The London Property Bubble

Michael Wilson, Mountgrange Heritage SalesAll the talk of recent months has been about the London property bubble following incredible price rises of nearly 20% in London over the past year. I have never felt that the ‘bubble’ analogy is a good way to describe the London property market as it suggests potential for a sudden pop where everything implodes and prices plummet. London is just too strong a city for that and as recent data shows we are re-gaining our crown as the Capital of the World thanks to billions of pounds of foreign investment which has flooded in over the last few years, creating new jobs and demand for more housing.

I don’t see London falling from grace, however there are factors in play that will result in the rhythm of the market changing over the coming year, particularly in the first half of 2015; the potential for an increase in interest rates (although we expect rates to sit well below historic averages for a long time to come), the general election next May and the strengthening of the pound which makes London a little more expensive for foreign buyers.

These factors could result in a slight deflation of the market and I believe it could become a little more sluggish with price acceleration subsiding. So the right analogy should really be the London housing balloon rather than bubble because we’re much more likely to see a small deflation rather than a pop. That said, the behaviour and strength of the market has surprised us all over recent years so the balloon could easily continue to swell as the irrepressible appetite for London property from both those who live here and those who invest continues.

Michael Wilson
Director – Head of Sales, Mountgrange Heritage
4 June 2014

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