Do you think London is in a housing bubble?

[cunningplan101]

The subject is it really ... do you think this is a bubble and prices are going to crash? Or do you think they'll carry on going up? Or flatten out?

If (when) interest rates rise, a 2% or 3% increase on a mortgage £200k will be so much more devastating than the increases on the mortgages of £30k we had in the early 90s.

When I bought my first flat the rate was 9% and it rose to 15% in the run up to the big crash. Hopefully rates will never rise like that - I would guess that the powers will be will stop it somehow. Everyone with a mortgage would be bankrupt.

*Blu this is why they are going to build gazillions of new homes. The intention is to bring demand down, slowly reducing values but also ensuring that if interest rates went up, people could still afford to buy.

People would go bankrupt and may lose their homes but there would be a lot of affordable properties being built and relative values would be low. Rents would also have to come down. Banks would simply have to cut their losses or be lumbered with an empty property they can't sell.

taking the Central London / Russian Oligarchs / Middle Eastern Sheiks out of the equation - and afterall they are only really interested in a very small bit of London - I really wonder if all these 20/30 something cash buyers are being funded by their parents? - they can't all be bankers after all and, as many have pointed out, virtually every family house sold in London these days (and the suburbs) seem to have youngish cash buyers wafting about. Surely this is just the end of a particularly unique phenomenon - that the baby-boomers that bought in the 60's and 70's for 15/20K are now dying/going into homes/releasing equity and selling the same houses for 1million plus? Therefor there is a unique generation who have made silly money in a relatively short time and are enabling the next generation to buy at a far inflated level.

They won't be able to do the same for their children. Surely this is still part of a one-off unique event. It won't happen again. How will their children pay millions for family houses in London on normal jobs?

Google wouldn't have gone to Birmingham. There's a far bigger pool of good quality talent in London!

Of course. Cos people in London are so much more talented than the people in Birmingham, so talented that they won't move two hours up the road to get a job.

Google's HQ in the US. Intellectual hub that it is:

www.google.com/maps/place/37%C2%B025'23.4%22N+122%C2%B005'05.7%22W/@37.423478,-122.0841,3a,75y,180h,86.95t/data=!3m5!1e1!3m3!1sBM2dOE-xWsMAAAGut301aQ!2e0!3e11!4m2!3m1!1s0x0:0x0?hl=en

I didn't say they were more talented. There's just more of them in London, ie 'bigger pool'. So a better chance of getting exceptional talent, yes.

OK, "the population isn't as transient as it is in North London" - that might sit better.

Sorry I used the wrong expression. It's the way others see it, not me. They are the racist ones. They won't live in areas where there are lots of immigrants and won't send their children to school there, the house prices go down. It's the reality of modern London and the way others see it.

I am an immigrant myself and fairly civilised.

We are just about to buy in London. Trying to decide on a small Central London flat for £650-700k or push the boat out for suburbs for £1m plus. We don't need the extra space as it's just the two of us, but thinking ahead we may decide to have kids (leaning towards no kids still)

Just don't know what is the better financial decision. Any thoughts??

Apatite it depends what lifestyle you want. If you want space, move further out. If you don't there are plenty of options. If you want a community feel where you can talk to neighbours I think central london has lost that now completely so you'd be looking at areas outside zone 1. When you have kids you will probably rethink it and move anyway.

House

Flats are still being built, which means houses are in shorter supply, so always going to be in demand

I hear you. Horsetowater, you're probably right that we'd probably rethink everything once we have kids, so I guess it's not entirely pertinent to buy based on what ifs right now.

We will go outside zone 1, anyone know where would be a nice place to buy south of the river in zone 2/3?

Some of Tp's comments seem good,

I still say 'you' need gov intervention to reign in prices

I do think one of the best ones is rental income taxed before deductions, seems entirely fair, and would really sort out the problem of family houses being held for various reasons that plus oh let me see no IO mortgages on properties rented for over 1 year would do it very nicely I think

I don't think anyone can really come up with acceptable objections to either of those although I am entirely open to hearing them.

Maybe couple that with a phasing in over 24 months of interest rates up to 6%.

I still say 'you' need gov intervention to reign in prices

but the government are doing the exact opposite
they are pumping prices UP with £6,000,000,000.00 of taxpayers money

the government should not get involved in house prices
it should let banks go to the wall if their mortgage book is crap

but it SHOULD tax land - as is the case in every other developed country

All true but we have had so much ramping of house prices by govs (previous labour mainly) that people believe that they won't drop, the gov will step in to stop it happening etc etc

Private pyramid schemes involving homes need to loose their taxpayer funded gov orchestrated subsidy

(and yes we need proper land taxes)

Aberdeen is also a housing bubble : m.scotsman.com/news/scotland/top-stories/aberdeen-is-no1-property-hot-spot-in-uk-1-3335496

I'm always confused when people say "the government" will prevent house prices falling.

Governments don't want many things to happen - they don't want inflation to take off, they don't want deflation, they don't want house price crashes, they don't want high unemployment, they don't want a weak pound but they want to protect exports....and on and on...

All of the above happen (enough examples through history!) despite the wishes of government (or the BoE for that matter). They can juggle, but many of the influencing variables are external and outside of their control.

there wasn't a fall in prices in our area in London in 2006 onwards - I sold a house in 2006 for 720k and it sold again in 2012 for 1.2m. now houses in that street are up from 1.5m to 2m.

(I am more than slightly gutted that I moved out of the area to one blighted by the recession with house prices that did fall from 2006 ).

We're in London, and thinking of moving. The scramble for houses that come on the market round here is nuts. A nearby ground floor one bedroom flat with nice but small (obviously) garden recently had nearly 50 viewings in one day, 20 offers and was sold for over a fifth more than the asking price. It's a nice enough flat, but come on!

There's a new development up the road that was sold in record time - I think a week from putting the flats and houses on the market to all sold. And guess what? Only a quarter of it is inhabited! We have friends living there and they say that it's like a ghost town. Overseas buyers are going mad for investing in London property, especially in the area I live in.

We're in two kids about selling this place. The main reason being the discrepancy between London prices and non-London prices is alarming enough to make us wary of never being able to get back on the ladder, should we need to.

Two kids? Two minds. Sorry, typing and eating never a good combination.

Beattiebow commiserations I understand. We 'lost' about half a million in 10 years by moving out from zone 1 to zone 2. It's all relative though, you do what you can at the time. In the end it's a family home not a financial game (I keep telling myself). The first flat I bought in 1986 is now worth £750k, my current 3 bed home is worth £650 so no great property gains for me!

Meanwhile my old Mum lives in a £2M property and still thinks it's worth £40K and she's definitely not downsizing. It's utter madness. All I can say to people outside the 'bubble' is - it's not real, it's a shimmering illusion drawing people in out of fear. Don't feel you are missing out. Take the lower pay and enjoy a life outside London where life is still real and people talk to each other.

Beatie I think when you sell a house you should never go and check it's history afterwards - that is only going to upset you!

Do you like the area you're in now though? I think if you do (and obviously don't need to move) then it's all relative, it's a home, try not to think of the money side. And I say this as someone who could make a 'tidy profit' if we sold today but we have plans that mean we need to stay in the UK for another 2 years (by which time I would think the prices in London have popped...) and will probably be kicking ourselves then...