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Our CEO Richard Palfreeman gives us his views on the housing bubble theory

17 Sep 2013
This summer proved to be the busiest for the housing market for quite some time, with regard to both sales and lets. In fact, the buy-to-let market continues to go from strength to strength and mortgages for the sector are at a 4-year high. Add to that the rise in prices, particularly in London, and the government’s Help to Buy scheme boosting new property sales and it’s probably one of the best times to be an estate agent in recent memory.

Will there be a “housing bubble”?

Whilst critics make noises about the new housing bubble and predict gloom, this doesn’t seem to be happening anytime soon.  In fact, looking at the previous “pre-crash” boom it seems that the current rise in activity in the housing market isn’t even close to the level it was back then.  Whilst prices are rising, this remains at less than 5% per year, according to the Halifax and Nationwide. Despite media reports predicting that it will all end in tears, at the moment the economic and housing market recovery looks strong.  Repossessions are at a six year low and mortgage arrears are lower than they have been since 2008. And we’ve seen the return of first time buyers who accounted for more than half of all house purchase loans taken out in London in the second quarter of this year, recent data from CML has revealed.

More properties need to come onto the market

It is now crucial that the supply of property improves so that the goal of a significant increase in transaction numbers is not overshadowed by an unsustainable boom in property prices. Providing assistance with the purchase of housing artificially props prices up. We have witnessed this twice before.  When it became easier to borrow money during the 1980s house prices rose.  Even after the 1990s downturn the market just kept finding ways to lend people more money, allowing prices to rise again. For prices to stabilise there needs to be a significant increase in the supply of housing for sale and rent.
Warwick Road 4 bedroom house for sale in W5
Prices for property in Ealing have gone up by 14% in the last year
As Professor John Kay recently commented in the Telegraph, government policies should focus more on increasing the supply of housing, rather than “encourage people to bid up the price of existing stock”.

Property prices in London

House prices are currently around 12% higher than the lows seen in the midst of the financial crisis, though they are still around 10% below the all-time highs recorded in late 2007. London has been affected by external factors like overseas interest and wealthy individuals in the Eurozone looking to protect their money.  Consequently there is a lot of foreign money in London that is not in the rest of the country and this is boosting prices. You may be interested to know that prices in Ealing have soared by more than 14% over the past year and are now at a record high! To book a free, no obligation valuation showing what your property is worth today call us now on 020 8740 6622 or e-mail us at [email protected]

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