Property Boom, Property Bubble!
These are the two most common statements in the last couple of weeks from the national press as they work themselves into yet another frenzy trying to decide if we are about to crash and burn once again. I have to admit a property boom is what we are experiencing right now, with house prices seeing a crazy 9.7% increase in London over the year to July according to the Office for National Statistics (ONS). House prices in London and the South East both raced past their 2008 peaks and stood at an average of £438,000 and £303,000 respectively, while prices in the East of England and the South West also edged close to their previous highs. The annual pace of house price inflation picked up across the UK in July to its fastest rate recorded in 2013 so far at 3.3%, taking values to £245,000 on average. Prices rose by 0.3% month-on-month. Concerns have mounted in recent weeks that Government initiatives to kick-start the housing market such as Funding for lending and Help to Buy are in danger of creating a property bubble, with borrowers over-stretching themselves as access to low-deposit deals returns. Last week, the Royal Institution of Chartered Surveyors (Rics) suggested that a 5% cap should be placed on annual house price growth to stop any future house price bubble and borrowers taking on too much debt for fear of missing out on a boom which I think is a sensible idea. In the short term, a shortage of homes on the market in London is likely to spell further price gains in the capital, but the return of many new builds now hitting the market should ease the problem slightly. The huge demand for property in the most desirable parts of the capital, from both UK and overseas buyers, is helping to push prices higher. I am seeing a continual stream of Buy to Let overseas investors keen to secure property in the UK as good news surrounding the boom of the UK property market reaches them. Many buyers feel concerned about this and have asked me if I think it’s a good idea to be buying now in case we have a repeat of what happened before. I think not given the caution that still prevails amongst the lenders and the surveyors, I don’t think they will be fooled again into thinking they are invincible and buyers too are very aware of what can happen if it all goes wrong, with that in mind I think we should embrace the positive conditions of the market but stay realistic and grounded at the same time.