> The London property market is overvalued by as much as 50pc, raising fears of a looming correction, according to a leading global ratings agency.
> S&P Global Ratings, part of S&P Global, used long-term average prices of properties and compared them with income data for its calculations.
> Alastair Bigley, a researcher for the agency, warned that prices were likely to fall.
> “A combination of low rates, the stamp duty holiday and excess savings amid the pandemic have driven property prices higher, particularly in London and the South East where overvaluation relative to income over the long-term is as much as 50pc,” he said.
> “We expect a greater correction in property prices in an overvalued market.”
> Outside London, S&P estimated that property was overvalued by 20pc.
> Mr Bigley said that house price rises were “a consistent trend” across the pandemic, which was not initially noticed due to the disruption to the international economy. Prices had also risen sharply across Europe since the pandemic began.
> The overvaluation did not necessarily affect home owners because higher prices gave them more equity and had minimised defaults.
> UK house prices hit a fresh record high on Monday, jumping nearly £6,000 in a single month amid a rush to buy before mortgage costs rise further.
> According to property website Rightmove, the average home now costs £354,564, the first time asking prices have risen above £350,000.
> It came as homeowners increased their asking prices by an average of £5,760 or 1.7pc in March, the largest monthly rise in spring since 2004.
> Rightmove’s Tim Bannister said that the market is expected to slow in the second half of the year as economic headwinds dampen consumer confidence.
> “We’ve just seen interest rates rise again, and there are further incremental increases forecast for the year which will raise mortgage rates for some,” he said.
> “Inflation and cost of living increases are also likely to affect buyer affordability and market sentiment.”
*Only* 50%? I am genuinely surprised it is that low TBH. Or did they drop the leading “1” by mistake?
Hard to disagree. Prices in London are ridiculous and prices outside London are chasing London prices.
I’ve been saving all my cash for a while trying to buy a house and now it looks like it’s almost within reach I’m worried about buying something and being plunged into negative equity in times of instability or not buying and my savings being eroded while house prices shoot up even more.
Next time someone on this sub says “but I pay more than the monthly payments in rent, why cant I have a mortgage?” – this is why. The regulators cannot allow a situation where people go into negative equity, otherwise its 2008 all over again.
What nonsense is this? Nobody is going to sell their home unless it’s foreclosed and is a distressed sale. If you buy a home for 250k and somebody says it’s only worth 125k then you ain’t gonna sell for a huge loss over your purchase. Moreso if you have a mortgage. House prices will be up, up, and away so ignore this nonsense.
Correction won’t happen anytime soon. Too many people have the equity to keep buying properties meaning the market never gets a chance to right itself. Demand need to be cut to make being a landlord less attractive and they will stop buying up so many properties.
Funny what happens when all the Russian money dries up.
We can only hope… (as written by someone trying to buy their first home)
Asking prices are not sold prices, and upscale london property behaves different from budget london property.
Live in a 2 bed ex council flat in zone 3 near canary warf, and the price has been static since 2017 when I bought. At the time I payed the same as other sold prices in th block. Every few months another flat in my block goes up for 25% more than the 2017 price, and then end up accepting the 2017 price +-5% depending on whether it has a new kitchen.
I am seeing plenty of these flats going up now for high prices, but that does not mean they will be sold for these prices, and in the past they have not been.
Outside London, my sister got 20% off the asking price for a house last year.
We will know what the price movements are in 6 months when we get the agregate sold prices data. Anything before that is the word of estate agents, and do you trust them?
Genuine big price moves have happened in rural and low cost areas, as work from home has allowed people with high incomes to move there. Colleague in a village near manchester talking about 100% price increases. Is it sustainable? Well the fundementals have changed but 100% is a lot. Will it take money out of the London market? Possibly
2% base rate probably won’t effect the market too much, but 5% sure would. Where will we end up?
My brother is buying his first ever place in London right now. Gulp.
Never gonna happen. With business’s opening and returning to the office the demand will go up as will the prices.
We’ll only see a correction if there is a return to mass unemployment with thousands of people defaulting on their mortgages and entering rental arrears over a year. Maybe also a flavour of telling foreign investors buying to let to fuck off from sapping our high rental payments.
This will flood the market with buy to let failures and homes families are selling under distress.
If that happens you’ve got more issues than affording a mortgage. But at least people buying for the first time with a job may finally get a property.
If you know how to work out risks and call markets on their bullshit, do you a) go work at a rating agency for 20k a year or b) join a hedge fund and make 20k a day?
The answer to this question is why rating agencies are useless and know nothing and so often have to derate things after they already crashed.
14 comments
> The London property market is overvalued by as much as 50pc, raising fears of a looming correction, according to a leading global ratings agency.
> S&P Global Ratings, part of S&P Global, used long-term average prices of properties and compared them with income data for its calculations.
> Alastair Bigley, a researcher for the agency, warned that prices were likely to fall.
> “A combination of low rates, the stamp duty holiday and excess savings amid the pandemic have driven property prices higher, particularly in London and the South East where overvaluation relative to income over the long-term is as much as 50pc,” he said.
> “We expect a greater correction in property prices in an overvalued market.”
> Outside London, S&P estimated that property was overvalued by 20pc.
> Mr Bigley said that house price rises were “a consistent trend” across the pandemic, which was not initially noticed due to the disruption to the international economy. Prices had also risen sharply across Europe since the pandemic began.
> The overvaluation did not necessarily affect home owners because higher prices gave them more equity and had minimised defaults.
> UK house prices hit a fresh record high on Monday, jumping nearly £6,000 in a single month amid a rush to buy before mortgage costs rise further.
> According to property website Rightmove, the average home now costs £354,564, the first time asking prices have risen above £350,000.
> It came as homeowners increased their asking prices by an average of £5,760 or 1.7pc in March, the largest monthly rise in spring since 2004.
> Rightmove’s Tim Bannister said that the market is expected to slow in the second half of the year as economic headwinds dampen consumer confidence.
> “We’ve just seen interest rates rise again, and there are further incremental increases forecast for the year which will raise mortgage rates for some,” he said.
> “Inflation and cost of living increases are also likely to affect buyer affordability and market sentiment.”
*Only* 50%? I am genuinely surprised it is that low TBH. Or did they drop the leading “1” by mistake?
Hard to disagree. Prices in London are ridiculous and prices outside London are chasing London prices.
I’ve been saving all my cash for a while trying to buy a house and now it looks like it’s almost within reach I’m worried about buying something and being plunged into negative equity in times of instability or not buying and my savings being eroded while house prices shoot up even more.
Next time someone on this sub says “but I pay more than the monthly payments in rent, why cant I have a mortgage?” – this is why. The regulators cannot allow a situation where people go into negative equity, otherwise its 2008 all over again.
What nonsense is this? Nobody is going to sell their home unless it’s foreclosed and is a distressed sale. If you buy a home for 250k and somebody says it’s only worth 125k then you ain’t gonna sell for a huge loss over your purchase. Moreso if you have a mortgage. House prices will be up, up, and away so ignore this nonsense.
Correction won’t happen anytime soon. Too many people have the equity to keep buying properties meaning the market never gets a chance to right itself. Demand need to be cut to make being a landlord less attractive and they will stop buying up so many properties.
Funny what happens when all the Russian money dries up.
We can only hope… (as written by someone trying to buy their first home)
Asking prices are not sold prices, and upscale london property behaves different from budget london property.
Live in a 2 bed ex council flat in zone 3 near canary warf, and the price has been static since 2017 when I bought. At the time I payed the same as other sold prices in th block. Every few months another flat in my block goes up for 25% more than the 2017 price, and then end up accepting the 2017 price +-5% depending on whether it has a new kitchen.
I am seeing plenty of these flats going up now for high prices, but that does not mean they will be sold for these prices, and in the past they have not been.
Outside London, my sister got 20% off the asking price for a house last year.
We will know what the price movements are in 6 months when we get the agregate sold prices data. Anything before that is the word of estate agents, and do you trust them?
Genuine big price moves have happened in rural and low cost areas, as work from home has allowed people with high incomes to move there. Colleague in a village near manchester talking about 100% price increases. Is it sustainable? Well the fundementals have changed but 100% is a lot. Will it take money out of the London market? Possibly
2% base rate probably won’t effect the market too much, but 5% sure would. Where will we end up?
My brother is buying his first ever place in London right now. Gulp.
Never gonna happen. With business’s opening and returning to the office the demand will go up as will the prices.
We’ll only see a correction if there is a return to mass unemployment with thousands of people defaulting on their mortgages and entering rental arrears over a year. Maybe also a flavour of telling foreign investors buying to let to fuck off from sapping our high rental payments.
This will flood the market with buy to let failures and homes families are selling under distress.
If that happens you’ve got more issues than affording a mortgage. But at least people buying for the first time with a job may finally get a property.
If you know how to work out risks and call markets on their bullshit, do you a) go work at a rating agency for 20k a year or b) join a hedge fund and make 20k a day?
The answer to this question is why rating agencies are useless and know nothing and so often have to derate things after they already crashed.