London property bubble ‘about to burst’
By Bridging Loan Directory -
The Telegraph has today reported that the London property bubble could be about to burst, with the number of “distressed” sellers in the capital rising for the first time, according to one property company.
PPR Estates said it had seen rising number of inquiries from property owners in London looking for a quick sale below the current market price. It said rising unemployment, an increase in the number of company liquidations and a collapse in buyer interest – particularly in areas hit by the recent riots – were to blame.
Nick Hopkinson, the director of PPR Estates, said that over the past few years there had been a rising number of “distressed” sellers in other parts of the country, but London had appeared to be immune as prices continued to rise.
This has changed though within the past two months, with the company now reporting a jump in the number of inquiries from both residential and commercial property owners in the capital who need to access the equity in their home quickly.
“Two very different property markets have emerged in London and across the rest of the UK in the last year,” Mr Hopkinson said. “London has been the one area of the UK to buck the downward house price trend. Prime London prices, limited supply and cash-rich international buyers have masked the real state of the housing market by propping up the national statistics.
“And our company has had relatively few distressed inquiries from London sellers as a result of the unique dynamics in the capital.”
But he said this sentiment had changed over the past few months, a trend particularly noticeable in areas hit by the recent riots – such as Lewisham, Croydon, Walthamstow and Tottenham.
“In the areas we have seen buyers withdrawing. We are also aware of international buyers pulling back from investment purchases as a result of a loss of confidence in the ‘safe haven’ investing benefits of London. As we move into autumn I fear this may prove to be the catalyst that bursts the unsustainable property bubble that built up over the last few years.”
According to the latest data from the Land Registry, in July house prices in London showed increased by 1.3pc over the year. In every other region in England and Wales house prices fell. The biggest falls were in the North East, where prices fell by 8.8pc; in Yorkshire and Humber they declined by 4.5pc while in Wales they fell by 3.4pc.
In the South East and South West price falls were not as dramatic, but property prices fell by 1.1pc and 1.9pc respectively over this period.
PPR Estates said that in the regions negative equity was a growing problem for many home owners. A year ago it was able to help more than 15pc of the “distressed” sellers outside London who contacted the company. Now it was able to help less than 10pc because they market price of their property was less than the value of their mortgage.