Wednesday, October 15, 2008
Housing Bubble Bursts in London
The financial crisis is taking a heavy toll on London's once-thriving property market, as real-estate agents report the biggest slump in business since records began 30 years ago. London's real-estate agents sold an average of 8.3 properties apiece in the three months ended in September, according to the Royal Institution of Chartered Surveyors. That is the lowest tally for any region of the country since the survey started in 1978. In Britain as a whole, agents sold an average of 11.5 properties during the three-month period, down more than 50% from a year earlier. The London property market blazed a trail for Britain's decadelong housing boom, which saw average prices more than triple between 1997 and 2007, according to Nationwide Building Society, one of the U.K.'s biggest lenders. But prices have fallen 9.4% in London in the past year, as layoffs and the specter of evaporating bonuses rein in spending among those still employed. "I've never seen such low volumes, and I've been in the business 25 years," said Peter Rollings, managing director of Marsh & Parsons, a London real-estate agency. "The first five months of the year were OK, but since then, volumes have fallen off a cliff." Across Marsh & Parsons's 14 outlets in the western part of the city, agents typically receive some 200 inquiries a week. In early September, the agency recorded only around 140 weekly inquiries, and by late in the month, that number had shrunk to just 25. In another sign of the property market's deepening slump, U.K. home builder Bellway said Tuesday its profit slid 84% for the year ended July 31. Bellway's chairman, Howard Dawe, said the company had never witnessed such a swift change in the housing market as the one seen in the past 12 months. Agencies that focus on sales instead of rentals appear especially vulnerable in the downturn. Richard Snook, an economist at the Centre for Economics and Business Research, a London-based consultancy, said half of the city's thousands of real-estate agents could lose their jobs. "In the market at the moment, transactions are down by about half, and the returns being made on each transaction [are] going to be reduced," he said. For now, London's economy has remained relatively resilient despite the slump in the housing market. That is largely due to this year's downward spiral in the U.K. pound, which has fueled retail sales by attracting bargain-hungry shoppers from the euro zone. "The London economy is still holding up well despite the crisis in financial markets, but certain businesses, particularly estate agents, are finding it very tough at the moment,"