Are We In A House Price Bubble?

Are We In A House Price Bubble?

This question is being asked a lot these days – even on Question Time last night!

Opinions seem to vary about whether there’s a bubble or not, when to me it’s quite clear.

Yes we are.


No we’re not.


It depends where you are. In the UK so many people – and in particular the mainstream media – think the UK = London.

And be in no doubt, London is experiencing a house price bubble unlike anything we’ve seen before.

Tales of gazumping, open viewings with dozens attending, “best and final” offers required – all these are classic symptoms of a house price bubble. Lucky vendors and Estate Agents are able to extract the maximum out of potential buyers.

With stamp duty increasing to 3% at £250,000 and above, mediocre properties that would have sold for less than £200,000 just a few months ago are now achieving this level.

It’s all very different in other parts of the country.

In the North East for example, prices are still static. Definitely no bubble there.

Generally, the closer to London, the more buoyant the market, although regional capitals like Manchester and London are performing well.

So what can we expect to happen to house prices from now on?

Well, again there will be two scenarios – one for London and one for the rest of the UK.

London price increases were initially fuelled by overseas investors buying for cash. This will slow down, and as more and more local people are unable to afford to buy, prices will gradually ease. I expect this to start after the summer.

The rest of the UK will start to catch up. Again, using the North East as an example, although prices are static the number of sales is increasing. A lot of the lower quality stock is now being bought by Investors who see the value here. Supply is still limited though so it won’t be long before prices start to rise.

In fact house prices are probably rising now, we just can’t be sure because the statistics lag the activity. But by August I expect we’ll be seeing prices increasing steadily.

We’ll have bubble talk for some time yet. Uninformed opinion, even from some politicians, is that Help to Buy is fuelling a bubble. Wrong. In London it’s largely irrelevant and in the regions it’s a way that ordinary families can get a mortgage and get on, or move up, the housing ladder.

By Richard Watters

Related posts:

Is the House Price Crash over?
Is The House Price Crash Over?
House Prices Continue To Rise – But What’s Happening Where You Live?

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