Is There A Bubble Around Uk Properties?
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Is There A Bubble Around Uk Properties?

Let's first look at what is meant by a housing bubble. A bubble means that the price of certain assets, in this case property, bears no relation to other basics of life. In other words the price of property keeps increasing whereas other fundamentals of life seem to have reached an affordable level. The only way to make any money in a bubble is to find a less financially savvy person to take the asset off your hands.

So let's look as whether there is in fact a bubble around UK properties. One way is to compare the cost of buying against that of renting. Both prices in the UK at the moment are comparatively high, when related to incomes. In many other countries it is still cheaper to buy rather than rent. In the UK, particularly London, this is not the current state of play. UK house prices are currently 1/3 above their value, in the long-term, related to rents. In London a rental property is likely to yield a gross rental of around 5%. Slim pickings indeed for any prospective landlord. All this suggests a bubble. It makes sense that things need to change, either prices fall or rents increase.

The UK housing market is not however bubble proof. While an investment in bricks and mortar can be reassuring economic history shows that your money is not 100% safe when invested in property. All over the world prices have in turn slumped and risen again from the ashes. In the US current house prices are cheaper now than in the late 1970s and in Japan they are more than half what they were in 1993. There is something slightly different about the London housing market though. It seems to have become an investment hotspot for foreigners who are looking for somewhere safe to stash their cash. Foreign buyers usually look for property in areas where they have connections and the community is made up of like minded people. Services such as Mr Rubbish Harrow are provided by companies that are sympathetic to peoples circumstances.

Research has shown that when trouble hits other countries, such as Greece for example, areas in the capital with a high percentage of Greek residents experienced a demand for housing. It also shows that the world in general is due a slump. It is likely that house prices in other countries will need to rise to catch up with prices in the capital.


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