London’s Luxury Home Sales Haven’t Been Boosted by a Falling Pound

Realtors who thought that London’s luxury-home market would be kick started by the pound’s fall after the Brexit referendum are being left disappointed.

Sales of houses and apartments in the U.K. capital’s best districts rose less than 0.5 percent in the three months through September from a year earlier, according to data compiled by researcher Lonres. That’s based on transactions for existing homes and new properties being sold on by speculators.

Just like it did after the financial crisis, the pound’s decline and falling values have created fat discounts for Asian investors interested in buying London’s best homes. The difference now is that many upper-middle-class residents of Hong Kong and Singapore who wanted a property in the U.K. capital already have one.

They’ve “been tapped out,” said Paul Donovan, global chief economist at UBS Wealth Management.

Values have fallen 15 percent since their peak in September 2014, according to broker Savills Plc, but the pound’s decline means buyers from Hong Kong can acquire a mansion in London’s best districts for 30 percent below the record, according to Bloomberg calculations. For a purchaser in mainland China, it’s about 26 percent cheaper.

Rising taxes for landlords and second-home owners, as well as declining rents, have damped demand for prime central London properties. The luxury-home market is suffering from oversupply and the wider city is at risk of becoming a bubble, UBS Group AG said in a report in September. Savills forecast last month that residential values in the best districts won’t match their previous peak until 2022.

Buyers living overseas piled into the London market after the financial crisis, seeking a haven from Europe’s debt crisis and turmoil in the Middle East. Almost half of the purchasers of new-build homes in central London’s best districts in the two years through June 2013 were living abroad, broker Knight Frank LLP…

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