Next Brick to Drop on UK Economy: Housing Bubble Deflates
London home prices are already tanking, as demand sags.
The symbiotic sectors of construction and real estate have been a vital engine of economic growth in the United Kingdom for decades, but that could be about to come to an end. In the words of Paul Smith, the chief executive of the UK’s largest independent lettings and real estate agency, Haart, “unaffordability in the UK’s property market is now reaching crisis point.” If drastic measures are not taken to tame prices, the UK could lose its place as a property owning democracy, he warns.
The latest figures published by the Office for National Statistics (ONS) reveal that the average cost of a home jumped by £10,000 in June from a year earlier, to £223,000. In the last eight years prices have surged by almost 50%. Its National House Price Index is now 18% higher than during the peak of the prior housing bubble (September 2007). This chart is for the UK overall. But home prices in London have now turned the other way.
Demand is already sagging. In the first six months of 2017 alone, first-time buyer registrations dropped by almost 20% across Haart branches. It seems that a trend that began in London is now going nationwide.
For well over a decade soaring property prices have priced most Londoners out of the market. The number of homeowners in London in the 25 to 29 age bracket has dropped more than 50% since 1990. Foreign buyers have virtually cornered the market, acquiring as much as three-quarters of all new-build housing in the capital in recent years.
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