UBS are warning
The government’s Help-to-Buy Scheme, attractive options for buy-to-let investors and low interest rates on property finance have all contributed to house prices rising exponentially since 2013, so much so, that demand continues to exceed supply. A recent report by UBS stated that London is now the most overvalued market in Europe and catching up with other cities such as Hong Kong.
London 2nd on the “bubble risk” radar
Swiss bank, UBS, studied 15 cities worldwide and London is confirmed to be second on the “bubble risk” index, resulting in a warning from UBS that London property prices are significantly overvalued and a “substantial price correction” could see the market crash within 3 years.
Despite the fact that real earnings in London have fallen by 7 percent since 2007, price-to-income and price-to-rent values have soared in the same period.
Graph provided by UBS
The graph by UBS above, shows London has now reached the “bubble risk” zone on the index, along with Hong Kong.
Average property prices
A report by Nationwide showed the average house price in the UK is now just short of £200,000 (£196,807), representing a 0.6 percent rise in 6 months and 3.9 percent annually.
However, in London it’s a different story with the average house price in excess of half a million – £531,000.
Graph provided by The Telegraph
Action being taken
The Bank of England have already called for a review of the buy-to-let mortgage market regulations, as it is viewed as a potential risk area to the future financial stability of the UK.
As for the rest, the warnings have begun, so now we wait to see the action the officials and government will take in response.
Dental & Medical Financial Services keep track of economies and market trends to provide the best advice possible to doctors and dentists. If you have a question about buying property in London, call our team.
Tel: 01403 780 770