London property market bubble?

cells

Generali wrote: »

It's a bubble.

boooo
hissssss

westernpromise

cells wrote: »

someone needs to sell house price crash insurance

something like £500 a year for a 6 year term and if prices are more than 10% lower at the end of the term the insurance pays out the difference. Property owner would need to pay for the survey after the 6 year point if they wish to determine value of property to make a claim


basically an insurance policy that would never need to pay out and hopefully it will stop the 2%?? of the population that are uber conservative and would never buy irrespective of price and would instead set up a forum to discuss why their logic is sound

Interesting idea, although the problem (in claiming on it) might be in establishing that you have suffered a loss. That is, your house was worth £100k and it's worth £95k, fine - but if all you did (and continue to do) was live it, where's your actual out of pocket loss?

Maybe rather than insurance it needs to be a CFD? Then it's just a punt, which should suit misguided souls who think buying a house is, too.

Generali

cells wrote: »

boooo
hissssss

Other views are available. They are wrong.

cells

Generali wrote: »

Other views are available. They are wrong.

With per capita GDP in the region of £60k vs £20k for the rUK it seems reasonable that prices should be some 3 x higher in London than elsewhere

London average price is £530k vs £144k for rUK so London is some 3.7 x higher in price than rUK therefore it is overpriced vs the rest of the UK by about 20% on a GDPvsPrices basis

I would not call 20% above price a bubble.

cells

http://www.ft.com/cms/s/0/b65110d0-d7c2-11e4-849b-00144feab7de.html

London does not seem any worse than Paris.

A year ago it says prices were about 8000 euro per sqm. So a 80 sqm apartment would come in at 640,000 euro plus they have bigger transaction taxes.

At the same time London was at ~£5,600 euro per sqm.

So give or take depending on the exchange rate paris average price per sqm a year ago was higher than London a year ago. Its probably about the same now with London prices up some 15% but the currency down 10%

Also New York with average sale prices of some $12k per square meter

Capital cities of growing countries are expensive

richdeniro

The price of an average 1-2 bed flat in Zones 2-4 of South London appears to have increased by around 50-100% in less than five years, at least in my experience.

Wages have not gone up that much and lending might be slightly looser than a few years ago but surely not enough to increase prices that much.

It has to be a bubble.

CLAPTON

richdeniro wrote: »

The price of an average 1-2 bed flat in Zones 2-4 of South London appears to have increased by around 50-100% in less than five years, at least in my experience.

Wages have not gone up that much and lending might be slightly looser than a few years ago but surely not enough to increase prices that much.

It has to be a bubble.

population of london is growing by about 100,000 per year: plenty to sustain high house prices

cells

richdeniro wrote: »

The price of an average 1-2 bed flat in Zones 2-4 of South London appears to have increased by around 50-100% in less than five years, at least in my experience.

Wages have not gone up that much and lending might be slightly looser than a few years ago but surely not enough to increase prices that much.

It has to be a bubble.

the problem is that we base some given date as 'normal' and what prices do from there is then abnormal.

Prices 5 years ago were too low 'thanks' to a recession and a credit crunch and lots of lost jobs etc etc

Likewise people who talk about prices of 20 years ago being some sort of base or norm and thus prices today are crazy miss the point that prices 20 years ago were crazy cheap so much so that some flats in Hackney inner London were selling for less than the cost of the materials let alone everything else that is needed to take a pile of materials and turn it into a flat


Personally I feel prices are now 'normal' for London. If prices double from here then yes I would join the side of prices are far too high it looks like a bubble. With London prices at £530k or ~£6,500 per square meter things dont seem all that crazy when the same in New York is $13,000 per square meter and in Paris 8,000 euro per square meter. Simply capital cities in growing nations are expensive. London is comparable to paris and cheaper than new york

westernpromise

cells wrote: »

Likewise people who talk about prices of 20 years ago being some sort of base or norm and thus prices today are crazy miss the point that prices 20 years ago were crazy cheap

Although of course 20 years ago a white stucco house in Holland Park was £3 million and 20 years before that it had been £50,000, so in 1996 you had people who thought London had gorn mad, and that the right price was that of 20 years earlier than that.

And of course in 1976 you had people who thought £50,000 meant prices had gorn mad because in 1956 the same house would have been £10,000.

Jason74

Generali wrote: »

It's a bubble.

Interesting that you say that, but I'm interested in why you say it. I tend to disagree with you on most of the more political related threads, but take a view that on purely economic matters, you're one of the most (if not the most) well informed posters here.

I tend to share your view that current London prices are in (or certainly close to) bubble territory. But that's based on nothing more than looking at price levels relative to historic ratios and the ratio of house prices to earnings, along with a sense that the government has introduced a series of measures to prop up the market nationwide that have as a side effect turbocharged an already buoyant London market.

My own sense is that as soon as the Government stop finding new ways to actively support the market, the music will stop. I'm in the same part of London as RichDeniro, and like him I am absolutely astounded by the prices being paid around me. My own sense is that it just can't last. But that's just a personal view, and I also have to acknowledge that I thought the same thing 18 Months ago and have so far been very wrong. with that in mind, I'd be interested to hear a more "technical" view from someone as well informed as you