I'm sorry, but this article just seems bizarre. It's not economically literate - it doesn't actually examine the cost of a house relative to earnings and access to mortgages. It doesn't make any attempt to quantify how much money foreign entities actually invest in London. It doesn't cite any evidence that prices have even started to drop!<p>Let me tackle this. Firstly, interest rates are still at historic lows, it's cheaper to buy a house and pay the mortgage than to rent, so that core reason to buy is still there. The only limit is deposits. The government has just handed £5k to every first time buyer in London (stamp duty cut). That's not going to cause lower prices.<p>Foreign investment doesn't come from Saudi Arabia, it comes from Hong Kong and Singapore and Malaysia.[0] So his entire argument there is just misinformed.<p>None of the evidence he sighted actually points to a price crash now - it points to long term pressures for prices to drop. You could have made that argument 5 years ago.<p>Don't get me wrong, I'm not saying house prices won't drop at some point. This just doesn't argue it at all well. It's more wishful and wishy washy thinking that anything else.<p>There are far better arguments that the prices will drop in 2019/2020 - when interest rates recover, buy-to-let investors will get stung by harsher taxes and Brexit actually happens.<p>[0] <a href="https://www.theguardian.com/society/2017/jun/13/foreign-investors-snapping-up-london-homes-suitable-for-first-time-buyers" rel="nofollow">https://www.theguardian.com/society/2017/jun/13/foreign-inve...</a>
As a Londoner, I'm sad to say high property prices seem sustainable.<p>With a decent deposit, you can borrow long term at around 2%, which makes living in a £0.5m flat cost £10k a year, less than £1k a month. That's very affordable for a couple.<p>The problem is the vicious cycle of low interest rates. I would argue that most important variable affecting house prices is long term expectations of interest rates. Very (very!) roughly, if long term mortgage interest rates half, we would expect property prices to double.<p>In the past decade, property prices have been driven up by very low interest rates, which have meant that's its affordable to service very large mortgages. Interest rates have stayed lower, for longer than anticipated, which has driven higher and higher prices<p>The problem is that these low interest rates have increased the potency of monetary policy: with higher house prices, an increase of 1 percentage point on mortgage rate hits you really hard. Previously a movement from say 5% to 6% interest on your mortgage mattered less.<p>This means that rises in interest rates will be smaller and take longer than historically, 'locking in' high property prices. I don't expect to see interest rates return to 'normal' levels any time soon.<p>I'm not arguing that the market is not overinflated, but I doubt there will be anything like an apocalypse. Maybe we see prices coming down 10%-20% at most.
One thing that really makes me angry about owning property in England is the (imho) fraudulent setup where I buy house (or flat) and have to pay rent to the land owner. Yes, that is right. The LAND doesn't come with the HOUSE.<p>Also money laundring helped plenty, on insanely inflating the prices - money from anyone who could afford this. There are buildings in London that are empty. Kind of like a piece of jewelery that you keep as a safe-keep in the safe (but only bigger).<p>That said, it is a pitty that plenty of people will see that they got a mortgage of 999 for a flat that "now" costs 200-300,but it is healthy for this parasitic/fraudulent behaviour to end.
A rather thin and sensationalistic piece. While everyone would love for property prices to crash, share prices to collapse and everything to become miraculously cheap again, nothing mentioned hints at this.<p>Oil prices? Might have driven the run up in properties in Mayfair but are all these owners suddenly going to hit the market to sell as they desperately need cash? I don't think these buyers are particularly hard up.<p>Similarly, the 8k debt figure is across the UK. Not really relevant to those spending £1 million+ in central London.<p>Yeap, it's depressing for buyers in London, SF and NY. Either figure out how to make a high salary or don't try climbing that ladder!
> the prospect of Jeremy Corbyn waiting in the wings to become Britain’s next Prime Minister is a rather more relatable bad omen for London property values.<p>This seems to be contradicting itself: it's not a bad thing that house prices come down if they're too high. Arguably they <i>should</i> be brought down if they're too high (ideally in a more controlled manner, no one wants prices to collapse in a catastrophic manner). As such, shouldn't we be welcoming Corbyn's strategy here?<p>> While undoubtedly a lovely sentiment, Jez, making state confiscation threats out loud isn’t great for shifting houses to minted foreigners.<p>As if we should endeavour to endlessly bow to the wishes of foreign investors? Running your own country into the ground and making it hard for your own citizens to live there doesn't do you any favours. Foreign investors should take a backseat to ensuring the people who live and work there can actually afford to and aren't having to suffer exorbitant rents.
>>> While undoubtedly a lovely sentiment, Jez, making state confiscation threats out loud isn’t great for shifting houses to minted foreigners.<p>I found this passage very strange. Throughout the article, the author seemed to be advocating the position that most Londoners seem to hold: that houses should be for people to live in, and not for overseas property investors to use as an investment vehicle. So why should anyone be concerned about "shifting houses to minted foreigners"?<p>Legislation that would stop housing being kept deliberately empty by overseas investors has been shown to be hugely popular with the public – but that's not mentioned by the article, either.
Title should read:<p>"London house prices suffer a blip, will recover in a year to 18 months"<p>Read the blogs own reference:
<a href="http://uk.businessinsider.com/london-house-prices-2-drop-in-2018-2018-2" rel="nofollow">http://uk.businessinsider.com/london-house-prices-2-drop-in-...</a><p>2% is not a crash, nor an Apocalypse...
>>> the cost of getting by — long ago went past insane (£17,040: the cost per year of educating a four year-old child at Thomas’s school in Fulham, not including uniform).<p>Note that this is only if you send your child to private school, not merely "getting by". Even among the middle classes, this is not very common, especially at four years old. The nicer parts of London have some of the best state schools in the country.
Another thing which non-UK readers might not be aware of is that the UK government introduced a "Help to Buy" and "Lifetime" ISA, which is essentially an account with some bank where, any money you put in (up to a certain limit), the government will give you an extra 25% free if yiou use it to buy your first home. While this might seem to help with home ownership, I think studies have shown that it only really benefits people who were already saving hard, and thus it only really contributes to house price inflation. I'd be interested to know if other countries have similar schemes.
Which London though?<p>There are a lot of different boroughs, and the way their house prices move seem to be somewhat independent of each other.<p>The bottom falling out of Kensington because there is no oil money seems like a vastly different situation to just generally people wanting to live in outer suburbs.
Nope. Demand still exceeds supply otherwise the government wouldn't be trying to build thousands of new houses and flats each year. Also, London is an employment hotspot. When people stop moving to London, then prices will drop. UK <i>net</i> migration is still over 200,000 a year, so that's 200,000 people on the demand-side of property prices.
Most people aren't sending their kids to private school, I stopped reading at the point where they talked about school fees - this simply doesn't affect the majority of people.
While it might happen, I can't help but think articles like this are partly wishful thinking and partly trying to be self-fulfilling prophecies. I find it's extremely hard to get unbiased opinion about markets, even from friends, because you just don't know if they are actually in the market themselves.
Having been observing the market closely for a few months, it does look like the asking prices for many £1-3M properties are being reduced. When you consider inflation is running at 3% in the UK currently it's easy to see house prices fall by 10% this year.<p>On the high end, it's easy to see that figure reach 20-30%. At the entry level of the market though, there is still so much pent up demand for housing I personally can't see any significant falls, just growth flatlining.
The sentence "It’s not all skagheads in tenement blocks running up these debts" really shines a light on the author.<p>Pretty offensive, I thought.
A rather bitter article,let's not forget the last time prices crashed was after the banking crisis 10 years ago, and then subsequently recovered all their losses and went up some more. The fundamental reason for high prices in London is a serious lack of supply. Until that's solved, prices aren't really going anywhere.