Lance Paul put his home in West London on the market last May with a £1.5 million (Dh7.3m) price tag. A year on, the retired animator is asking £1.1m and still hasn’t found a buyer.
Now, after dozens of viewings that came to nothing and a few low-ball bids, the 71-year-old has an offer that’s agonisingly close to the floor he promised himself he would never go below. He just might accept it.
“The fear from my point of view is because things are volatile, it could go down even further,” Mr Paul told Bloomberg.
Similar deliberations are playing out across London as sellers weigh whether to take what they can get in a falling market or sit tight in the hope the slump will be short-lived. For most of the past four decades - through Tory and Labour-led governments and across financial booms and busts - sitting tight proved a wise course. The question now is whether Brexit and the gradual withdrawal of easy-money policies around the globe will turn the current stumble into something much worse.
“The party is over for the London housing market and the hangover is just beginning,” said Neal Hudson, founder of research firm Residential Analysts. “Lower demand due to Brexit or interest-rate rises could put further pressure on some home-owners and investors to sell.”
Since 1973, the year Britain joined the European Union, the average London home price climbed from just under £13,000 to about £474,000 - a 36-fold increase, according to Nationwide, the UK’s largest building society. The last big reversal occurred during the financial crisis, when prices dropped about 20 per cent. Since bottoming out in 2009, they’ve nearly doubled.
The declines this time have been modest. London recorded its first annual decrease in prices in more than eight years in February, a drop of 1 per cent, government data showed. That said, pricier central districts registered sharper falls and forward-looking indicators, such as the time it takes to sell homes, point to further declines.
Pessimists fret that some of the pillars that underpinned the long London property boom - from rock-bottom interest rates to generous government support - are under threat.
In the US, 10-year Treasury yields have reached the highest in almost seven six years, narrowing the premium that real estate has commanded over bonds for the past decade. That dents the relative appeal of London property, especially for those from outside the country.
International buyers made more than half of home purchases in prime central London and almost a third in greater London in the second half of 2017, according to broker Hamptons International. Both overseas and UK investors who purchase homes to rent out have become an increasingly important part of the London market over the past decade, lured by higher returns on offer from rental property at a time of low interest rates.
“What happens to real estate if real interest rates go up? In the most simple form, values go down,” said William Hughes, managing director and global head of research and strategy for real estate and private markets at UBS’ asset management unit. “If the political situation in the UK causes the economy to struggle while global rates were to rise, then that would be a double whammy for London.”
It is not only homeowners feeling the pinch. London-focused estate agent Foxtons posted a 15 per cent drop in first-quarter revenue to £24.5m as it was hit by lower sales and lettings income, according to Reuters.
Foxtons, which was once a symbol of the British capital's property boom, has warned since as early as 2014 that the once runaway market was cooling as prices fall particularly in the city centre.
The firm, known for its coffee shop-style offices, said revenue from its lettings business had fallen in the first three months of 2018 due to a slow start in January and the timing of Easter but that it had seen an up-tick in April.
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UK house prices remain stuck in doldrums
UK millennials face a poorer future than their parents
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"Whilst the sales pipeline has begun to improve it remains below where it was this time last year. The performance of our lettings business improved towards the end of the quarter and throughout April," it said.
Changes the government made over the past few years to deter property speculators could also weigh. The reforms included an increase in sales taxes on second-home purchases and the gradual elimination of tax relief for mortgage interest on rental homes, which will eventually disappear in 2020. One popular initiative that’s helped support the property market, the government’s “Help to Buy” loan plan, is slated to end in 2021, unless it’s extended again, Bloomberg said.
And looming over everything is the potential impact of Britain’s withdrawal from the European Union. Less than a year from the planned exit date, the terms of that rupture remain as murky as ever.
“What happens if rents fall 20 per cent because we had a bad Brexit and no one wants to come here?” said Richard Donnell, director of research and insight at Hometrack, which provides data and analysis on the property market.
The city has had a good run. London’s best districts have seen prices climb by more than 500 per cent since 1989, according to an index published by broker Knight Frank. That compares with an almost 350 per cent increase in the average value of condominiums and co-ops in Manhattan in that period, data compiled by Miller Samuel show.
Not everyone sees Brexit, or even higher interest rates, upending the property market. The pound’s slump after Britons voted to leave in June 2016 cushioned the blow by making London homes more affordable to buyers from abroad. The prospect of a weaker currency remains an insurance policy against a disorderly Brexit, said Savvas Savouri, the chief economist at Toscafund Asset Management. He’s optimistic about the housing market and supports leaving the EU.
He does see one big political risk beyond Brexit, however: the potential ascension of Labour party leader and self-proclaimed socialist Jeremy Corbyn to the premiership. At last year’s general election, Mr Corbyn promised to introduce rent controls, among other proposals that hark back to a less business-friendly era.
Should a Labour government materialise, “the pound will crash”, Mr Savouri said. That would lead to “a genuine stampede” of capital out of the UK, he said.
All of these “what ifs” complicate matters for owners like Mr Paul, who’s considering the offer for his Shepherd’s Bush home. He wants to raise money for medical bills, to top up his modest pension and to move closer to his son, who was forced out of London by sky-high home prices.
“We want to move now - so we have to accept that if we hung on we could get more,” he said. “But I don’t think we would be out of this house for another three years.”
While older homeowners like Mr Paul are having difficulties selling, experts say more and more young people are having to rely on their parents to get on to the property ladder in the firts place.
"Today's young people, millennials, are half as likely to own their own home at the age of 30 as baby boomers were in the past," Lindsay Judge, a senior research and policy analyst at British think-tank Resolution Foundation, told Reuters.
Baby boomers are considered to be people born before the mid-1960s while millennials are those born between 1981 and 2000.
In the 1980s and 1990s, it took the typical young household about three years to save for a deposit. Now it takes 19 years, according to a Resolution Foundation statistic that Ms Judge called "shocking".
"This is largely due to increased barriers to entry because of higher house prices, lower earnings growth and tighter credit availability - so they've got a triple whammy," she said.
Over the past 20 years home ownership in Britain has plummeted among young adults, who have had to pay more toward pensions while bearing the brunt of weak wage growth since the financial crisis.
As part of a push to help people on to the housing ladder, the government has set an ambitious target of building 300,000 new homes a year by the mid-2020s.
"Over the decades there's been a lack of investment in truly affordable housing," said Jon Sparkes, the chief executive of the homelessness charity Crisis.
"There clearly aren't enough houses being built overall."