London home values may fall by over 30pc, opines SocGen

Bloomberg

London’s seven-year housing boom may be about to end after the UK voted to leave the European Union.
“While in recent stress tests, the major UK banks were assessed with declines of around 30 percent in commercial real estate prices, we fear that London residential could experience an even more severe downturn,” Societe Generale analysts including Marc Mozzi wrote in a note to clients.
“Brexit will damage the UK economy, and some companies will almost certainly have to relocate parts of their business to retain access to the EU single market.”
Home values across the capital were already being hurt before the vote, with prices decreasing 1.4 percent in May, the biggest monthly decline since June 2011, according to data compiled by Acadata Ltd. and LSL Property Services Plc.
The number of prime properties sold in London in the 12 working days after the referendum fell 43 percent from the same period a year earlier, according to data compiled by researcher Lonres. The number of homes under offer dropped 25 percent.
“We do expect the recent rebound in real estate stocks may ultimately turn out to be just a ‘dead cat bounce’,” the Societe Generale analysts wrote. Commercial property values in the UK may fall 25 percent from their peak on rent declines and could fall further if concerns about frozen property funds spread, they forecast.
Earlier it was reported that the UK construction is on course to shrink for a second straight quarter and economists are warning of worse to come after Britain voted to leave the European Union.
Building output fell 2.1 percent in May, almost double the decline forecast in a Bloomberg survey of economists, figures from the Office for National Statistics showed Friday. There were falls in almost every category of work, with private housing down the most in more than a year.
It means production will contract in the second quarter unless June sees a gain of 1.9 percent, a seemingly impossible feat if the latest surveys of the sector are correct.
Construction was shrinking even before the referendum on EU membership, with Markit Economics’ purchasing-management index tumbling to a seven-year low in June.