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There is a real danger of a house price bubble in London. Discuss - Essay Example

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The property market all over the world is governed by the basic principle of demand and supply, and the London property market is no exception to this rule. When supply of property exceeds its demand, a slump can be witnessed in housing prices, whereas a hike in prices is often…
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There is a real danger of a house price bubble in London. Discuss

Download file to see previous pages... ntly the property prices in London have gone up way too high; too high for investors to believe that there is a very high danger of a housing price bubble within London. This essay seeks to present a case for the high level of risk associated with housing prices in London, and it does so by backing up the case with substantial evidence. The property bubble in London is real, and investors need to exercise caution if they want to come out safe from this scenario.
Looking at media reports makes one thing very clear – the property prices in London have touched their four year low by the end of 2014. This can be linked to the very basic principle of demand and supply like mentioned above. According to a survey of property agents and surveyors dealing in London based property, there a wide consensus amongst market makers that property value in London is likely to follow its downward trajectory as demand for housing falls has gone down, coupled with new projects being announced by builders, thus resulting in a very low volume of transactions (Edwards, 2014).
The high probability of a housing price bubble in London also emanates from the fact that many property holders in London have all of a sudden found their property values going up multi folds. This has made them put their property out in the market for sale and realize profits, as they move to live in county areas. Also, there is a wide believe amongst these investors that the current prices in London are far too high, and the market can crash anytime and therefore it is best to realize profits rather than being a part of the loss themselves as the market witnesses a correction (Bracke, 2014).
Besides the information mentioned above, a few other facts also prove the existence of a property bubble in London. The house price to earnings ratio computed by the famous mortgage lender, Halifax, shows how many times or what multiple of house prices are made up income of buyers. It is rather shocking to note that the ...Download file to see next pagesRead More
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