London builders offer freebies as demand slumps

LONDON • London homebuilders are offering to pay sales taxes, gift £20,000 (S$35,500) of furniture and the chance to win a free parking space as Britain's vote to leave the European Union, dubbed the "Brexit", damps demand.

Brexit will damage Britain's economy and residential property values in London could fall by more than 30 per cent, Societe Generale analysts, including Mr Marc Mozzi, wrote in a note to clients yesterday.

The British capital's housing market faces an oversupply of apartments that Londoners cannot afford and fewer landlords want after tax changes made owning real estate less attractive.

New home sales in London, where prices are about 62 per cent above the 2007 peak, have been falling after the introduction of a capital-gains levy last year for overseas buyers and higher sales taxes since April damped demand.

Purchases fell 33 per cent in the first quarter to 5,947, according to data compiled by Molior London that was seen by Bloomberg News.

After Britain voted in a shocking move to leave the EU on June 23, the result has hammered sterling and hurt confidence in the British economy, though newly minted British Finance Minister Philip Hammond asserts that Britain remains an attractive destination for investment after the Brexit referendum.

Even before the vote, values were facing a "major shock" as landlords offloaded properties after increases in levies and new lending rules reduced their returns to near zero, analysts at Deutsche Bank said a week before the referendum.

Home prices fell 1.4 per cent in May, the biggest monthly fall in about five years.

Plans are in the pipeline for 35,000 high-end properties worth almost £77 billion in the coming decade. But as many as 100,000 financial-services jobs could be lost in Britain by 2020 because of Brexit as firms seeking to access Europe's single market through London pull out, according to an estimate by PricewaterhouseCoopers, which would reduce demand from buyers and renters.

Ms Natalia Kopczynska, a 26-year-old compliance officer, and her fiance were planning to buy a £500,000 property in the Beckenham district before the vote to leave. They have put the decision on hold.

"We now have no idea what is going to happen to interest rates, if the country is heading for recession and if, and how far, property prices are going to fall," she said in a telephone interview.

"You can't make a decision as big as this with so much uncertainty in the mix."

BLOOMBERG, REUTERS

A version of this article appeared in the print edition of The Straits Times on July 19, 2016, with the headline 'London builders offer freebies as demand slumps'. Print Edition | Subscribe