London's housing market stalls. Time to buckle up?

Giuliano Valentino's family home in west London has been on the market for six months and he has already dropped the price. "We'll give it away before we actually sell it," he says.

His predicament is a sharp contrast to the years of frenzied bidding for houses in Britain's capital, where a quadrupling of prices in the past two decades made the property market look like a one-way bet.

Valentino, a 59-year-old businessman, lowered the price of his four-bedroom house by £75,000 to £860,000 ($1.13 million) but still found no takers.

Potential buyers such as Mo Valipour are holding off.

"We went ahead with an offer and then Brexit happened," said the software engineer.

He said the combination of rising inflation, after last year's vote to leave the EU drove down the pound, and big uncertainties about what Brexit means for house prices and the economy meant he no longer wanted get into the market. Neither are sure when they will be able to move as the unaffordability of housing in London, which now costs around 10 times the average salary, also takes its toll.

At the same time, there are questions about Britain's political outlook as Prime Minister Theresa May's grip on power looks shaky and opinion polls show the left-wing opposition Labour Party running neck-and-neck with her Conservatives.

House prices in London fell by an annual 0.6 per cent in September, the first fall in eight years, according to mortgage lender Nationwide, while other measures have shown prices rising far more slowly than in recent years.

In the high-end central London market, estate agent Savills said prices fell 3.2 per cent in the year to October.

London's market has slowed more sharply than the rest of the country but prices across Britain are rising only slowly, potentially boding ill for consumer demand which drives economic growth. The latest figures show British economic growth slowed to an annual 1.5 per cent in the second quarter.

The value of the United Kingdom's housing stock is now at a record £6.8 trillion, almost 1.5 times the value of all the companies on the London Stock Exchange.

Predicting the future direction of the market has become much more difficult, partly because far fewer houses are changing hands. Five estate agents said sales had effectively ground to a halt in the second quarter due to the uncertainty about Britain's planned withdrawal from the European Union, combined with higher property taxes and a slowing economy.

"There's a lack of confidence in the housing market. We are not just not seeing sales," said an estate agent in Central London, who did not want to be named due to the sensitivity of the situation for his firm's business.

The latest official statistics show the number of homes sold in London in May were down by over a third compared with two years ago. Preliminary data for June-August 2017 are even more dismal. Those houses that are on the market are taking longer to sell than a year ago, according to online portal Rightmove.

Twenty-two property market experts surveyed in August by Reuters all said prices in London were over-valued, but their forecasts for the next three years ranged widely from a 17.5 per cent drop to a nine per cent rise.

"Time to buckle up," said Josh Holmans from Valunation, one of the most pessimistic respondents to a separate study by the Royal Institution of Chartered Surveyors which predicted price falls in central London over the next year without giving figures. "Unless sales pick up pace this train driver may stall her engine. Not confident at all," he said.

Source: Khaleej Times