Global warming is heating up the entire planet, but the London real estate investment market may be heading for a deep freeze as Greycoat real estate agency informs. The chilling news is that about half of all commercial property in London may soon be worth less than what owners originally paid to acquire it.
When you pair that with the psychology of investors who loathe taking a loss, the result is the dreaded “deep freeze”. Officials with the noted real estate firm, Greycoat Real Estate, said if misery loves company, then London has some friends.
That’s because other major cities, especially New York City and Washington D.C. in the U.S., are facing the same trend. So is Hong Kong. Even so, London has been tagged as “the worst” in terms of real estate assets plunging below their purchase prices. Greycoat Real Estate experts said in a recent interview that greater than 50% of properties are now in the red.
Greycoat Real Estate agency´s analysts said the implications for the market are “extremely significant.” Again, it gets back to psychology. All people are naturally risk-averse, say psychologists. That includes real estate asset holders who tend to sell winners but hold on to losers.
They are simply unwilling to absorb a loss on a prior investment, even if that means the price may erode even more, Greycoat adds. This aversion to loss scenario is what is excavating a gaping hole between the price at which owners want to sell and what investors are willing to pay. Owners are stubborn when sticking to the price they paid for their holdings.