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Author Topic: London house prices a bubble waiting to burst?  (Read 1852 times)
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September 20, 2014, 09:06:15 PM
 #1

I am not an expert in the housing market, so I wanted to ask your opinions. Is this price rise in London sustainable? I look at the price declines in the USA and Japan and ask why the UK is different?


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September 21, 2014, 02:39:40 AM
 #2

The prices in developing markets like China are also at unbelievable levels.
Guess real estate prices in most markets deserve to be popped.


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September 21, 2014, 06:07:19 AM
 #3

there will come a time that it will decline too.
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September 21, 2014, 10:04:10 AM
 #4

Housing bubble will never burst.  This isn't the 1980s or the 1950s.  Banking is completely 110% digital these days and they can create money out of thin air due to fractional reserve banking (so interest rates will always be low).

  If you try a bank run, like Occupied Wall Street attempted, the bank just closes its' doors and blames hackers / "technical problems" and nobody revolts or questions it.


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September 21, 2014, 11:40:57 AM
 #5

I am not an expert in the housing market, so I wanted to ask your opinions. Is this price rise in London sustainable? I look at the price declines in the USA and Japan and ask why the UK is different?

England is an isle so you have limited place to put house on. So is totally normal, price will go sky high. IF Scotland would independent, you would lose half of island, then would be really crisis begun. So you should be so grateful right now and not complain.
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September 22, 2014, 04:20:09 AM
 #6

Excess liquidity from central bank will need to end up somewhere.

While it benefit the few who has access to the liquidity, the effect will be bear by majority of the population in term for cost of living.
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September 22, 2014, 04:01:17 PM
 #7

I am not an expert in the housing market, so I wanted to ask your opinions. Is this price rise in London sustainable? I look at the price declines in the USA and Japan and ask why the UK is different?

England is an isle so you have limited place to put house on. So is totally normal, price will go sky high. IF Scotland would independent, you would lose half of island, then would be really crisis begun. So you should be so grateful right now and not complain.

Totally incorrect about the limited space argument. Most of England is a desert of empty green fields within easy reach of local town/city centres.

Take Oxford for example, one of the most expensive places to buy a house in the country. There's loads of room to build more homes but the local land hoarder (Oxford Uni) only releases land for building when they need to top up the university coffers. A land value tax is the only way to destroy the landowner/serf way of living.



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September 22, 2014, 04:13:37 PM
 #8

I am not an expert in the housing market, so I wanted to ask your opinions. Is this price rise in London sustainable? I look at the price declines in the USA and Japan and ask why the UK is different?

Of course prices are not sustainable. The average salary in London is approximately £30,000. If you want to live in an area that doesn't have alcoholics and gypsies defecating in your front garden a house will cost half a million pounds. Loans to income levels are ridiculous.

I know of an apartment near Mare Street, Hackney which sold for £600,000 to a Chinese investor. Totally bonkers. Mare Street is known as "murder mile" and smells of piss every morning after the vagrants have cleared off.
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September 22, 2014, 04:27:42 PM
 #9

I am not an expert in the housing market, so I wanted to ask your opinions. Is this price rise in London sustainable? I look at the price declines in the USA and Japan and ask why the UK is different?

Of course prices are not sustainable. The average salary in London is approximately £30,000. If you want to live in an area that doesn't have alcoholics and gypsies defecating in your front garden a house will cost half a million pounds. Loans to income levels are ridiculous.

Exactly. House prices in London and many other major cities in central Europe are excessive and are likely to come down substantially (adjusted for inflation) in the foreseeable future. I think the magnitude will be between -60% to -80% for the most expensive locations.

A good measure for real estate valuation levels is the ratio of cost to buy vs. cost to rent which determines the possible return you can get from an investment in real estate. That measure is at record highs for the top real estate locations in Germany like Munich for example. This means that an investment takes much longer to amortize and generate a positive return today than in the past.
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September 22, 2014, 04:43:20 PM
 #10

I am not an expert in the housing market, so I wanted to ask your opinions. Is this price rise in London sustainable? I look at the price declines in the USA and Japan and ask why the UK is different?

Of course prices are not sustainable. The average salary in London is approximately £30,000. If you want to live in an area that doesn't have alcoholics and gypsies defecating in your front garden a house will cost half a million pounds. Loans to income levels are ridiculous.

I know of an apartment near Mare Street, Hackney which sold for £600,000 to a Chinese investor. Totally bonkers. Mare Street is known as "murder mile" and smells of piss every morning after the vagrants have cleared off.

Prices might not be sustainable, but they still might go up further before coming down. The Chinese investor might be lucky if he exits at the right time.
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September 22, 2014, 05:57:30 PM
 #11

I am not an expert in the housing market, so I wanted to ask your opinions. Is this price rise in London sustainable? I look at the price declines in the USA and Japan and ask why the UK is different?

Of course prices are not sustainable. The average salary in London is approximately £30,000. If you want to live in an area that doesn't have alcoholics and gypsies defecating in your front garden a house will cost half a million pounds. Loans to income levels are ridiculous.

I know of an apartment near Mare Street, Hackney which sold for £600,000 to a Chinese investor. Totally bonkers. Mare Street is known as "murder mile" and smells of piss every morning after the vagrants have cleared off.

Prices might not be sustainable, but they still might go up further before coming down. The Chinese investor might be lucky if he exits at the right time.

I wish the Chinese investor the best of luck with his grim 3 bedroom ex council flat. I just pray that the £600,000 isn't mortgaged from a UK bank.
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September 24, 2014, 09:51:39 AM
 #12

I am not an expert in the housing market, so I wanted to ask your opinions. Is this price rise in London sustainable? I look at the price declines in the USA and Japan and ask why the UK is different?

Of course prices are not sustainable. The average salary in London is approximately £30,000. If you want to live in an area that doesn't have alcoholics and gypsies defecating in your front garden a house will cost half a million pounds. Loans to income levels are ridiculous.

I know of an apartment near Mare Street, Hackney which sold for £600,000 to a Chinese investor. Totally bonkers. Mare Street is known as "murder mile" and smells of piss every morning after the vagrants have cleared off.

Prices might not be sustainable, but they still might go up further before coming down. The Chinese investor might be lucky if he exits at the right time.

And it's not just the Chinese but big money from Russia,bmiddle east etc has been flowing into London, NYC, Canada, Australia etc foe 3-4 years now. A safe haven / geo politic play, not a profit play at that level.

For the Middle-upper class it is different. Interest rates are basically zero so money in the bank is shrinking due to inflation (even when it is 'subdued'). This means people look for ways to profit elsewhere - and where is an uptrend occurring? Stocks and RE! Put your cash in and see it double in a few years. Buy, flip or renovate works equally well in hot, incentivised markets.

For the lower to middle class it is about biting the bullet. Do you try and get a foothold and buy with a big mortgage and hope the party continues until you sell or pay down the principal enough, or do you continue to try and maintain your inner city life whilst being robbed by rental increases and food inflation? Some are forced to give up by either downgrading or moving further out of metro areas to bring down living costs. Problem is once u move out its hard to move back.

Everyone asks if it is sustainable. I have no idea and not enough experience, knowledge or education to be of assistance, but I do know when and if it all goes tits up ( ie when govts lose control of economic levers) then everyone will cop it, but the middle class will hurt the most.


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September 24, 2014, 10:18:54 AM
 #13

Global interest rates have been near zero for so long, it is basic economics that housing markets will flourish. Wait till we enter a period of rising interest, the bubble will burst.

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September 24, 2014, 10:42:50 AM
 #14

Global interest rates have been near zero for so long, it is basic economics that housing markets will flourish. Wait till we enter a period of rising interest, the bubble will burst.

I don't think we can enter such a period as most govts would be insolvent. The facade is only manageable by keeping IR's low, Japan style, no?
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September 24, 2014, 10:48:17 AM
 #15

Global interest rates have been near zero for so long, it is basic economics that housing markets will flourish. Wait till we enter a period of rising interest, the bubble will burst.

I don't think we can enter such a period as most govts would be insolvent. The facade is only manageable by keeping IR's low, Japan style, no?

The question is what is left to inflate ?
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September 24, 2014, 10:52:41 AM
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The US is close to raising rates. But UK not yet, Eurozone is starting their own QE. So, no interest rates hikes anytime soon. Govs are safe for now

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September 24, 2014, 12:34:50 PM
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What about brasil? My friend has some real state there, he's so confident about "being retired for life", but how safe he is? Is renting a better strategy than selling?
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September 24, 2014, 10:29:35 PM
 #18

Interest rates are out of the equation. The people who push the prices up are buying cash.

London, Singapore, Monaco, Geneva, to name the leading cities. There are some people who have everything in their home country and who want to invest abroad. London just seems like a good idea. As long as there are people getting richer, much richer, in some parts of the world, they will push real estate prices up in the few cities I've listed above.

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September 24, 2014, 10:42:57 PM
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housing prices in Indonesia are now very high compared to previous years, this is the case because many of her needs than the availability of housing, according to the economic law that, if the demand for more than the availability of the goods, the price of the item will be soaring high, vice versa .. .
I think it happens in london ...  Cool

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September 28, 2014, 05:53:48 PM
 #20

I am not an expert in the housing market, so I wanted to ask your opinions. Is this price rise in London sustainable? I look at the price declines in the USA and Japan and ask why the UK is different?

Of course prices are not sustainable. The average salary in London is approximately £30,000. If you want to live in an area that doesn't have alcoholics and gypsies defecating in your front garden a house will cost half a million pounds. Loans to income levels are ridiculous.

Exactly. House prices in London and many other major cities in central Europe are excessive and are likely to come down substantially (adjusted for inflation) in the foreseeable future. I think the magnitude will be between -60% to -80% for the most expensive locations.


That will not happen for as long as there are people willing to pay and a shortage of houses.


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