Historical evidence of London moving into bubble & dragging rest of UK with it

cepheus

The following graphs show there is indeed evidence consistent with a house price bubble in London, and that it is likely to spread nationally.

As the graph shows, London was in “bubble territory” from late 1985 until early 1990 and again from late 1999 until the third quarter of 2008, when the financial crisis hit.



London’s line has just gone back above the blue line, in the first quarter of 2014, so the capital’s house prices just turned explosive.

https://theconversation.com/explosive-london-housing-bubble-set-to-spread-to-the-rest-of-the-uk-27721

mobfant

Interesting. Can't work out what the measure is on the left hand side though or how they calculate the critical value

cepheus

It's part of the Backward Supremum Augmented Dickey-Fuller, or BSADF method

http://cowles.econ.yale.edu/P/cd/d18a/d1843.pdf

glad I've cleared that up

Oh and there is no right hand scale

Jason74

The problem with that analysis, is that what it appears to show, is that prices can go on rising for a good while yet before the "bubble" bursts. As someone who was previously convinced that London prices were well and truly in bubble territory, that graph actually makes me question that view.

Thrugelmir

cepheus wrote: »

The following graphs show there is indeed evidence consistent with a house price bubble in London, and that it is likely to spread nationally.

Why is it likely to spread nationally?

mobfant

Jason74 wrote: »

The problem with that analysis, is that what it appears to show, is that prices can go on rising for a good while yet before the "bubble" bursts. As someone who was previously convinced that London prices were well and truly in bubble territory, that graph actually makes me question that view.

This is why the scale on the left matters. Also, this time around, there are limits placed on salary:mortgage ratios. And it's not like average prices can reach £1m in a couple of years, drop for a couple, then reach £1.5m a few years later. So the trend can't continue going up forever.

AndyGuil

Looks like it is just ramping up again.

padington

Prices are going to keep on rocketing for a good while yet until it's slowed by the tax man. I can see labour introducing progressive capital gains on first properties.

Just two percent on houses over a million and one percent for houses under a million could raise a lot of cash.

If they ring fence that money to offer innovation grants for new small British businesses and press the argument that we need to support innovation more and dampen the housing market a bit, they would probably find it a popular policy ...

They won't snuff the fire out though, just slow it down a bit.

CLAPTON

padington wrote: »

Prices are going to keep on rocketing for a good while yet until it's slowed by the tax man. I can see labour introducing progressive capital gains on first properties.

Just two percent on houses over a million and one percent for houses under a million could raise a lot of cash.

They won't snuff the fire out though, just slow it down a bit.

would make no difference at all

if I buy a property over 250,000 I pay 3% tax
if I buy over £1 million I pay 5%

why would selling a property will a GAIN of 1 million bother about 2%?

nonsense

padington

CLAPTON wrote: »

would make no difference at all

if I buy a property over 250,000 I pay 3% tax
if I buy over £1 million I pay 5%

why would selling a property will a GAIN of 1 million bother about 2%?

nonsense

There must be a point where if you increase taxation on property, other investments could begin to look like a better alternative for some people and this would slow down the housing market, no ?

I for one would like to cash out of property and travel the world with out the bother of renting it out but there is no other taxable investment so alluring so I'm keeping my money in London property in the meantime.

When or if the dynamic changes sufficiently, I'll move my money and I'm sure I'm not the only one.

CLAPTON

padington wrote: »

There must be a point where if you increase taxation on property, other investments could begin to look like a better alternative for some people and this would slow down housing market would slow down, no ?

no

just build more houses