It’s the unthinkable prospect that has shaken the Disunited Kingdom to its foundations. No, not Brexit (everyone’s bored of that), but rather the fall of London property prices, the continued rise of which was previously considered to be as safe as, well, houses. Real estate agent Savills predicts that London property – particularly the so-called “prime” type hitherto beloved of overseas investors – will lose money over the next five years.
Blame Brexit uncertainty, but more so the gap between wages and prices in the capital, making mortgages hard to come by and any increase in interest rates crippling. Then there’s the extra three per cent stamp duty on second homes and imminent hike in tax for landlords. The “apocalyptic” 35 per cent drop in prices heralded by some headlines is “highly unlikely”, says Savills, which forecasts that they should go up by a national average of 15 per cent over the next five years. But London property looks less and less like a sound investment.
Then again, houses have never been quite as safe as Brits, almost uniquely obsessed with home ownership, tend to think. For a start, property is usually “leveraged”, which is to say that you put in your money, but also the bank’s, and a lot of it. You shouldn’t need Ms Lisa Conway-Hughes, author of forthcoming book Money Lessons and an independent financial advisor at Westminster Wealth Management, to tell you that this is risky: “Because if it goes down in value, you could end up owing the bank money that you don’t have if you decide to sell.”