Housing Price Bubble in London

Housing Price Bubble in London.

Auditors, accountants and economic think tank, Ernst and Young has issued a stark warning that the housing bubble is already in London.

Property prices in the capital have soared with the average property price in London now at £600,000 compared to the rest of the country hovering at around £170,000.

Demand is still high with property prices in London up nearly 12% in a year compared to nearly 6% across most of the UK.

Comment

As advisers will clients both in London and the rest of the country, we regularly see clients struggling to find property on London, with as many as 30 or 40 potential buyers chasing each property.

We suspect the bubble will still continue.  Property prices are already recovered from the credit crunch slump and demand is still high.

As ever, people feel safer with bricks and mortar and we cannot see this abating.  Rents are high and interest rates are low, this means that it is cheaper for most people to buy rather than rent.

Whilst Government rhetoric talks about managing the bubble, we suggest yet again that there is a conflict of interest.

• State owned banks need property price increases to reduce toxic debt.
• Government benefits from increased stamp duty receipts with a more active, higher prices property market.
• Government has launched its Help to Buy scheme encouraging 95% mortgages for first time buyers where the government lends 20% and stands to gain by its equity share increasing in value.
• Government has set up the 95% mortgage indemnity guarantee scheme encouraging more lenders to offer low deposit, 95% mortgage schemes for non-first time buyers.
• Bank of England base interest rates are still being held at 0.5%pa.
• Pressure is still on the Government to keep borrowing costs low, encourage economic growth and stimulate the economy.

We suspect that property prices will continue to rise across the UK.

Auditors, accountants and economic think tank, Ernst and Young has issued a stark warning that the housing bubble is already in London.

Property prices in the capital have soared with the average property price in London now at £600,000 compared to the rest of the country hovering at around £170,000.

Demand is still high with property prices in London up nearly 12% in a year compared to nearly 6% across most of the UK.

Comment

As advisers will clients both in London and the rest of the country, we regularly see clients struggling to find property on London, with as many as 30 or 40 potential buyers chasing each property.

We suspect the bubble will still continue.  Property prices are already recovered from the credit crunch slump and demand is still high.

As ever, people feel safer with bricks and mortar and we cannot see this abating.  Rents are high and interest rates are low, this means that it is cheaper for most people to buy rather than rent.

Whilst Government rhetoric talks about managing the bubble, we suggest yet again that there is a conflict of interest.

·        State owned banks need property price increases to reduce toxic debt.

·        Government benefits from increased stamp duty receipts with a more active, higher prices property market.

·        Government has launched its Help to Buy scheme encouraging 95% mortgages for first time buyers where the government lends 20% and stands to gain by its equity share increasing in value.

·        Government has set up the 95% mortgage indemnity guarantee scheme encouraging more lenders to offer low deposit, 95% mortgage schemes for non-first time buyers.

·        Bank of England base interest rates are still being held at 0.5%pa.

·        Pressure is still on the Government to keep borrowing costs low, encourage economic growth and stimulate the economy.

We suspect that property prices will continue to rise across the UK.