London is experiencing its own Perfect Storm in its real estate market. The difficulty is one seen around the world right now, which is that of mixing strength and weakness. Yet, some unpopular political and economic movements have impacted the British economy and London’s housing by default. From the wildly unpopular Brexit decision to the 3% stamp duty tax on landlords and second homeowners, it has caused homes under construction dropped 34% in value.
What’s at issue is that the wealthy landlords who are facing 12% tax on 1.5 million pounds have pulled out of these undesirable and unprofitable deals, leaving a lot of real estate open for the taking. The other problem is that London’s market has long been pretty hot, which means that the prices are high in a weak and uncertain economic climate. The issue is the homes that are being completed are getting dumped into this weak real estate market amidst a weak economy.
Now there is the regular flow of the currency market to take into account as well. Many investors are watching currency for shifts that provide opportunities for them to make more favorable moves. It turns out that there were 5,655 homes completed second quarter, which is a record for the past seven years, during which time record-keeping started.
One piece of good news is that price growth increased a healthy 13.6 percent year over year since May 2015. Otherwise, the rest of the numbers are bleak and the roaring markets are showing signs of weakness and quick changeability. Dealing with the uncertainty of rapid changes is tough for most investors. It has caused a lot of moving around of money as they try to read the markets and make decisions partly from a reactive standpoint.
For instance, wealthy landlords and investors giving up on renting out properties is one way that they reacted to changes in the economic climate. Time will tell how currency fluctuations may provide new opportunities.