Watch Kate’s interview on ITN and see how well your local authority property prices are fairing versus the heights reached in 2007.
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XXX | For buyers in London frustrated to see the large rises in some areas, I’m afraid it’s the people who have been talking about a new housing bubble you have to thank. Unfortunately most of the people who are predicting a house price bubble aren’t people I’ve either heard of before, or are economists who have a terrible track record of predicting property prices! |
I say this as someone who has a degree in Economics from the London School of Economics and studied it again doing an MBA at Imperial College in London…..much as I believe in the subject matter, economists typically see housing as an asset similar to stocks and shares, and apart from the odd few, they don’t take into account buyers and sellers behaviour, so tend to get predictions wildy wrong!
Who to go to for property forecasts
All the people I know and listen to such as Savills and the Royal Institute of Chartered Surveyors economic team as well as David Smith, the Times Economist, are all saying, there is no bubble yet, far from it.
London property prices are diverse, from -15% to +36% since 2007
Even though the headline figure for London is 10% up year on year, this is an average based on prices being static year on year in areas like Enfield, Newham and Havering hardly increasing at all, while areas such as Camden, Lambeth and Wandsworth have headed into
double digit growth.
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But, this growth needs to be put in context. Camden is up 10% year on year, but versus the peak of the market in Camden, it’s 25% up. That sounds a lot, but that’s over six years, so a growth of 4% - only just ahead of inflation. Normally, according to the Nationwide, property prices grow by 2.8% above inflation. So if prices were growing at a ‘normal rate’ versus the last 30 years, Camden prices should actually be 27% or more up. Take another area such as Barking and Dagenham. Prices are up there by 4.3% year on year. However, they are 15% lower than the height in 2007. So a small rise in the last year hasn’t brought prices anywhere near the level they should be. |
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See what’s happened to your area
And from a forecasting perspective, although cheap mortgages are available at the moment, it’s still much harder to get a mortgage and lenders have harsher limits to what they can lend. In the next few years, mortgage costs are likely to go up to 5-6%, or more, so this will put a lot of people off buying and is likely to make renting more cost effective. Add to this people’s wages are not going up and many people quite liking the flexibility and lack of responsibility of renting, the drive to buy a property isn’t as high as it used to be.
Worried you are being priced out of the market and can’t afford to buy? Speak to your local
Help to Buy Agent. According to Rightmove, there are still properties thousands of properties available to buy at less than £150,000.
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