London Housing Bubble Crash - When and Why

berimbolo80

One of the major factors supporting the London housing bubble is the high rental yields despite high prices which would suggest that prices will continue increasing.

Current properties under the £1 million will see a rental yield of 4-7%. With mortgage rates available for less than 3% coupled with the tax efficiencies of owning a property and capital gains, it is currently very attractive to buy a property as opposed to renting.

In my view as long as rental yields remain high the property values in London will keep increasing. The only way we will see prices decreasing would be if rents for some reason started to decrease.

So what could possibly cause rents to decrease?

Interest rates increasing!

In my view many home owners are happy to let excess capacity (spare rooms/property owned by foreign investors) go unused as the interest rates are so low. However, when interest rates start to increase....people will start offering any excess capacity onto the market and we will see rental yields plummet. Higher interest rates will also make rental yields look less favourable relative to mortgage rates. This combination will cause a property crash.

You heard it here first.

Mallotum_X

Buy silver?

chewmylegoff

Where and when?

The Raffles Hotel, 10.48pm, Tuesday 12th January 2024.

You heard it here first.

CLAPTON

berimbolo80 wrote: »

One of the major factors supporting the London housing bubble is the high rental yields despite high prices which would suggest that prices will continue increasing.

Current properties under the £1 million will see a rental yield of 4-7%. With mortgage rates available for less than 3% coupled with the tax efficiencies of owning a property and capital gains, it is currently very attractive to buy a property as opposed to renting.

In my view as long as rental yields remain high the property values in London will keep increasing. The only way we will see prices decreasing would be if rents for some reason started to decrease.

So what could possibly cause rents to decrease?

Interest rates increasing!

In my view many home owners are happy to let excess capacity (spare rooms/property owned by foreign investors) go unused as the interest rates are so low. However, when interest rates start to increase....people will start offering any excess capacity onto the market and we will see rental yields plummet. Higher interest rates will also make rental yields look less favourable relative to mortgage rates. This combination will cause a property crash.

You heard it here first.

the population of London increased by 1,000,000 in the last 10 years; it's likely to increase by another 1,000,000 in the next 5 years

berimbolo80

How much has the population increased since 2009? Why have rents increased despite a fall in real wages and a rise in unemployment?

CLAPTON

berimbolo80 wrote: »

How much has the population increased since 2009? Why have rents increased despite a fall in real wages and a rise in unemployment?

rise in population London is obvious if you ever enter a London shop
but do your own research

what fall in wages in London?

what rise in unemployment in London?

Generali

Hard to see why increased interest rates cause lower rents. Where's the link?

CKhalvashi

Generali wrote: »

Hard to see why increased interest rates cause lower rents. Where's the link?

I was thinking this, too.

Interest rates on mortgages increasing will lead to higher costs to landlords with mortgages, and therefore increased prices.

I've noticed that the Soviet community in London is growing every time I stay for a few drinks (usually in an area that's always had a certain amount of former Soviet citizens), and I wouldn't be surprised if this is the case with other communities, too.

I know that there are a lot of Middle-Eastern nationals, certainly using OH's premises, but also working for a number of countries we deal with, many of whom have recently arrived in the UK.

Immigration will bear strongly on rental prices in London, as it's a city very much in demand, and regarded very highly abroad, especially in Georgia, where I'm originally from, and also the Russian city I studied in.

CK

SolidShot

berimbolo80 wrote: »

One of the major factors supporting the London housing bubble is the high rental yields despite high prices which would suggest that prices will continue increasing.

Current properties under the £1 million will see a rental yield of 4-7%. With mortgage rates available for less than 3% coupled with the tax efficiencies of owning a property and capital gains, it is currently very attractive to buy a property as opposed to renting.

In my view as long as rental yields remain high the property values in London will keep increasing. The only way we will see prices decreasing would be if rents for some reason started to decrease.

So what could possibly cause rents to decrease?

Interest rates increasing!

In my view many home owners are happy to let excess capacity (spare rooms/property owned by foreign investors) go unused as the interest rates are so low. However, when interest rates start to increase....people will start offering any excess capacity onto the market and we will see rental yields plummet. Higher interest rates will also make rental yields look less favourable relative to mortgage rates. This combination will cause a property crash.

You heard it here first.

You are missing out the unsustainable high public draining of funds to pay people rents and mortgage interest payments.

Things that are unsustainable will not be sustained.

When the can hits the wall and can no longer be kicked down the road, rents and house prices can no longer be proped up with public funds.

ging84

i think you are living in a dream world if you think a hike in interest rates would reduce rent as more people take on lodgers.
The people who own the homes with this "excess capacity" are most likely to be the ones who can most afford to keep it.

berimbolo80

CLAPTON wrote: »

rise in population London is obvious if you ever enter a London shop
but do your own research

what fall in wages in London?

what rise in unemployment in London?

Rise in population is obvious if you ever enter a London shop???
Try telling that to all the high street stores which have closed down across the capital.

Fall in wages...I was referring to a fall in real wages. Inflation is growing faster than wages are.

Rise in unemployment over the last 6 years is undisputed.