Does the London property market fall?
The fall of Londongrad
In 2016 a young captivating girl bought a ground-floor flat not so spacious in the borough of Kensington for $5.5 million. This is not a story to be seen in the first paper of news outlets. But when we heard that she didn’t have a job but paid in cash everything changed. Also, it was not the first acquisition of that magnitude in the famous city of London. After the collapse of the USSR and the apparition of oligarchs in Russia, the UK capital city was a safe place to invest and enjoy the sudden luxurious lifestyle for the newborn business people. Anyone who could invest at least $1.3 million later increased to $2.6 million could get a residence and a passport. A green card to the European clubs and business markets. But what does this has to do with our story and why the London property market will fall?
In 1983 they were only 50 to 100 Russians living in the city. But after money began to trickle in one guy spent $112 million on a 15-bedroom pile on Kensington Palace Gardens, a half-mile gated avenue known as Billionaire’s Row. Things turned like a flood in the next years. The siege on the city started and a lot of wealthy families raised the bar for the other oligarchs. It become a trend for powerful people to have a flat or property in the city. Some were also attracted by the private school system and the possibility for their children to be educated in a safe haven. Their money supercharged London’s property market for some time until someone called the shots. It was the annexation of Crimea and other events that cooled the big attraction of spending big bucks on different amenities around the city. Russian buyers became less dominant in this upscale market and things made prices fall. After the invasion and with the pandemic all along buyers were not willing to pay much for such homes, especially for those with limited or no outside living space. The fall of Londongrad began.
As Oliver Bullough, author of a timely new book, Butler to the World says “Londongrad is no longer the central repository for oligarchs’ wealth.” This year was the worst-performing property market, with values up 3.9% until May reports. Also, now it takes longer to sell a home than in other regions. A number of boroughs are seeing price declines based on fewer people interested. Real estate agents are expecting that Russian will try selling their properties very soon as they cannot do any business in the city. If the war goes on in 2023 it will be a super fire sale expected. Public resentment made them very interested in probably not coming back or retaining these properties.
However, experts from the property industry are not sure what the next year will bring up. We know that houses continue to outperform flats based on the escalation of Britain’s cost of living crisis. If a full-blown recession will hit then the economy is heading into a downturn. This will make the property market moderated as homebuyers become even more circumspect about big expenses. In addition, Brexit seems to exacerbate the feeling of dumping prices. (a trillion worth of capital has left the city since Brexit) Thus, experts suggest that the property market is expected to fall by 3.0% in 2023 and 1.8% in 2024. But will not have the impact of 2008 when house prices fell by 20%. Even if 7 London boroughs are recording lower asking prices today than they were in June 2016. Notables are Westminster and Southwark both down 7%, and Kensington and Chelsea down 4%. Most people making predictions on property prices are certain that Londongrad will still not be the crown jewel and that any price growth will be outside of the city. Some blame train strikes, congestion charges, strangled roads due to cycle lanes, and poor public services. (car tax for one person charges were over four hundred pounds a month in zone 1) Who would want to live in the jams, there? My humble advice if we thinking of buying in the capital city is to take a long-term view into consideration and wait for the market to settle down again. In the short term, prices aren’t going to be growing. Demand has fallen off a cliff as Londongrad did since interest rates started rising.
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