Brokers have been quick to blame the uncertainty around Brexit for a downturn in London property prices, but beneath the surface there are a number of factors suggesting these declines may be inevitable, no matter what the outcome. Home values in the city have finally turned negative, according to a Bloomberg analysis of Land Registry data, months after analysts expected them to begin falling. It is also becoming increasingly apparent the housing market may be in worse shape than it looks. According to one metric, sales are at a record low. Asians still viewing London as property investment hotspot Property agents have been predicting a recovery in the prime central London market for years, pointing to an uptick in viewings as proof of demand. But the picture may be drastically different on the ground, as seen with London Central Residential Recovery Fund, a property fund that owns a portfolio of rental homes in the city’s most expensive districts. Sales are at their lowest level since records began and many properties that do come on the market are being treated as distressed, the manager told investors last month. The fund, coming to the end of its eight-year duration, urged shareholders to vote against winding down the portfolio, saying it expects offers of about 17.5 per cent below March valuation levels if it were to sell its properties now. That could be a conservative estimate if buyers were to perceive the fund as a distressed vendor because it was being liquidated, the filing said. Investors heeded the warning and voted this month against closing down the fund. “In recent weeks, viewings are up,” Naomi Heaton, the chief executive at London Central Portfolio, which manages the fund, said in an interview. “There are many more buyers and we’re seeing competitive bidding at a level not seen in many years.” The fund’s net asset value has risen by about 72 per cent since 2010, said Heaton. Elsewhere, the days of homebuyers queuing to snap up homes before they are even built appear over after increases in taxes damped overseas demand. Telford Homes said it was disappointed with the UK and the overseas launch of its Gallions Point project after securing just 15 sales for the 127-home project near London City Airport. There are many more buyers and we’re seeing competitive bidding at a level not seen in many years Naomi Heaton, CEO, London Central Portfolio The wider London market is seeing a “marked slowdown in volumes and downward pressure on price”, according to Crest Nicholson. Data supports its view. London’s stock of completed but unsold homes has surged by about half this year, according to researcher Molior London. The demand for London homes, rentals and owned, has been boosted by immigration from the European Union. If net immigration slows after Brexit, then demand could fall, those leaving could contribute to an increase in supply by selling their homes and landlords could opt to offload properties amid weaker demand from tenants. Home values rose more in hipster-favourite Hackney in East London than in any other local borough in the UK over the past 20 years, Evening Standard reported this year, citing a report by broker Cushman & Wakefield. Many of those who moved there work in the technology industry, whose huge growth has helped them get the deposit they need to purchase a home. This year is different – the drop in technology share prices in the second half means they will have less to spend than they thought. Some overseas investors who made a splash in the London market are selling out. When mainland Chinese billionaire Wang Jianlin decided to sell one of the largest luxury residential projects under development in London, his firm turned to a buyer it knew well – Guangzhou R&F Properties. The Chinese developer, together with C C Land Holdings, had earlier partnered to replace Wang’s Dalian Wanda Group as the buyers of the adjacent 10-acre Nine Elms Square land. Next up, Lodha Developers is looking to raise about £472 million (US$593.7 million) by selling its stakes in projects on Lincoln Square and at the former Canadian diplomatic premises at Mayfair’s Grosvenor Square. Sellers who put their homes on the market are facing the lowest chances of securing a sale in 10 years. Construction activity in London has fallen a little in recent months, particularly in residential development, Jon Di-Stefano, the chief executive of Telford Homes, said in a filing last month. Crest Nicholson told investors there was “softness” in the building market and that it took advantage of a rise in the availability of subcontractors to lock up longer duration contracts. Even property agents are finding it hard to make money these days. Online brokers Emoov and units of Tepilo Holdings went into administration this month. It came just months after Emoov had acquired Tepilo, and subsequent attempts to find a buyer for the combined business had not been successful, according to a statement on December 3. A number of prospective purchasers have indicated they would be interested in acquiring part of the business. Other property agents have also faced difficulties in recent years. Countrywide sold shares at a discount of about 80 per cent to shore up its balance sheet in August, while Foxtons Group has dropped by about 90 per cent in less than five years.