London Property Booming

[arrgee1991]

you say demand is fueled by schools - however demand does not explain bubble-valuations compared to rental yields on a sensible value-based assessment of price

so there is something else, a demand for ownership that goes beyond schools

There is a madness that afflicts buyers when it comes to schools. We had three young families mail shoot us last year to ask if we would consider selling. All had kids less than three years old. They are typical of the buyer in our street. And then when their oldest kid hits nine they all look to move down the road for the secondary school. We looked last year for this reason, but the difference in price was so much that it would have been cheaper to pay for private education for two children. Fortunately thanks to a lower birth rate in 1999, our son got into the school anyway. Really hacked off all the parents who spent a small fortune relocating

Edited April 13, 2011 by arrgee1991

[Si1]

Please tell me what you're seeing here in N2 that differs from the facts I've presented.

No? Didn't think so.

you stated few facts and even less logic

[Si1]

There is a madness that afflicts buyers when it comes to schools. We had three young families mail shoot us last year to ask if we would consider selling. All had kids less than three years old. They are typical of the buyer in our street. And then when their oldest kid hits nine they all look to move down the road for the secondary school. We looked last year for this reason, but the difference in price was so much that it would have been cheaper to pay for private education for two children. Fortunately thanks to a lower birth rate in 1999, our son got into the school anyway. Really hacked off all the parents who spent a small fortune relocating

I am sure this is true, but at the same time it is sentiment led, part of the bubble rather than much else

[Constable]

this is something that gets me

you say demand is fueled by schools - however demand does not explain bubble-valuations compared to rental yields on a sensible value-based assessment of price

so there is something else, a demand for ownership that goes beyond schools

it's a bubble

+1. Good schools does mean that people in those areas have higher wages rises, lower inflation, full employment.

[arrgee1991]

I am sure this is true, but at the same time it is sentiment led, part of the bubble rather than much else

Maybe it is sentiment led, but it is what is holding prices up in London for the time being. Which is why London is seen as booming. It is not just rich Russians and Arabs but also families in the surburbs willing to pay to be in the right areas. Scarcity is causing this so-called boom, but should interest rates rise, there could be a large number of people forced to sell. At that point sentiment will go out of the window.

[pyewackitt]

It's true. Much as I hate to say it. I've lived (renting) in Central London for 10 years plus, I've moved around several times, and I even nearly bought a couple of times. I like to think I know the rental and sales market fairly well....in my area, it's out of control. Stuff is up I reckon 20% over the last couple of years if not more on the nice stuff, and it really is selling. I'm desperate to buy a place but just can't bear to pay the price!! It's definitely banker money, I'm in the City and friends and colleagues are def buying...not in droves like in 2007 at the clear top, but definitely happy to trade up, or buy a nicer place. I get the impression none of them sell either, just rent out the current place. How depressing....and also, rents are up a lot also, it's crazy how little you get for the money...this was not the case in 2009, when the rental market was VERY soft (and I last negotiated on my rent).

I've lived in central london or close by for about the same time and i agree with this.

Prices have only gone up in the last 3 years for both rental and sales and it's only because London is special in it's investment sources.

I'm lucky enough to be on the same rate for the last 4 years and don;t see it changing but comparable places in zone 1/2 are now 200-300 quid a month more than i pay... great if i'm happy to stay here but a huge hit if i decide to move at all.

Frankly though, and we've all said, it can't last and either prices fall or currency is trashed still further....

Happy to wiat a bit longer - but been waiting a long long time now.....

Pye

[Si1]

Maybe it is sentiment led, but it is what is holding prices up in London for the time being. Which is why London is seen as booming. It is not just rich Russians and Arabs but also families in the surburbs willing to pay to be in the right areas. Scarcity is causing this so-called boom, but should interest rates rise, there could be a large number of people forced to sell. At that point sentiment will go out of the window.

indeed, maybe

(sentiment could also trickle down very very slowly, there might not be a real terms major fall, just a very slow very drawn out inflationary fall over >10 years; people will still get skinned financially, but by stealth)

[skomer]

Demographics should fuel a boom in the next few years for secondary schools. A higher birth rate post 2000 means that more children will be applying for schools.

Grammar schools are not affected as the catchment area is very wide for us, but for other schools even living in catchment areas won't be good enough.

My sister missed out on a place for her daughter in primary last year, and our son just scraped into his secondary school off a waiting list despite us both been in the catchment area. It will be OK for our daughter as she would get in as a sibling, but I can foresee her school friends relocating in order to ensure they get in.

Yes, Kingston has seen a rise in the birth rate plus increasing immigration (see the pdf below) such that it is having to expand or build new primary schools. Eventually this must feed into the secondary schools and be a push factor in the demand for family homes

http://www.kingston.gov.uk/joint_annual_public_health_report_chapter_2.pdf

[red]

you stated few facts and even less logic

Fact: Prices up 20% on two years ago in the area I'm looking. Care to refute that? I'll provide links if you like.

Fact: There's a definite demographic shift in the type of people moving into the area. Again, do you live here and refute that?

Facts: We're near the catchment area for Fortismere school (one of the best in North London) and whenever a property comes up in this area it carries a premium. We have Hampstead Heath, Kenwood House and Highgate Woods nearby and are 20 minutes from the West End by tube.

I'm not denying we're in a bubble here (a bubble upon a bubble than never truly burst, in fact) and the market is still essentially dysfunctional, but it's certain that areas like this that are currently being preferred by those who can't afford the £1m+ houses in surrounding affluent areas and are buying up around here for 700-800K instead. Properties that were going for 500-600k two years ago.

When we see that change and what the catalyst will be is anyone's guess. IR rises? Austerity measures biting?

The OP asked if people were seeing London prices booming. I answered with an honest appraisal based on what I am seeing locally.

If the best you can do is throw insults about, then at least come back with some facts yourself that counter mine.

[yekim1967]

I've lived in central london or close by for about the same time and i agree with this.

Prices have only gone up in the last 3 years for both rental and sales and it's only because London is special in it's investment sources.

I'm lucky enough to be on the same rate for the last 4 years and don;t see it changing but comparable places in zone 1/2 are now 200-300 quid a month more than i pay... great if i'm happy to stay here but a huge hit if i decide to move at all.

Frankly though, and we've all said, it can't last and either prices fall or currency is trashed still further....

Happy to wiat a bit longer - but been waiting a long long time now.....

Pye

I agree the rental market is getting stronger, but still weak in at just over 5% gross yields The selling market is dead, just go to property bee and see the days on market and price reductions all across London. (if you can handle the truth)

[Si1]

Fact: Prices up 20% on two years ago in the area I'm looking. Care to refute that? I'll provide links if you like.

Fact: There's a definite demographic shift in the type of people moving into the area. Again, do you live here and refute that?

Facts: We're near the catchment area for Fortismere school (one of the best in North London) and whenever a property comes up in this area it carries a premium. We have Hampstead Heath, Kenwood House and Highgate Woods nearby and are 20 minutes from the West End by tube.

I'm not denying we're in a bubble here (a bubble upon a bubble than never truly burst, in fact) and the market is still essentially dysfunctional, but it's certain that areas like this that are currently being preferred by those who can't afford the £1m+ houses in surrounding affluent areas and are buying up around here for 700-800K instead. Properties that were going for 500-600k two years ago.

When we see that change and what the catalyst will be is anyone's guess. IR rises? Austerity measures biting?

The OP asked if people were seeing London prices booming. I answered with an honest appraisal based on what I am seeing locally.

If the best you can do is throw insults about, then at least come back with some facts yourself that counter mine.

you said you couldn't see things changing, that's simply heresay; and I didn't insult you, I made an honest observation

I am certain, in one dimension, prices where you say ARE booming, even with low volumes, and I am also sure you are right that sentiment supports this

but your implication that this sentiment is somehow solidly underpinned is fatuous imho - I can easily SEE sentiment turning in any bubble market, at the same it might not, from a bahavoural point of view, it is virtually impossible to predict, which is my point, which is the opposite of what you said when you said 'I can't see it changing' (or to that effect) - the existence of bubble sentiment IMPLIES DIRECTLY that it is in a transient state implicitly liable to change. My truck with you is that you appeared to deny that self-evident fact just because you feel the mass psychology.

[Constable]

Fact: Prices up 20% on two years ago in the area I'm looking. Care to refute that? I'll provide links if you like.

Fact: There's a definite demographic shift in the type of people moving into the area. Again, do you live here and refute that?

Facts: We're near the catchment area for Fortismere school (one of the best in North London) and whenever a property comes up in this area it carries a premium. We have Hampstead Heath, Kenwood House and Highgate Woods nearby and are 20 minutes from the West End by tube.

I'm not denying we're in a bubble here (a bubble upon a bubble than never truly burst, in fact) and the market is still essentially dysfunctional, but it's certain that areas like this that are currently being preferred by those who can't afford the £1m+ houses in surrounding affluent areas and are buying up around here for 700-800K instead. Properties that were going for 500-600k two years ago.

When we see that change and what the catalyst will be is anyone's guess. IR rises? Austerity measures biting?

The OP asked if people were seeing London prices booming. I answered with an honest appraisal based on what I am seeing locally.

If the best you can do is throw insults about, then at least come back with some facts yourself that counter mine.

You've got fibre optic broadband too haven't you? Maybe it's that!!

Ps. Highgate is great. I can understand high prices there.

[greengreen]

The super prime stuff is mainly Kensington and Chelsea and a few posh pockets inside a few other boroughs.

IMO the real bubble areas in London are the SW middle class boroughs (Hammersmith & Fulham, Wandsworth, Richmond, Kingston) and inner London boroughs like Camden and Islington - these areas like to think that they are 'prime', but on the whole they are far from it.

Rich foreigners and bankers are fewer in number than many seem to believe, and low volumes exaggerate their impact on the market.

As for the Olympic areas, well, 'polished turd' springs to mind. Let's see what their crummy flats fetch after the rain-soaked minority sports event fortnight is over.

I have noticed a big difference in prices in some of these areas over the past 4 years. For 3/4 bed houses, of 1500 to 2000 Sq ft, prices sold have increased on most like for like sales that I know around me, particularly from 2007 to 2009, but have been quite flat since then. The real difference I can see is the huge increase in prices for larger houses, e.g. 5/6 bedroom 2,500 to 3,000+ sq ft. Asking prices are ridiculous at the moment, e.g. one 3000sq ft house near me was on the market in 2009 for 980k, reduced to just over 900k (it did not sell), put back on the market 4 months ago, for £1.5m, now under offer.

Looking at asking prices for houses that face green space, have gone through the roof, some asking 750k to £1m more than any previously achieved sale price, e.g. asking £2.5m up to £2.75m, top sales price £1.9m. The volumes are extremely thin at the moment, (admitedly they were in the small numbers before), time on market seems to be very long and looking at the EAs that service these high value houses, when looking at their stock on rightmove, very few are "under offer" as a percentage of their total stock.

I can only think:

1. Get real, you'll never afford these houses, accept it and move on.

2. people are taking on enormous mortgages

3. this is the final last gasp of the bubble, hold your nerve and wait, it will fall

4. the area is becoming more popular with city bods who receive big bonuses, and so the best houses will move further out of reach

or a combination of these.

[E14]

you stated few facts and even less logic

Sometimes you only need the basic facts, a bit of logic, bit of luck and good timing.

Having a degree in how the market should behave is not always the bible to follow

[Si1]

You've got fibre optic broadband too haven't you? Maybe it's that!!

Ps. Highgate is great. I can understand high prices there.

I've got fibre optic in my part of Leeds and selling prices have crashed 30-50%

however, some askings are back at bubble levels - maybe they have 20kbps, and the neighbours don't

[Si1]

Having a degree in how the market should behave is not always the bible to follow

oh yes it is.

you will find this out soon enough

[arrgee1991]

Yes, Kingston has seen a rise in the birth rate plus increasing immigration (see the pdf below) such that it is having to expand or build new primary schools. Eventually this must feed into the secondary schools and be a push factor in the demand for family homes.

A new free secondary school (and possibly a new primary) will be opening in our area next year to help cope with demand. However, there is also pressure on the secondary schools to enlarge, which will be interesting to see given that some of them already have 240 pupils per year and have had to move to two sites to accommodate that number.

[Constable]

I have noticed a big difference in prices in some of these areas over the past 4 years. For 3/4 bed houses, of 1500 to 2000 Sq ft, prices sold have increased on most like for like sales that I know around me, particularly from 2007 to 2009, but have been quite flat since then. The real difference I can see is the huge increase in prices for larger houses, e.g. 5/6 bedroom 2,500 to 3,000+ sq ft. Asking prices are ridiculous at the moment, e.g. one 3000sq ft house near me was on the market in 2009 for 980k, reduced to just over 900k (it did not sell), put back on the market 4 months ago, for £1.5m, now under offer.

Looking at asking prices for houses that face green space, have gone through the roof, some asking 750k to £1m more than any previously achieved sale price, e.g. asking £2.5m up to £2.75m, top sales price £1.9m. The volumes are extremely thin at the moment, (admitedly they were in the small numbers before), time on market seems to be very long and looking at the EAs that service these high value houses, when looking at their stock on rightmove, very few are "under offer" as a percentage of their total stock.

I can only think:

1. Get real, you'll never afford these houses, accept it and move on.

2. people are taking on enormous mortgages

3. this is the final last gasp of the bubble, hold your nerve and wait, it will fall

4. the area is becoming more popular with city bods who receive big bonuses, and so the best houses will move further out of reach

or a combination of these.

Good points. If I had £10m I would probably spend several million on a great house and wouldn't care too much about the price. Maybe these people are scared of hyperinflation too and want the money in hard assets. I'd also get a safe in the cellar and stick a couple of thousand ounces of gold in it.

[red]

you said you couldn't see things changing, that's simply heresay; and I didn't insult you, I made an honest observation

I am certain, in one dimension, prices where you say ARE booming, even with low volumes, and I am also sure you are right that sentiment supports this

but your implication that this sentiment is somehow solidly underpinned is fatuous imho - I can easily SEE sentiment turning in any bubble market, at the same it might not, from a bahavoural point of view, it is virtually impossible to predict, which is my point, which is the opposite of what you said when you said 'I can't see it changing' (or to that effect) - the existence of bubble sentiment IMPLIES DIRECTLY that it is in a transient state implicitly liable to change. My truck with you is that you appeared to deny that self-evident fact just because you feel the mass psychology.

The OP asked if anyone saw London prices booming.

I have replied to say what I see here in N2. Nothing to do with sentiment. Facts.

If you want to discuss sentiment/bubble psychology, etc., I'm happy to do so.

Having said I didn't present any facts, which I then did, you've tacitly acknowledged that you can't refute them and are now attacking a part of my first post that is a separate argument entirely.

And if I find a post insulting, that's for me to judge, not you.

[greengreen]

Good points. If I had £10m I would probably spend several million on a great house and wouldn't care too much about the price. Maybe these people are scared of hyperinflation too and want the money in hard assets. I'd also get a safe in the cellar and stick a couple of thousand ounces of gold in it.

you read my mind, i have thought about this too, now all I need to do is work out how to get the £10m!

[Si1]

The OP asked if anyone saw London prices booming.

I have replied to say what I see here in N2. Nothing to do with sentiment. Facts.

If you want to discuss sentiment/bubble psychology, etc., I'm happy to do so.

Having said I didn't present any facts, which I then did, you've tacitly acknowledged that you can't refute them and are now attacking a part of my first post that is a separate argument entirely.

And if I find a post insulting, that's for me to judge, not you.

you are speaking utter nonsense

you drew a false conclusion from your facts, and then you challenged my disputation

have it your way if it makes you feel better

[Georgia O'Keeffe]

you read my mind, i have thought about this too, now all I need to do is work out how to get the £10m!

if you hyperinflate it should be a doddle, just clean someones car for them

Edited April 13, 2011 by Tamara De Lempicka

[Cozza]

Booming, ha ha, I am looking at buying at the moment in London and the market is DEAD. Stuff on the market a long time, prices being reduced and sales falling apart because sellers and buyers are both pulling out. Mortgage brokers, agents and surveyors are desperate for work. There is a definite lack of buyers, its not the lack of mortgage availability but just no buyers with decent jobs or incomes. Lots of places are empty with no tenants, there is no housing shortage if these people sold there places. Places are really presented well to attract buyers, but its not working. Asking prices are too high, some people asking at 2007 and above prices, but also stuff on at 2005-2006 prices and not selling either.

+1. The market's definetely running out of steam where I am in London.

[Constable]

you read my mind, i have thought about this too, now all I need to do is work out how to get the £10m!

yeah that's the problem I'm working on too!

I think I'll email Mervyn King and ask if he wouldn't mind printing a bit extra for me - I'd promise to spend it all, doing my bit for the money supply figures while increasing consumer spending and propping up the housing market. He'd go for that don't you think?!

[craggy]

you are speaking utter nonsense

you drew a false conclusion from your facts, and then you challenged my disputation

have it your way if it makes you feel better

No he's not writing utter nonsense. He's reporting the market as he has experienced it in London, which is far more useful than your vague prognostications citing zero facts (while accusing others of not providing them) all garlanded in casual insults (insults like 'utter nonsense'). Since presumably you don't follow the London market in detail as you don't actually live there, perhaps he just knows more about it that you do? His reports chime far better with my actual experience of the London housing market over the last decade than your self-assured ignorance.

The London market has so far been quite resilient - remains to be seen what will happen, but a crash is by no means a given - markets can remain irrational for a long, long time, and we may well have a soft landing caused by the government's inflationary policies, in which case buying a house or other asset would be a better hedge against inflation than saving and renting - at present the government is effectively taking money from savers, and giving it to debtors. That's wrong, unfair, irrational, etc etc, but it is happening, and in those circumstances, we may not see a crash in London at all in nominal terms (save the mini one in 2008). A real terms crash doesn't make debtors any worse off than savers, and that's all we might see in London due to other factors (constant inflow of foreign cash due to the debased currency, concentration of the wealth of the nation in the capital etc).