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The Masked Tulip

Three Signs That The London Housing Market Has Gone Mad

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I think the author misses the point - the entire UK housing market has gone mad.

I’ve been flat hunting in London for the past few weeks. I already knew the market was pretty over-heated, but there’s nothing like grim first-hand experience to show you just how mad it is out there.

Flat viewings are mobbed. One place I saw had over 90 people view it in a single showing. And they’re being snapped up. Go to see a flat over the weekend and you’ll need to put an offer in by Monday lunchtime if you want to have a hope.

Prices are well above their pre-crash levels. I saw a basement flat that went for £210,000 in 2006 being put on the market for £350,000.

http://moneyweek.com/three-signs-of-a-london-house-price-bubble/

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MoneyWeek get so much stick for being bearish on property that they have given up mentioning it, even Merryn bought a place back in '11 whilst telling everyone what a bad investment decision it was.

Soon enough McTavish will be along to tell everyone how good value it is and they should get onboard before they miss out, property only ever goes up and rates only go down etc. etc.

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I think the author misses the point - the entire UK housing market has gone mad.

http://moneyweek.com/three-signs-of-a-london-house-price-bubble/

There's a for-sale sign two doors up that tells me how mad the London housing market has gone. Half a million for a three-bed terrace in a grotty bit of Streatham... ah, it's Monday, so they've probably put it up by another quarter million by now...

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and the average wage in London is £35,402.

http://

career-advice.monster.co.uk/salary-benefits/pay-salary-advice/uk-average-salary-graphs/article.aspx

Edited by billybong

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Prices are well above their pre-crash levels. I saw a basement flat that went for £210,000 in 2006 being put on the market for £350,000.

Bargain! I trust that isn't in a flood-prone area... :ph34r:

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and the average wage in London is £35,402.

... and thus the average London property should now cost £35402 x 3.5 = £123,907.

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I just heard two "experts' on You and Yours R 4 asked to give a straight yes or no as to whether there is a bubble in London.

Both said no. Only heard the end so don't know who they were.

Listeners invited to email their opinions. Feel like quoting this from SW17, pleasant though non fashionable part. Have posted recently about this so excuse repeat:

2 bed sold April 11 for 250, re sold 2 yrs later for 350, admittedly after some work, AP was 365. Identical property few doors up in less good condition recently on market for 410, quickly reduced to 395, very soon sold though no sold price yet. I will be very surprised if it's less than about 385 given other APs in the area.

If this is not a bubble I don't know what the hell is.

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Thats consistent with my experiences when I was buying in East London last year - the days of getting a scheduled individual appointment to view a property ate long gone, every single place I viewed was an open day which took place about a week after the property was first listed, followed by what is essentially a sealed bid auction where people send their prices within 2-3 days after viewing, and the highest bid gets it. Most properties were under offer within 1-2 weeks of hitting rightmove, and the open days usually had 50+ people viewing.

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... and thus the average London property should now cost £35402 x 3.5 = £123,907.

Most people today buy as a couple. A typical professional first-time buyer couple in London will be on about £40k each or so, so its more like £80k*4 = £360k. Throw in a £40k deposit from the BoMaD, and thats basically what is supporting the market.

Of course, when the woman scales back her working hours to have children, and interest rates go up, supporting a £350k mortgage on a single earner salary isnt going to be pretty.

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Why is this dunce trying to buy if he believes the market is already in a bubble?

Maybe he just wants a place of his own to live in? It does read a bit like "I've just went looking to buy a house and I can't believe the prices out there" rant though.

London has been in a bubble for a long time - but as Merryn Somerset Webb said on a BBC News Channel programme recently it can stay there defying the laws of economic physics as long as there is cheap money and a will on the part of the authorities to pump up property prices in general.

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Maybe he just wants a place of his own to live in? It does read a bit like "I've just went looking to buy a house and I can't believe the prices out there" rant though.

London has been in a bubble for a long time - but as Merryn Somerset Webb said on a BBC News Channel programme recently it can stay there defying the laws of economic physics as long as there is cheap money and a will on the part of the authorities to pump up property prices in general.

A 'bubble' implies price rises that arent driven by economic fundamentals (i.e. supply and demand). That isnt really the case in London; the astronomical price rises are basically a result of lack of supply (planning permission and NIMBYism blocking property development), combined with a huge spike in demand from both increased overseas immigration, and young people from the rest of the UK who now need to come to London for work due to the decimation of the economy up North. Thats your economic physics there, not statistics about salary-price ratios.

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A 'bubble' implies price rises that arent driven by economic fundamentals (i.e. supply and demand). That isnt really the case in London; the astronomical price rises are basically a result of lack of supply (planning permission and NIMBYism blocking property development), combined with a huge spike in demand from both increased overseas immigration, and young people from the rest of the UK who now need to come to London for work due to the decimation of the economy up North. Thats your economic physics there, not statistics about salary-price ratios.

How many of the 'economic immigrants' coming in to work from other parts of the UK would normally be in a position where they would want, or be able (under normal circumstances) to buy though? Many would be renters under normal conditions anyway being young and mobile.

The sheer level of prices for any and all property in London and commutable areas comes as the sum of a lot of abnormal things. It's enabled by banks being willing to lend money to people to buy at those prices. A major reason that the banks lend such huge amounts of money is the belief that prices can only go higher. A classic bubble - but in this case the bank lending is also underwritten by financial repression keeping base rates ridiculously low, willingness to provide liquidity on demand from the central bank (with guaranteed bank bailouts when it all goes wrong) and daft schemes like Funding for Lending or Help to Buy which are expressly designed to support prices and indemnify the lenders from the effects of unwise lending.

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A 'bubble' implies price rises that arent driven by economic fundamentals (i.e. supply and demand). That isnt really the case in London; the astronomical price rises are basically a result of lack of supply (planning permission and NIMBYism blocking property development), combined with a huge spike in demand from both increased overseas immigration, and young people from the rest of the UK who now need to come to London for work due to the decimation of the economy up North. Thats your economic physics there, not statistics about salary-price ratios.

Sorry, I have lived in London for over 45 years, and the amount of development has been insurmountable....good Victorian and Edwardian houses demolished and flats built, thousands of extensions, rapid building on brownfield sites, gardens paved over, houses built in gardens and on any available spare land, can't count the number of petrol stations that have had flats built on the site....

People should not need to come to London, business should be moving 'up north' people should be creating employment in the areas that need it most....this country is fast becoming all lopsided, bottom heavy. ;)

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Most people today buy as a couple. A typical professional first-time buyer couple in London will be on about £40k each or so, so its more like £80k*4 = £360k. Throw in a £40k deposit from the BoMaD, and thats basically what is supporting the market.

Of course, when the woman scales back her working hours to have children, and interest rates go up, supporting a £350k mortgage on a single earner salary isnt going to be pretty.

Exactement! So why is this dunce trying to buy... in a bubble? :blink:

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How many of the 'economic immigrants' coming in to work from other parts of the UK would normally be in a position where they would want, or be able (under normal circumstances) to buy though? Many would be renters under normal conditions anyway being young and mobile.

The sheer level of prices for any and all property in London and commutable areas comes as the sum of a lot of abnormal things. It's enabled by banks being willing to lend money to people to buy at those prices. A major reason that the banks lend such huge amounts of money is the belief that prices can only go higher. A classic bubble - but in this case the bank lending is also underwritten by financial repression keeping base rates ridiculously low, willingness to provide liquidity on demand from the central bank (with guaranteed bank bailouts when it all goes wrong) and daft schemes like Funding for Lending or Help to Buy which are expressly designed to support prices and indemnify the lenders from the effects of unwise lending.

+1

You might also have mentioned govt efforts to drive up wages so we can borrow even more.

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Most people today buy as a couple. A typical professional first-time buyer couple in London will be on about £40k each or so, so its more like £80k*4 = £360k. Throw in a £40k deposit from the BoMaD, and thats basically what is supporting the market.

Of course, when the woman scales back her working hours to have children, and interest rates go up, supporting a £350k mortgage on a single earner salary isnt going to be pretty.

That's why parties are moving towards thousands of pounds worth of free childcare. Get the woman back to work asap, let the taxpayer pay for the child. Taxpayer funding to maintain house prices continues.

Or she works part time and gets shitloads of tax credits. That option only really works with 2 or more kids though. But same result - taxpayer is paying to maintain those prices.

Edited by sf-02

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I listen to people on here but one thing I don't understand.

http://www.rightmove.co.uk/property-for-sale/property-43208665.html

This house is in London at £250,000. That's not too bad is it?

Around my neck of the woods Gloucester it would be £170,000 £180,000

That is in the bottom 5% of London prices. It's a terrible area is Woolwich but I am not sure why more people havn't moved there (and then gentrify) when the alternative in a similar dump like Streatham gets you a basement flat. After all Woolwich is only 15 minutes from Canary Wharf on the DLR and less than 20 to London Bridge and just over 20 to Cannon Street station in the City.

Never under estimate the ignorance of London from many who live there, who never visit or know the existence of places unless they are on the tube map. It doesn't matter whether they have a very regular and quick train service. It's because of that that SE London is so much cheaper than the rest of London.

Edited by sf-02

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I listen to people on here but one thing I don't understand.

22019_BROOKDENE_RD_IMG_00_0000_max_214x143.jpg

http://www.rightmove.co.uk/property-for-sale/property-43208665.html

This house is in London at £250,000. That's not too bad is it?

Around my neck of the woods Gloucester it would be £170,000 £180,000

Yeah it's not too bad.

Certainly better than this which I posted earlier

http://www.housepricecrash.co.uk/forum/index.php?showtopic=3533&view=findpost&p=1102476970

You don't have to pay 4x too much money to live in a slum, you can merely pay 2x much to live in a different slum. (And in Gloucester I guess you could find a decent school not full of non-English speaking Somalians, might struggle with that there.)

There are no nice, well-located areas at all, however, that aren't completely mad.

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