. There were 134 sales above that price in the district in 2014, according to Land Registry data.

That’s not good.

For related articles, see:

UK Think Tank Proposes Law to Restrict Foreign Oligarch Real Estate Speculation

The Bailout of Robert Mugabe – How Wall Street Money Led to Intimidation, Torture and Death in Zimbabwe

Meet the Pied-à-Terre Levy – The Proposed Tax that Could Crush High End NYC Real Estate

Introducing Ghost Skyscrapers – NYC Real Estate Goes Full Retard

In Liberty,
Michael Krieger

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