Action must be taken on house prices in London

Graham_Devon

the EY Item club has stated that prices in London now represent "bubble like conditions" and that mortgage multiples are now back to pre crisis levels, as people take on increasingly expensive mortgages.

The Bank of England must be “prepared to take action” on housing market controls amid fears that London is beginning to show “bubble-like conditions”, according to new research.

The average house price in the capital will rise to £600,000 by 2018, experts predict in a report released on Monday by economic forecasters the EY Item Club.

The cost is 3.5 times more than the average house price in Northern Ireland and over 3.3 times the average in the North East.

The research also revealed that income multiples are now back to pre-crisis levels in London as homeowners take on increasingly expensive mortgages.

During the past year, house prices in London have increased at more than double the rate of the rest of the UK to an average of £403,792, according to recent Land Registry figures.

The rest of the UK, they say, is returning to "normality".

http://www.telegraph.co.uk/finance/economics/10613626/London-shows-signs-of-house-price-bubble-experts-warn.html

HAMISH_MCTAVISH

Graham_Devon wrote: »

The rest of the UK, they say, is returning to "normality".

They said a bit more than that.....

Andrew Goodwin, senior economic advisor to the Item Club, said: “House prices across most of the country remain well below their pre-crisis peaks and there seems little danger of a bubble developing.

Mr Goodwin said calls to stop running Help to Buy are a “red herring” as the scheme has very little effect in London.

He said: “Withdrawing it could risk choking off the recovery in housing transactions across the rest of the UK without solving any of London’s issues.

wotsthat

http://www.ey.com/UK/en/Newsroom/News-releases/14-02-03---London-housing-market-risks-entering-bubble-territory

Caution on the part of borrowers and lenders should prevent a serious problem developing, but the report warns that policy makers should be monitoring this trend closely and be prepared to take action if this key indicator of market stability continues to escalate.

Some have suggested that Help to Buy should be altered or cancelled but this is a red herring. The scheme has only a very limited impact on the capital and withdrawing it could risk choking off the recovery in housing transactions across the rest of the UK without solving any of London’s issues. The FPC should instead be looking to limit income multiples.

CLAPTON

so it would seem that the EY Item Club didn't say 'Action must be taken on house prices in London'
nor does it seem that the Telegraph said that either

AndyGuil

Except the multiples are based on real salaries. Not whatever the person applying for the mortgage wanted as before.

michaels

I wonder if this potential bubble is the natural result of the HPC publicity machine. Having been told to sit on your hands and wait for a crash on numerous occasions only to lose out big time perhaps the natural reaction now is to 'get in while you can' rather than believing that this time it is different and that there really will be a crash?

purch

'Action must be taken on house prices in London'

I guarantee that it is much easier to say, than it is to come up with a coherent and workable method to take action that wouldn't have unwanted adverse effects on the whole market.

Graham_Devon

CLAPTON wrote: »

so it would seem that the EY Item Club didn't say 'Action must be taken on house prices in London'
nor does it seem that the Telegraph said that either

I'm drifting away from this forum due to these sorts of posts (hurrah I here you all say, but it's a bit quiet without any other viewpoint, isn't it!).

The sheer pedantism of replies is just not worth the time or effort. We can't discuss anything any longer as it's all out nit picking, pedantism and point scoring.

The article states:

The Bank of England must be “prepared to take action” on housing market controls amid fears that London is beginning to show “bubble-like conditions”, according to new research.

Granted, I missed out "prepared".

But hell, some of the outright misleading and incorrect titles posted on here by others leads me to believe it's not about the title at all. It's about doing anything to demean the article or the poster. Which is fine. But it's alienating lots of discussion.

Cornucopia

What is it that they/you are proposing should be done.

The only obvious thing is to vary base rates, but that would have unwanted effects elsewhere.

danothy

Graham_Devon wrote: »

The sheer pedantism of replies is just not worth the time or effort.

My experience teaches me that derisive accusations of pedantry are typically made by people who can't get the basics right.

Graham_Devon

purch wrote: »

I guarantee that it is much easier to say, than it is to come up with a coherent and workable method to take action that wouldn't have unwanted adverse effects on the whole market.

Absolutely.

I wonder if they could regulate mortgages on London property (as an example) differently to those outside of London?

Though that would obviously lead to the less wealthy possibly being exlcuded.

I guess the first place to start would be foreign investors and doing something about that which should releive a bit of the pressure.