London is heading for a house price bubble by the end of the year according to figures produced by academics at Lancaster University.
The institution’s UK Housing Market Observatory - a quarterly report produced by the university’s Management School department of economics - says that if house prices in the capital continue at their current rate of 2.9 per cent per quarter, they will reach “price bubble-type behaviour” within the next 10 months.
The latest quarterly analysis - which you can see here - says UK property prices have generally hit historic highs, exceeding even their peak pre-downturn values of 2007. In particular London house prices rose 11.6 per cent in the past year.
The institution uses terminology unfamiliar to most housing market observers and agents - for example, it describes the London market as ‘“exuberant.”
However, it makes clear its alarm at what is happening when it says:“The last time that Greater London real house prices were identified to be in an exuberant phase was the fourth quarter of 2007, while the last time that the ratio of London real house prices to London real personal disposable income was identified to be in an exuberant phase was the first quarter of 2007. However, it is interesting to note that the statistic has been increasing over the past two years and is currently close to its critical value, signalling prices could soon move to an exuberant level.”
The academics say there are no signs of this ‘exuberance’ at the national level, although those regions closest to London values - the Home Counties, referred to in the university report as ‘Outer Metropolitan’ - may also be vulnerable to a bubble.
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