Forever Blowing Bubbles.
Welcome to my weekly property blog... this week, we're going to take a look at property markets around the world and why London is (or isn't) overvalued.
Hong Kong topped the list of overvalued cities and here is a good place to start when we are evaluating the impact on London's bubble potentially bursting. As anybody who has visited will testify, Hong Kong is a bustling metropolis where you are busy or busier still. Even when you visit as a tourist, you feel like you are living at an incredibly fast pace because so much is going on to heighten your senses. This is precisely the reason why property prices are so high. When there are almost 7000 people per sq km on the island, is it any wonder why property prices are so high?
London has similar issues with its population density. Like Hong Kong, London is also a prime place for business. When you mix high earning potential with limited space, you get 'overvalued' property prices. If property prices were low, and the earning potential were the same, we'd all be living in pods... which actually happens in some parts of the world!
At the risk of coming across very unpopular with some of my close friends and business associates, large-scale developers have to shoulder some of the blame. There is almost 30 Hectares of land in London that has had planning permission granted, but do not have any buildings on the site. Developers dig the foundations so that they have 'made a start', and then leave the land to wait for more financially stable climates to complete the job. If they built everything at once, prices would fall because supply would outweigh demand and they would be at risk of going bust.
The UK government and local authorities have to accept the largest proportion of the blame for granting permission without backing it up with a definitive time frame for the developer to stick to, with penalties such as repossession if they are not keeping to their quotas.
The other issue is transportation and how easy it is to commute to these cities. With a new bridge opening in Hong Kong and HS2 on the horizon in the UK, these bubbles will likely burst due to people having the ability to commute from a place where they can get a larger property for their money.
In the end though, when a bubble bursts, it always seems to piece itself together and re-inflate. There are 100's of different factors involved with predicting what is going to happen in a property market. Unfortunately, the bubble will probably burst. Just make sure you time your sale or purchase right! Just remember to get on with the rest of your life though, because the ship can sail without you even realising it!
Have a nice weekend :)