London’s Rich See The Writing On The Wall: Stop Buying, Start Renting

London’s Rich See The Writing On The Wall: Stop Buying, Start Renting

Tyler Durden’s pictureSubmitted by Tyler Durden on 04/19/2016 22:00 -0400

When the going gets tough, the rich get going first… and the rest should pay attention. While the smorgasbord of well-heeled wealthy elites will continue to proclaim that all is well in the world at any and every opportunity – for fear of the revolt of the masses – two disturbing headlines from one of the world’s centers of money should have the 99% nervous.

Demand for London homes under construction slumped by 33%, according to Bloomberg, with “very few higher-end expensive sold in the central areas this year.”

The number of homes sold prior to completion in the U.K. capital fell to 5,947 from a record high of 8,927 a year earlier, according to data compiled by Molior London that was seen by Bloomberg News. Molior declined to comment.

“Affordability is still a huge issue for domestic buyers,” said Faisal Durrani, head of research at broker Cluttons LLP. “New builds in the higher price echelons normally appeal to international investors, but lots of uncertainties in their own economies — such as currency issues and the drop in oil prices — have led to a slowdown in purchases from a year ago.”

Demand has fallen for new homes in London after the government raised sales taxes, introduced a capital-gains levy for overseas buyers and said it plans to cut tax breaks for the wealthiest landlords. Developers in central London are offering institutional investors discounts of as much as 20 percent on bulk purchases as the tax changes limit demand from private individuals.

“There have been very few higher-end expensive sold in the central areas this year,” said Matthew Jackson, an associate director at real estate broker Chestertons. “Some of the volume has been taken up in the lower price ranges, where we have got investors who are looking well beyond the center.”

Investors who acquired apartments before construction commenced, betting they would rise in value, are seeking to sell the properties before they’re completed and stamp duty has to be paid.

“Developers are competing against their own customers in the presale market, so someone has to either pull back or discount,” Colin Sheridan, an analyst at J&E Davy Holdings Ltd., said by e-mail.

About 6,379 new homes were started in the first three months of the year, 39 percent less than a year earlier and the lowest number for seven quarters, the Molior data shows.

And then there is this…

At the same time The FT reports, the number of rental deals on homes worth more than $15m rose almost a third in the year to March 2016 from the previous year.

After stamp duty increased on expensive homes and prices began falling in the capital’s wealthiest areas, potential buyers of homes worth more than £10m are increasingly opting to become tenants instead.

Agents said uncertainty over the UK’s referendum on EU membership and concerns about the use of offshore companies for property purchases following the Panama Papers leak may add to the shift.

The number of lettings deals on homes worth more than £10m each year has more than doubled since 2011, and rose almost a third in the year to March 2016 from the previous year, according to figures from Knight Frank, an estate agency.

“No one is predicting that homes at the top end will be worth 10 per cent more in the near future and most people think they will be worth less,” said Henry Pryor, a buying agent. “It is much easier to make a decision to rent and make sure that if you do buy it’s something you really want.”

Translation: Rent, Don’t Buy, something is coming… and the elites know it.

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