London’s housing market took a mild blow in the second quarter as the pace of growth slowed to five year lows. The slow growth is being attributed to high stamp duty rates and a soft buy-to-let market. Interestingly, the rest of the country outperformed London. Is this a sign of things to come?
I believe in 2008 just before the crash similar situation occurred whereby London leads and the rest of the country follows and below I’ll illustrate quite clearly why the market is ready for a drop. I don’t want to scare monger, I look at the facts and I believe that I will be pointing this out to my clients. Wether they act will be solely at their discretion. I am certainly risk off now though.
In the second quarter house prices rose by a mere 1.2%. Well I say mere, personally I believe this figure is very dangerous, we should be seeing house prices rise in line with inflation or we are creating another bubble, although the article quoted suggests otherwise, that prices will steadily decline rather than see a huge depression. To an extent I agree, as long as money is cheap to borrow, that will be the case.
Down from 5% in the first quarter this would be a positive step to normality. We want strong house prices, but we don’t want crashes, it makes property development even more risky and difficult to handle. 1.2% growth was well below the UK average of 2.8% which seems fairly safe and strong. It’s number bolstered by Anglia still growing at a whopping 5% whilst only one region grew slower than London in the whole country. Asserta understands the numbers and is fully equipped to handle the housing market. We’ve seen many market movements over the decades and always managed to come out on top with shrewd planning and proactive measures.
This growth curb might be a good thing considering house prices in London are over 50% higher than the previous boom of 2006. If that figure anything to go by, a sharp adjustment down of 30% shouldn’t really be a surprise because nation wide the pre 2006 price is only 15% higher. To come into line London must drop or the rest of the country follow by another 30% rise and I don’t think the housing market could even close to absorb that cost. Families outside London are now in a position where they simply cannot get on the ladder already. Logic dictates then that housing in London should fall before other areas rise.