The housing market is overheating and it's time to cool off

As prices soar, we must avoid the mistakes of the past

Top of the market alert! A garage in Camberwell, London, has just been sold for £550,000, three times its guide price.

It seems in every property boom there is a transaction that makes you stand up and take notice. In the late 1980s it was a airing cupboard in Chelsea selling for £50,000. At the time of the great boom in the 2000s it was beach huts on the south coast selling for the price of a nice family semi elsewhere. Now we have the Camberwell garage.

But this doesn’t feel to me like a top of the housing market across the UK. Transactions are still historically low, about two thirds their normal level and the so-called boom barely touches much of the country. Top of the market in London though? It certainly is beginning to feel like it. Someone I know for instance is selling their studio flat in a good but not absolute prime part of London and with the money they will make they plan to buy a four-bedroom detached house in Hastings. So a single room in London equates to a four bed detached by the sea.

I worked out the comparative price per square yard. By my estimate for every square yard in London – non prime – you can buy between six and ten outside the capital in the south of the country and the further north and west you move the multiples increase. There has always been a property price gap but it has never been greater, not even when airing cupboards were being sold in Chelsea.

Where will it all end? Well there are a couple of different scenarios looking back at history. Firstly prices keep on expanding until there is an economic shock, such as a major international crisis causing a crippling rise in commodity prices, a sovereign debt or banking crisis, This brought to an end the last price boom. Secondly personal debt expands yet again until eventually sentiment shifts, the economy gradually worsens, throw in some inflation and we end up with a sell-off of the asset that the debt is secured against, a classic bubble bursting, which is what happened in the late 1980s crash.

There are some ways that either of these can be avoided and I hope Mark Carney, the Governor of the Bank of England, is taking notice. Cautious husbandry of the mortgage market is essential. I’d suggest that the historic sign of an overheating market, around 100,000 sales a month, is too much; 80,000 should be the point the brakes are applied. Secondly, and Mr Carney can’t do anything about this, we desperately need more supply of housing. Building 100,000 houses a year isn’t enough; we need double that. If more supply is brought on stream then price inflation should be capped. We are not quite top of the market yet but it is approaching at a speed few thought possible.

Debt shops go pop

There has been a lot of noise this week about how wages are finally rising faster than inflation – that is if you relate the official figure of inflation with real everyday prices, and I don’t. I still hold the older retail price index as more relevant to you and me in the real world. But undoubtedly the economy feels much better; the job market is loosening up with opportunities available again and partly due to the limited housing boom described above many feel wealthier as their key asset, their home, is starting to rise in value. 

A purely anecdotal indication of better times for me has been the closing down of some of the parasitic high street money-lending shops. I have come across half a dozen instances in recent weeks where these gaudy places have been closed down. They had spread as the economy worsened. They were like pop-up debt shops. Now they are, it seems, retrenching, the only problem is with what do you fill the gaps they leave on the high street?

Time to fix your energy?

To date it has been an unseasonably warm April so the last thing you are probably thinking about is the cost of domestic energy. However, the worsening crisis in the Ukraine and the potential knock-on effect this could have on energy bills should be a concern. Fortunately, it seems that there are some new fixed-energy tariffs coming on stream now which should protect you from any nasty bill shocks. Price-comparison site uSwitch has even gone as far as suggesting there is now a price war on in the sector. it can often be best to look for a deal when demand is at its lowest – when the sun is shining. Come the autumn many of these tempting deals may disappear. If you aren’t fixed it may be prudent, bearing in mind the shaky international situation, to explore the possibility.

Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    SThree: Experienced Recruitment Consultant

    £20000 - £40000 per annum + OTE + Incentives + Benefits: SThree: Established f...

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + OTE 40/45k + INCENTIVES + BENEFITS: SThree: The su...

    Recruitment Genius: Collections Agent

    £14000 - £16000 per annum: Recruitment Genius: This company was established in...

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + OTE 40k: SThree: SThree are a global FTSE 250 busi...

    Day In a Page

    Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

    How Isis profits from destruction of antiquities

    Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
    Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

    'If we lose touch we’ll end up with two decades of the Tories'

    In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea
    Tunisia fears its Arab Spring could be reversed as the new regime becomes as intolerant of dissent as its predecessor

    The Arab Spring reversed

    Tunisian protesters fear that a new law will whitewash corrupt businessmen and officials, but they are finding that the new regime is becoming as intolerant of dissent as its predecessor
    King Arthur: Legendary figure was real and lived most of his life in Strathclyde, academic claims

    Academic claims King Arthur was real - and reveals where he lived

    Dr Andrew Breeze says the legendary figure did exist – but was a general, not a king
    Who is Oliver Bonas and how has he captured middle-class hearts?

    Who is Oliver Bonas?

    It's the first high-street store to pay its staff the living wage, and it saw out the recession in style
    Earth has 'lost more than half its trees' since humans first started cutting them down

    Axe-wielding Man fells half the world’s trees – leaving us just 422 each

    However, the number of trees may be eight times higher than previously thought
    60 years of Scalextric: Model cars are now stuffed with as much tech as real ones

    60 years of Scalextric

    Model cars are now stuffed with as much tech as real ones
    Theme parks continue to draw in thrill-seekers despite the risks - so why are we so addicted?

    Why are we addicted to theme parks?

    Now that Banksy has unveiled his own dystopian version, Christopher Beanland considers the ups and downs of our endless quest for amusement
    Tourism in Iran: The country will soon be opening up again after years of isolation

    Iran is opening up again to tourists

    After years of isolation, Iran is reopening its embassies abroad. Soon, there'll be the chance for the adventurous to holiday there
    10 best PS4 games

    10 best PS4 games

    Can’t wait for the new round of blockbusters due out this autumn? We played through last year’s offering
    Transfer window: Ten things we learnt

    Ten things we learnt from the transfer window

    Record-breaking spending shows FFP restraint no longer applies
    Migrant crisis: UN official Philippe Douste-Blazy reveals the harrowing sights he encountered among refugees arriving on Lampedusa

    ‘Can we really just turn away?’

    Dead bodies, men drowning, women miscarrying – a senior UN figure on the horrors he has witnessed among migrants arriving on Lampedusa, and urges politicians not to underestimate our caring nature
    Nine of Syria and Iraq's 10 world heritage sites are in danger as Isis ravages centuries of history

    Nine of Syria and Iraq's 10 world heritage sites are in danger...

    ... and not just because of Isis vandalism
    Girl on a Plane: An exclusive extract of the novelisation inspired by the 1970 Palestinian fighters hijack

    Girl on a Plane

    An exclusive extract of the novelisation inspired by the 1970 Palestinian fighters hijack
    Why Frederick Forsyth's spying days could spell disaster for today's journalists

    Why Frederick Forsyth's spying days could spell disaster for today's journalists

    The author of 'The Day of the Jackal' has revealed he spied for MI6 while a foreign correspondent