London property bubble 'about to burst'

Thrugelmir

Flight2quality wrote: »

Another major factor is globalisation and the abilty to work from home. Now if someone does not need to live near the city for work, but can work from a laptop anywhere in the world, then they will prefer to live in the countryside with a nice view.

You can't run and coordinate a trading floor from different rooms. The market moves too fast. Shouting across a room sometimes is the optimum method of communication.

the_flying_pig

I dunno what I think about London prices long term.

I think that arguments about things moving away from a central hub, with more home working & whatnot are a little fanciful... even in something like 'Star Wars', with George Lucas' imagination an unlimited special effects budget, 3D/holographic conferencing looks pretty rubbish, and without that I'm sure that people will always want to meet face to face. London will remain the most important place in the UK for a long time.

Interest rates and whatnot are important, as in the rest of the country, but less so at the top end [where cash buyers abound].

Two things that are particularly relevant to London:

(1) If the HB cuts go through in full effect that could be quite a really big deal. London HB is basically the taxpayer pumping a few billion of quid worth of demand for housing into the market every year. If they don't manage to cut it or if it [somehow] gets worse then that puts a really solid floor under prices of low to middling quality stock.

(2) What about the city? Will it stay the same [or get bigger], i.e. go on making thousands more new UK millionaires every year? If so then the top end, at least, of London is safe and may even go higher in real terms. Or will it get smaller? If the finance industry generally got smaller, or less well paid, or started to move away from the UK [e.g. to places with lower tax] then there's almost no limit to how low London property could go. Lots and lots of £500k-£2m flats and houses could, well, in certain areas that are perhaps a bit shabby but expensive due to proximity to the city, new 70% clubs could conceivably be springing up all over the place in those kinds of areas if the city went into decline... well, I'm exaggerating, not least because change of this sort would happen over a lot of years rather than instantly, with inflation racking up during those years, but you get the picture.

Thrugelmir

the_flying_pig wrote: »

I dunno what I think about London prices long term.

Around 75% of all new jobs created have been in London and the South East since 2009. Helps to explain resilience in the region.

Batchy

I have often wondered WHY london... why does London command higher wages, prices, and housing...

With the modern age, we can work effectively without being next door, and travel when necessary, if not communicate via one of the many technological methods.

There is a huge hurdle to jump to start business in London, when its so much cheaper elsewhere in the UK. It wont surprise me soon, if we was to see a mass exadus from London to relocate within the UK, rather than India etc... which is a sure fire way to destroy the reputation of your business's customer service...

Thrugelmir

Batchy wrote: »

I have often wondered WHY london... why does London command higher wages, prices, and housing...

Concentration of highly paid jobs in specific sectors plus international presence. Live in London work in Brussels. Closer than Manchester on the train.

B_Blank

Bankers pay is unstastainable and they are all losing their jobs in the finance industry. The riots also will effect overseas demand. London is going to fall, and this is wonderful news as it could drag the rest of the uk housing market with it.

Flight2quality

B_Blank wrote: »

Bankers pay is unstastainable and they are all losing their jobs in the finance industry. The riots also will effect overseas demand. London is going to fall, and this is wonderful news as it could drag the rest of the uk housing market with it.

Lots of foreign investors were horrified by the riots, they were worried about their expensive properties getting smashed up or burnt down.

As the pound sterling gets stronger compared to other currencies who are doing better in the race to the bottom, foreign investors will want out of London.

It does seem lots of factors are converging like the perfect house price crash storm. All this talk about relaxing planning permission and the influx of new homes being built around the country, on top of what the government has already promised to build.

Foreign investors selling up taking their money out of London just at a time when there are many new homes being built and added to the supply.

All this at the time when we are getting near to interest rates going back up, and an end to easy credit which we still have now. The auction houses will be full of repossessed properties of people who can only just afford the interest only now, before rates go back up.


On top of all this the cuts to housing benefit can not be postponed any longer and huge numbers are forced to move away from London to cheaper areas. Creating even more supply and even less demand.

It would be the perfect storm for UK house prices.

drc

London is a great place if you are a tourist but to live here is very difficult. Why should very average terrace homes in very average parts of London cost a quarter of a million pounds? What is it about them that makes them so special? If it is demand then they would all be snapped up straight away. The fact is that there are not enough people with that sort of money to buy these properties. In areas which are fairly nice, middle-class sort of areas but certainly not Beverley Hills, an average terrace house is on the market for half a million. So there needs to be a buyer with half a million to spare to be able to afford such a house. If you have half a million you are more likely to invest it in a bigger property outside London if you have kids or abroad rather than put so much money into a place that probably doesn't even have its own parking space/garage unless you really really really love London. I think London residential house prices have a whiff of the emperors new clothes about them.

Flight2quality

drc wrote: »

London is a great place if you are a tourist but to live here is very difficult. Why should very average terrace homes in very average parts of London cost a quarter of a million pounds? What is it about them that makes them so special? If it is demand then they would all be snapped up straight away. The fact is that there are not enough people with that sort of money to buy these properties. In areas which are fairly nice, middle-class sort of areas but certainly not Beverley Hills, an average terrace house is on the market for half a million. So there needs to be a buyer with half a million to spare to be able to afford such a house. If you have half a million you are more likely to invest it in a bigger property outside London if you have kids or abroad rather than put so much money into a place that probably doesn't even have its own parking space/garage unless you really really really love London. I think London residential house prices have a whiff of the emperors new clothes about them.

I love London too. But you are right about people paying quarter of a million for a bog standard house just because its near a tube station. Talk about overvalued.

Remember for a time the Emperor was happy and no one said anything, even a child can see that London house prices are overvalued and all it takes is for everyone else to cotton on.

Wookster

worldtraveller wrote: »

Another major factor is that there could be a bloodbath in the City/Canary Wharf very soon as investment banks lay off large numbers of staff over the next few months due to poor returns. The "fake" boom of 2009, due largely to QE, and the resultant huge bank revenues & massive employee bonuses, has now pretty much dried up. I would think that many London property owners/investors may well now be looking to sell pronto!

Yup. This is happening at the moment I think. Banks are beginning to lay off staff.