Im calling it.....

[semi-pro waster]

That's what people said about the real estate bubble of the early 2000s too, just because prices are continuing to rise astronomically doesn't mean it can continue forever.

Maybe it can't continue forever but without a drastic change (either an increase in housing stock or reduction in demand) it seems likely that the pressure on London's housing will continue to force prices up and/or people to move further out seeking value with an acceptable commuting time.

There might be a slowdown/correction/whatever you want to call it but even allowing for the effects of the global recession in 2007/08 absolute prices are on on average higher now than they were then, real prices (i.e. adjusted for inflation) still appear to be heading back up to that peak but they're not all that far off.

It's possible we've hit a peak, or perhaps a plateau might be more accurate, but in the longer run I'd suggest property is still likely to be a pretty decent investment.

 

[pedromaltez]

Generation rent.

indeed...

 

[Tefal]

Ah, the Glaucus school of literacy must be taking on new students.

I'll have you know i was typing ilegibly long before glaucus started using a tablet!

 

[Vince]

I hope it doesn't drop too much, we bought two years ago in the south east and needed to have it valued a few months ago for a remortgage. The value that they put on it was IMO ridiculous, some 45% more than what we paid for it.

I agree that it can't keep rising like it is.

 

[muon]

I have an insight into this I cannot disclose specifically but I agree. I have seen property prices drop, lenders down valuing new build property prices, developers being unable to sell. A particularly large developer in London currently has a large stock of 1-2 bed flats in what really are undesirable areas, that they can't shift, including foreign buyers walking away after exchange of contracts.

There are so many places that are screwed. Massive bubble in new build prices that went pop a few months ago. None more so than here:

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

Morgan Stanley put a note out earlier this year.

http://www.standard.co.uk/business/...m-on-london-luxury-flats-bubble-a3193576.html

If the UK leaves the EU, the market will truly disappear for £500k-£2m highrise premium flats.

Developments in Greenwich, Lewisham etc. selling £400k-£500k flats are looking very shaky.

 

[Maccapacca]

I hope it doesn't drop too much, we bought two years ago in the south east and needed to have it valued a few months ago for a remortgage. The value that they put on it was IMO ridiculous, some 45% more than what we paid for it.

I agree that it can't keep rising like it is.

Why do you hope it won't drop? You're 'in" the system and with little to no chance of falling into negative equity what does it matter to you? Unless you're prone to remortgaging to the hilt to buy stuff?

In fact if you're moving up the ladder then a fall would benefit you more as you won't have to borrow as much to move on.

 

[Tefal]

Why do you hope it won't drop? You're 'in" the system and with little to no chance of falling into negative equity what does it matter to you? Unless you're prone to remortgaging to the hilt to buy stuff?

In fact if you're moving up the ladder then a fall would benefit you more as you won't have to borrow as much to move on.

cause if it drops its likely to affect far more than house prices.

 

[Amp34]

Is London the only city in the uk or something £400.000 for a flat above a chippy no thanks.

That's not far off a what a friend got last year, except it was just under £400k and above a mattress shop...! Prices are mental, but they are in most sought after cities around the world (NY, Sydney etc).

 

[Rifte]

I am not an investor, I do have a property in London that I rent out, and it has gone up siginficantly in value.

When the next crash happens......and lets not fool ourselves....its coming, I am anticipating that my property will take some form of hit. Will it wipe out the equity gains I have had in the past 6 years? Unless the crash is epic I dont think so.

Too many people and too many industries are simply too tied into the housing market for it to collapse long term.

 

[jonneymendoza]

great thread

 

[Rifte]

Why does it..the more wealthier of folks will continue to buy and sell?,..nothing will change for the average joe,Housing will continue to be expensive while our wages will stay the same crap so many of us young folk will never be able to afford one.

Generation rent.

Agreed, until there exists a balance without the huge disparity between jo average and the super rich (and this aint ever gonna happen), the rich will dictate prices in London.

 

[Randomface74]

why do you think it'll crash? I don't see supply or demand changing much.

 

[Freakbro]

why do you think it'll crash? I don't see supply or demand changing much.

If what people are saying is true and foreign investment money is starting to walk away and investors are struggling to sell the properties they have, then it looks like demand is already falling.

It's not like your average worker or EU migrant are buying these properties

 

[Vince]

Why do you hope it won't drop? You're 'in" the system and with little to no chance of falling into negative equity what does it matter to you? Unless you're prone to remortgaging to the hilt to buy stuff?

In fact if you're moving up the ladder then a fall would benefit you more as you won't have to borrow as much to move on.

It matters because recent changes in value means that the LTV is significantly changed and with greater equity in the property you can get a far better deal and pay much lower interest rates. The net result being reduced payments and a reduced term.

I am not concerned about negative equity and would certainly never remortgage to buy any "stuff".

 

[RoboCod]

I hope you are right - I'm holding off making any moves hoping at some point there will be a reset and I can use my money to good effect biding my time.

How exactly would a reset work in your eyes? Without completely wiping out any equity built up by millions of people that is?

 

[Rifte]

How exactly would a reset work in your eyes? Without completely wiping out any equity built up by millions of people that is?

I suppose reset to what? 2007/2008 post crash prices or much earlier?

I think we have passed the ability to reload a saved game on this one.

 

[Yaayuh!]

The only way is up, baby!
For you and me now.

 

[Uther]

If only people bought a house to live in rather than as an 'investment' the country would be a very different place.

 

[h4rm0ny]

But in the early 2000s the was not as much immigration and foreign investment.

Investors are buying up property in London off plan and not even living in them, then shifting them on when the price goes up.

That, to me, just says "bubble" even louder.

China has economic slowdown and a vast property bubble of its own. Middle East oiligarchs are still wealthy but whether the fashion for buying up London properties as investments continues, I have doubts... They buy them up as status symbols and because the value keeps rising. As prices start to top out (you can only go so high on a house before the disparity between price and worth is too great to pretend it isn't there), that will no longer be true and they will begin to leave.

London is inarguably propped up by a lot of foreign purchases and people who buy as investments. There's no steady state in such a scenario. I.e. if it stops rising as quickly (which I think it is doing correct me if I'm wrong), then it starts approaching the point where the rise is below the desired level for investors and they stop buying and start selling. Once that process begins, you can't stop the tide coming in, no matter how much money the government throws into the ocean.

OP - I can't testify if your timing is right or wrong, but I think you are correct that it will happen. Maybe something like in the next five years. In the next ten it will certainly have happened, imo.

Also, The Big Short is a good film and yes I have watched it recently!

 

[Em3bbs]

I suppose reset to what? 2007/2008 post crash prices or much earlier?

That crash didn't affect prices in London or the South East much though, just look on Zoopla. I purchased a house in Feb 2007 just before the crash and sold it this year in March for 50% more, it never even dipped in value.

And no, I don't think there will be a crash. People have been saying this for as long as I can remember, and stupidly I didn't buy a house in the 90s because of it! Over the period of a mortgage when have houses *ever* dropped in value by the end? It will never happen.