[LONDON] London homebuilders are offering to pay sales taxes, gift 20,000 pounds (S$36,153) of furniture and the chance to win a free parking space as Britain's vote to leave the European Union damps demand.
An economic contraction means residential property values in London will probably fall as much as 10 per cent next year and UK homebuilder sales will drop by 5 per cent, according to Barclays Plc analyst Jon Bell.
That means more competition among developers, who are building a record number of high-end homes in London for those brave enough to purchase as the economy weakens.
The UK capital's housing market faces an oversupply of apartments that Londoners can't afford and fewer landlords want after tax changes made owning real estate less attractive.
Even before the vote, values were facing a "major shock" as landlords offload properties after increases in levies and new lending rules reduced their returns to near zero, analysts at Deutsche Bank AG said a week before the referendum. Home prices fell 1.4 per cent in May, the biggest monthly fall in about five years.
Natalia Kopczynska, a 26-year-old compliance officer, and her fiance were planning to buy a 500,000 pound 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."
Galliard Homes Ltd is offering a three per cent discount for owner occupiers and will pay the stamp duty tax for buy-to-let investors, according to the firm's website. It's also offering the chance to win two parking lots worth 25,000 pounds each for buyers of a three-bedroom home at its Marine Wharf East development in London.
Galliard sold the project to an investor and the homes have since been effectively resold, sales director David Galman said. Just two "buyers spooked by Brexit" dropped out and purchasers have since been found for those properties, he said by e-mail.
"It's the 3 million-pound plus market in London that's been most slowed by Brexit and Galliard has very little exposure to this marketplace."
Barratt Developments Plc is offering furniture packages worth 20,000 pounds to clients who commit to purchasing a one- bedroom apartments in Aldgate Place near the City of London financial district before the end of the month. An apartment at the project costs more than 800,000 pounds, according to the company's website.
The homebuilder is also offering reduced stamp duty on its most expensive homes.
"At the price point above 1 million pounds or 1.5 million pounds, you will find that there is more supply and therefore from a sales perspective it is more challenging," chief executive officer David Thomas said.
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 for overseas buyers and higher sales taxes 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.
Plans are in the pipeline for 35,000 high-end properties worth almost 77 billion pounds in the coming decade, 40 per cent more than in 2014. As many as 100,000 financial-services jobs could be lost in the UK by 2020 because of Brexit, according to an estimate by PricewaterhouseCoopers LLP, which would reduce demand from buyers and renters.
Pre-sales to Asian buyers, used by London developers to help raise construction finance, may not surge despite the fall in sterling since the vote.
"I expected to see double the usual numbers of people turning up" at a two-day property fair showcasing London homes in Hong Kong the weekend after the Brexit vote, "but it felt more like a normal exhibition," said Mimi Capas, head of international project marketing at Knight Frank LLP.
The number of rental properties available in London surged 33 per cent in June from a year earlier after landlords rushed to buy before the stamp duty tax on second-homes increased in April, according to data compiled by Countrywide Plc. Increased supply in the market is slowing rental growth, the broker said.
That means now's not the time for investors to buy, said Charlie Ellingworth, a co-founder at broker Property Vision Ltd, which advises purchasers.
"New builds have been flooding the market and the number of renters is finite, so if people leave your main worry will be finding a tenant."