Want to buy a home in London? Brexit isn’t the only thing to watch out for

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.