London property market bubble?

westernpromise

richdeniro wrote: »

I don't see how a one bedroom flat like this can be worth over 250k and will maintain that price.

http://www.rightmove.co.uk/property-for-sale/property-39303684.html

By the time you've done the work that needs doing (it needed a complete renovation) you would be down almost 300k.

I went and saw it, it was in a grim block with thin walls, single glazed windows, etc. Even if I was buying it for 160k I'd want a 2nd/3rd viewing and would really have to think about it.

2-3 years ago the one bedroom flats in this block were going for around 120k.

I think this says much about how market psychology works. You saw this flat at £250k and thought Gawd, no, it was £120k a few years ago. Had you looked at it a few years ago you’d have thought Gawd, no, it was £100k a few years ago.

One tends to be incredulous at current prices regardless of the level, but especially if higher than in the past. Suddenly ten years have passed and the same dumps are worth twice what they used to be, and then you need a crash.

buglawton

Seen the link and this one is a classic Location, Location item. Looks valued correctly. If you can afford to buy it and plan to live in it for 5 years, not much downside.

chucknorris

Generali wrote: »

Perhaps next time you see someone on a bicycle you could give a cheery wave and hand them a tenner.

I think that they would settle for just not stealing or vandalising their bike whilst it is parked, that's the only thing that has stopped me cycling to Morden (from Dorking) and then catching the tube, rather than getting the train then tube.

padington

chucknorris wrote: »

I think that they would settle for just not stealing or vandalising their bike whilst it is parked, that's the only thing that has stopped me cycling to Morden (from Dorking) and then catching the tube, rather than getting the train then tube.

Get a Brompton, you don't leave them anywhere to get nicked.

Generali

cells wrote: »

Well I wouldn't say to the exact penny what I mean is that prices (asking prices) are about correct now, plus 15% or minus 10%

Why are London prices correct now?
well people are buying.
There is still a profit to be made from BTL.
The economy has now entered more normal waters (whereas thinking 2009 prices were normal or correct in the middle of a global recession is silly)
Future supply of property and demand from population growth looks positive for prices
London economy will likely continue to outperform rUK which is positive for prices.


Of course having said that I am aware that reasonable arguments can be made for any price level and only time will tell what the markets will do.

I do however think post crash we have definitely exited the cheap prices of 2009-2013 and now we will have normal-ish prices for 2014-2016 and we may well keep on with a boom from 2017-2020 which would set us up nicely for a correction from 2021-2026

So your argument is that for all of history houses in London have been undervalued, only finding the right level in 2016.

It seems unlikely to me.

Jason74

buglawton wrote: »

Seen the link and this one is a classic Location, Location item. Looks valued correctly. If you can afford to buy it and plan to live in it for 5 years, not much downside.

As someone who lives in the same part of london as the flat Richdeniro mentions (my place which I thankfully own outright is just over half a mile from there), I have to say I agree with him that the valuation on that flat is a sign of bubble like tendancies. We're not talking prime London here. It's a grotty 1 bed flat in a nondescript block in what is historically a cheaper suburb.

Yes, it's in a nice spot and that makes it worth more than it otherwise would be, but when the coast of owning a flat like that is (when the cost of bringing it up to any kind of reasonable standard) close to 10x median London earnings, something is wrong. I think there's a "rush" effect going on in terms of beating the BTL tax changes, but I can't for the life of me see how prices local to me can go up much further from here. Whether that then transaltes to big falls later on is another question, but it would imho be no bad thing if it did.

mwpt

Jason74 wrote: »

As someone who lives in the same part of london as the flat Richdeniro mentions (my place which I thankfully own outright is just over half a mile from there), I have to say I agree with him that the valuation on that flat is a sign of bubble like tendancies. We're not talking prime London here. It's a grotty 1 bed flat in a nondescript block in what is historically a cheaper suburb.

Yes, it's in a nice spot and that makes it worth more than it otherwise would be, but when the coast of owning a flat like that is (when the cost of bringing it up to any kind of reasonable standard) close to 10x median London earnings, something is wrong. I think there's a "rush" effect going on in terms of beating the BTL tax changes, but I can't for the life of me see how prices local to me can go up much further from here. Whether that then transaltes to big falls later on is another question, but it would imho be no bad thing if it did.

I largely agree with this. But one thing we might consider is amount of transactions per year and correlate that with the median salary of this number of people.

In other words, if only 5000 properties come on the market in London pa, there may be 10000 people earning above £60k pa who don't yet own a property. If most of them arel interested in buying, they will compete on price to buy properties.

Just an idea.

HAMISH_MCTAVISH

mwpt wrote: »

if only 5000 properties come on the market in London pa, there may be 10000 people earning above £60k pa who don't yet own a property. If most of them are interested in buying, they will compete on price to buy properties.

This has been discussed frequently on here over the years.

It's really quite simple....

If the disincentives to supply such as mortgage rationing, planning restrictions, stamp duty, etc, cause us to only supply half the houses we need every year, then they'll be priced to the top earning 50% of people.

If we only supply a third of the houses we need then only the top earning third of people need to be able to afford them.

If supply is 10% of need then only the top earning 10% have to be able to afford them..... etc.

The market will ration goods in short supply through price. As it is doing today.

And in that scenario comparisons based on a historical multiple of the average income of all people are completely worthless as an indicator of value. High prices are supposed to stop most people from being able to buy. That's the entire point of them being high.

chucknorris

padington wrote: »

Get a Brompton, you don't leave them anywhere to get nicked.

I really like cycling, I want to ride proper bikes, not those daft things.

chucknorris

padington wrote: »

Get a Brompton, you don't leave them anywhere to get nicked.

I really like cycling, I want to ride proper bikes, and get some serious exercise using the same bike that I use anyway, not cycle using those daft things.