London house price bubble: is it time to quit the capital?
Anxiety over booming property market grow, and as prices rocket homeowners should cash in
THE rumbles of anxiety over London's booming property market are getting louder, says Katie Allen in The Guardian. Against a backdrop of soaring demand and reports of mobbed viewings, housebuyers are now paying more than 99 per cent of asking prices, according to Hometrack. That's "the highest proportion seen for a decade".
With the cost of the average property in the capital approaching £500,000, the gap between London and non-London property prices is now at its widest ever. Last week, the Bank of England warned that almost one buyer in five is taking out a "high income-multiple" loan in a desperate scrabble to get on the ladder before it is lifted completely out of their reach. There are fears of an unsustainable bubble.
Sound of the suburbs
In central London, where prices (up 13.1 per cent year-on-year) are now beyond "all but the very wealthy", demand is still being stoked by foreign buyers, says The Sunday Times. The upshot, according to developer David Galman of Galliard Homes, is that even "a grotty studio of crack-den quality" costs over £1m in Mayfair. Some suggest prices may double to £10,000 per square foot within five years.
As the billionaires continue to maintain a stranglehold over prime central London, the merely wealthy "are being pushed out to the leafy streets of Zone 2" – and further. The latest Land Registry figures show that the hotspots with the highest house-price growth over the past year are Hackney (up 21 per cent) and Waltham Forest (up 20.1 per cent). Agents in popular migratory cities such as Oxford and Cambridge also report "a rampant market".
Hometrack's historic data suggests that when the gap between asking and agreed prices is this narrow, it's a reliable sign that prices are about to peak. So if you live in London, do yourself a favour, says Merryn Somerset Webb on MoneyWeek.com. Bank your "vast gains" and move out. The current price gap with the rest of the country is bound to narrow eventually. Assuming you want to live in a Wiltshire manor house with acres, "rather than a three-bedroom terraced mini-home in Balham", there's rarely been a better time "to make the trade".
A version of this article appears in the 4 April 2014 edition of The Week