Tuesday, April 1, 2014

London living through biggest house price bubble ever

by Jonathan Prynn

'Unreal' property market in capital soars by 13.8% in a year

'Detached from reality': average house prices in the capital have surged to a record £414,356

The average London house price surged to a record £414,356 last month as a new report said the capital's boom is now the biggest property bubble in history.

Experts said the London market is now “detached from reality”, as prices rocketed by 13.8 per cent in the year to February — the fastest rate since 2007 — according to latest Land Registry figures. An explosion in the number of first-time buyers scrambling on to the ladder and easier access to mortgages have contributed to heating up the market.

Another factor is the tidal wave of foreign cash drawn by London’s status as the world’s premier “safe haven” investment. The latest increase means that the typical London home has gone up in value by just over £50,000 in a year, far outstripping the capital’s average salary of £36,781 in 2013.

But it immediately revived fears that the “dysfunctional” London property market is now out of control, with frenzied buyers creating a new bubble that will end in a disastrous crash when interest rates start to go up.

It also follows comments from the Prince of Wales this week warning that an entire generation of young Londoners is in danger of being priced off the property ladder.

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Campbell Robb, chief executive of housing charity Shelter, said: “Another rise in house prices is another rise in people priced out, with thousands forced to watch their dream of their own home slip even further out of reach.

“The Government’s own figures predict house prices will continue to climb and it should start meeting people halfway by urgently addressing our shortage of affordable homes.”

The Land Registry figures were published as a survey ranked this London boom as the biggest speculative housing bubble in economic history.

Research commissioned by the Discovery Channel estimated property in the capital has increased in value by £1.2 trillion in the five years since prices started to recover in spring 2009 — dwarfing the Klondike gold rush and the Victorian railway mania.

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