Property, London’s gold. You can smell it. The features are timeless and high demand drives the value of this tangible asset class. The world’s wealthiest have forever weaved their way in and out of the prime London housing market. One might say that it is understandable how anyone would want to own a property in a city and country with such depth of history and culture. One has to love the beautiful Victorian and Georgian properties in tree-lined streets, almost statue-like and stern in their grandeur. This sentiment is not shared across the board as certain commentators assert their concern over imbalances in the housing market.
2012 Olympics to Boost London Property Market: Liz Peace
Consensus appears to be mixed as far as the medium term outlook goes. The majority of estate agents are optimistic about property in London, expecting positive nominal growth over the next two to three years. This sentiment is confirmed by data produced by many economists working privately and for the government. The picture for real growth however, may not be so attractive.
Higher rates of appreciation are expected in the prime London housing market with multi-million pound properties experiencing sustained demand. This is attributed to constant, if not improved income growth within the buyer profile for these properties. This is not to forget the major fact that prime London property is considered to be a safe haven asset. As a result, many wealthy individuals from around the globe have been buying up stock and paying a premium for it.
High levels of growth in the prime London market have caused a trickle down effect for years whereby sellers of central London property are holding out for higher prices in the hope that local and foreign investors will pay a premium for this "safe-haven asset". Sellers of property in neighbouring areas would also hold out for longer. This has had the effect of continuously pushing prices up throughout London, especially in areas of relative desirability. Many areas of the UK have faced a buyers market for some time now in contrast to London which predominantly remains a sellers market for the time being.
I find myself increasingly wary of the prevalent trends. It seems that investors are treating property in London as if it were gold. I am not sure for how long this can be supported as interest rates will not remain so low forever. Inflation in the UK has been on the rise and there is growing concern that people's spending power is dwindling rapidly. This is not good news, especially in a zero-growth environment.
2012 Olympics to Boost London Property Market: Liz Peace
Consensus appears to be mixed as far as the medium term outlook goes. The majority of estate agents are optimistic about property in London, expecting positive nominal growth over the next two to three years. This sentiment is confirmed by data produced by many economists working privately and for the government. The picture for real growth however, may not be so attractive.
Higher rates of appreciation are expected in the prime London housing market with multi-million pound properties experiencing sustained demand. This is attributed to constant, if not improved income growth within the buyer profile for these properties. This is not to forget the major fact that prime London property is considered to be a safe haven asset. As a result, many wealthy individuals from around the globe have been buying up stock and paying a premium for it.
High levels of growth in the prime London market have caused a trickle down effect for years whereby sellers of central London property are holding out for higher prices in the hope that local and foreign investors will pay a premium for this "safe-haven asset". Sellers of property in neighbouring areas would also hold out for longer. This has had the effect of continuously pushing prices up throughout London, especially in areas of relative desirability. Many areas of the UK have faced a buyers market for some time now in contrast to London which predominantly remains a sellers market for the time being.
5 years in 1 minute: One Hyde Park: The Residences at Mandarin Oriental, London
One Hyde Park pushes the boundaries of the London prime market, showing that demand is prevalent even in the face of apartments costing circa £6,000 per sq ft.
Interest rate rises in the near future are thought to cause loan default rates that may be similar to those seen 2-3 years ago. This will preclude house price growth and may cause UK house prices to revert to their previous recessionary lows or worse. This would cause yields on rental income to increase as values decline. Many market participators are arguing that rising yields will prop up demand causing values to rise again and revert back to some sort of balance. I am skeptical of whether there will be sufficient interest from home-buyers and/or investors, to keep values afloat at that point.
As an investor it may be wise to revise your buying criteria in order to safeguard against the uncertainty. I would certainly not rush into anything, especially as it seems that buyers and sellers in London are becoming increasingly greedy and bullish about the property market. This is in an environment where half of the UK housing market is still in the doldrums, the pound is weakening and most of the world is retreating to cash and gold and out of illiquid assets.
GREED AND THEUK
Uploaded by sirlenwells on 30 Jan 2011
The short term dip in gold and silver prices is only likely to build the foundations for a more balanced upward movement in these metals in the near to medium term. By investigating the commentary online, enough to make an informed decision, it appears that property prices are certainly not out of the danger zone. As far as London prices are concerned, I am by no means pessimistic about any eventualities in the immediate term. However, I am wary of the fact that a peak has been reached whereby even any short term gains made will be shadowed by stagnant growth in years to come.
Inflation will also have a large part to play in the years ahead, especially if interest rates remain at their current lows. If no precautions are taken, or there is no correction in the near term there may be more severe corrections as the bubble bursts further down the line. If creating debt by printing money is supposed to support the economy, then why would it just mount up with no real positive economic impact? The Federal Reserve Bank and the Bank of England will do what they can for now, propping up the US, the Eurozone and the array of globally interlinked economies until what may become an even more critical point in the not so distant future.
Relevant Video Links:
Bloomberg: Decline in U.K. House Prices to Accelerate 03/10/2011
Gardner Says U.K. House Prices May Move `Slightly Lower' 29/09/2011
As an investor it may be wise to revise your buying criteria in order to safeguard against the uncertainty. I would certainly not rush into anything, especially as it seems that buyers and sellers in London are becoming increasingly greedy and bullish about the property market. This is in an environment where half of the UK housing market is still in the doldrums, the pound is weakening and most of the world is retreating to cash and gold and out of illiquid assets.
GREED AND THE
Uploaded by sirlenwells on 30 Jan 2011
The short term dip in gold and silver prices is only likely to build the foundations for a more balanced upward movement in these metals in the near to medium term. By investigating the commentary online, enough to make an informed decision, it appears that property prices are certainly not out of the danger zone. As far as London prices are concerned, I am by no means pessimistic about any eventualities in the immediate term. However, I am wary of the fact that a peak has been reached whereby even any short term gains made will be shadowed by stagnant growth in years to come.
Inflation will also have a large part to play in the years ahead, especially if interest rates remain at their current lows. If no precautions are taken, or there is no correction in the near term there may be more severe corrections as the bubble bursts further down the line. If creating debt by printing money is supposed to support the economy, then why would it just mount up with no real positive economic impact? The Federal Reserve Bank and the Bank of England will do what they can for now, propping up the US, the Eurozone and the array of globally interlinked economies until what may become an even more critical point in the not so distant future.
Relevant Video Links:
Bloomberg: Decline in U.K. House Prices to Accelerate 03/10/2011
Gardner Says U.K. House Prices May Move `Slightly Lower' 29/09/2011
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