Tuesday, May 29, 2012

UK economy’s last pillar of support looks increasingly wobbly

Not even London property prices are safe as houses now...

London house prices are an absurd bubble that must go pop. I don't mean a vague wobble here, a one-month 0.3% slide. I mean a crash. For at least the past 10 years, house prices in the capital have been sharply driven by City bonuses, which had a ratcheting effect all the way down, even for homes in which no banker would be seen dead. There just aren't many bonuses now. Indeed, business in the Square Mile is so slack there will probably be another cull of expensive brokers and traders. It’s not just the juniors who will be axed. City firms aren't really hiring graduates, so there are fewer ambitious types at the bottom of the ladder willing to stretch themselves for a starter flat in contemptible Clapham. Many London homeowners live precariously....

Posted by drewster @ 10:26 PM (2169 views)
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11 thoughts on “UK economy’s last pillar of support looks increasingly wobbly

  • Anyone who remembers the early 90s knows that London is not immune.

    The timing the writer sets out is plausible but … who knows?

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  • I’d prefer to see something more evidence-based. This is speculation at best.

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  • @1

    within the m25 you could buy 2 bed flats around #20k in mid 90s….no-one wanted them

    london suffered because no-one wanted to live there by choice as most of it is a pit

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  • I for one do not believe that people live in London out of choice. Over the last 20 years the government have deliberately concentrated economic activity in London, so if you want a job >40k you will need to move there.

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  • what seems so strange is that in the 80s companies relocated out of london….a trend I thought would continue particularly as internet/broadband came into the fold

    think london is in for a shock and if you’ve ever lived there as I have(central london) its dreadful and so are alot of the people..rude with no manners…my experience

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  • what seems so strange is that in the 80s companies relocated out of london….a trend I thought would continue particularly as internet/broadband came into the fold

    think london is in for a shock and if you’ve ever lived there as I have(central london) its dreadful and so are alot of the people..rude with no manners…my experience

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  • Taffee, London has improved over the years. The air is cleaner and crime has fallen significantly.
    Khards, yes the jobs are in London, but I don’t think that was deliberate govt policy. If a company wants well-educated internationally-minded staff with easy access to Heathrow, then they have to be in or near London.

    I disagree with this journalist’s logic. The market isn’t just being supported by bankers’ bonuses. If total income (including bonuses) is stagnant or falling, then why are rents higher than ever? Landlords are supporting prices, it’s that simple. In many parts of London it’s actually cheaper to buy than rent, if you can get a mortgage.

    The only thing that can pop this bubble is rising interest rates, and there’s no sign of that for the next five years.

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  • Thecountofnowhere says:

    It’s one of those no s**t sherlock moment.

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  • Khards I live outside London and have a job earning more than £40k pa, so do all the guys in my office and our clients earn much much more than we do. I also have a nice 3 bedroom semi (bought in 2005) in an affluent area by the sea with lots of cafes, coffee shops, world class golf courses, and tendy boutiques. Our house would cost 2-3x as much in london in an area with worse schools and higher crime rates. Our joint mortgage is only 2x our salary.
    I have colleagues in London who eanr up to 50% more than me but have more than twice the mortgage, and because they can’t afford to live central spend hours and hours commuting everyday, not to mention the cost of season tickets. I drive 10 miles in to work each morning and park under my office a luxury not afforded to even the city bankers with there mega bonuses.

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  • mark wadsworth says:

    I liked the article. Although it is fairly fact-free, he puts the bullish and bearish cases very well and concludes that basically nobody has a clue and the whole thing is a mystery.

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  • I’d agree with Drewster here, the rental market in London is totally out of control and will keep prices afloat for a while. Have just bought a flat in Crystal Palace and will save £300 on rent a month for a much nicer place (currently in Bethnal Green).

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