The housing market is overheating and it's time to cool off
As prices soar, we must avoid the mistakes of the past
Sunday 20 April 2014
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.
Independent Partners: Get fee-free expert mortgage advice and find the right mortgage deal for you.
Buying property overseas? Check out these hotspots
China stock collapse: Five things you need to know about 'Black Monday'
Kate Hudson's online sports brand Fabletics drains your account if you don't say 'stop'
Bargain Hunter: Exclusive discount on a SmartGlider - a self-balancing electric scooter
Number of parents moving to their desired school catchment area is increasing, according to Santander research
- 1 Huawei Mate S and Huawei Watch: new products take on iPhone 6 Plus and Apple Watch
- 2 More than 11,000 Icelanders offer to house Syrian refugees to help European crisis
- 3 If these extraordinarily powerful images of a dead Syrian child washed up on a beach don't change Europe's attitude to refugees, what will?
- 4 Senior British politicians tell David Cameron: When dead children are being washed up on beaches – it's time to act
- 5 German police forced to ask public to stop bringing donations for refugees arriving by train
Climate change: 2015 will be the hottest year on record 'by a mile', experts say
Senior British politicians tell David Cameron: When dead children are being washed up on beaches – it's time to act
Jeremy Corbyn calls Osama bin Laden's killing a 'tragedy' - but was it taken out of context?
If these extraordinarily powerful images of a dead Syrian child washed up on a beach don't change Europe's attitude to refugees, what will?
If you're not already angry about the refugee crisis, here's a history lesson to remind you why you really should be
Theresa May says migrants should be banned from entering the UK unless they have jobs lined up
iJobs Money & Business
£20000 - £40000 per annum + OTE + Incentives + Benefits: SThree: Established f...
£20000 - £25000 per annum + OTE 40/45k + INCENTIVES + BENEFITS: SThree: The su...
£14000 - £16000 per annum: Recruitment Genius: This company was established in...
£20000 - £25000 per annum + OTE 40k: SThree: SThree are a global FTSE 250 busi...
Day In a Page
With four bedrooms, this spacious maisonette in a mid-terrace period-style house in Holland Road is well-maintained and offers high ceilings and period features.
The terraces of this two-bedroom penthouse apartment offer panoramic views that stretch over fifty miles from the cliffs of Beachy Head.
In the heart of the coastal village of Mumbles and moments from the pier, this five-bedroom Victorian terrace is set over three floors and retains many original features.
In a sandbanks location, moments from the beach, this three-bedroom apartment has a large open-plan living area and a south-west facing balcony.
This four-bedroom home has an annexe accessed from the side of the house, with potential for improvement and conversion subject to the necessary permissions.
In the heart of the hamlet of Wardley, this five-bedroom period home offers countryside views and a stylish interior, with original features and open fireplaces.
Offering countryside views and landscaped gardens, this three-bedroom Grade II-listed lodge has a spacious conservatory and a large cellar that could serve as a workshop.
Set in approximately 1.5 acres, this four-bedroom home comes with a second, detached property that's currently used as an annexe.
In the hamlet of Newchurch, this former parish church is now a four-bedroom home complete with clock tower and eyrie.
Offering scenic views from a large balcony and sun terrace, this four-bedroom home has a wraparound garden and a heated swimming pool.
Offering views across the Humber and East Yorkshire Wolds from a glass panelled balcony, this four-bedroom barn-style home befits a life of leisure.
This four-bedroom home offers versatile accommodation with annexe potential; features include a hot tub, sauna and Norwegian BBQ hut.
Well-located for schools, colleges and the town centre, this contemporary thatched cottage offers flexible living space with six bedrooms.
Built in 1907, this four-bedroom Edwardian period home has been refurbished by the current owners, retaining many original period features.
Surrounded by landscaped gardens, this five-bedroom home offers living space across three floors.
This lovely country home in Burnham Market is currently run as a popular holiday cottage, with five en suite bedrooms and colourful gardens.
This three-bedroom 17th-century former village bakery is just a few miles from the East Sussex coast.
Set on a landscaped plot, this light and airy four-bedroom home comes with a log burner in the lounge, a fitted kitchen and an open-plan ground-floor layout.
Set sail for this four-bedroom farmhouse in Cowes. With five acres of land and an indoor pool, this home oozes character. There is even potential to let a one-bedroom annexe.
Built on a former chapel site, this impressive four-bedroom home boasts balconies, stunning views and contemporary modern living.
This three-bedroom house is situated in a quiet mews and set over three floors. Features include glazed staircases and high ceilings.
A period townhouse set over four floors, this five-bedroom home was built in the 18th Century and retains many original features.
With five bedrooms, this spacious home offers beautiful gardens and modern interiors - set within the popular market town of Bingley.
A few miles from the seaside at Perranporth, this four-bedroom farmhouse sits amongst nine acres of idyllic grounds - including a lake and two barns used as holiday lets.
In the pretty market town of Bungay, this grade II-listed Mill House is arranged over four floors, offering four bedrooms and three reception areas.
This first-floor flat comes with two bedrooms, an impressive open-plan reception room and two lovely roof terraces.
This five-bedroom home comes with a range of outbuildings including a large barn which could be converted into a self-contained granny-flat or rental.
Moored at Taggs Island and reached via a pretty garden, this two-bedroom houseboat has a vaulted reception room and skylit garden studio - currently a beauty salon.
On the edge of the city, this six-bedroom home comes with an outdoor swimming pool and a large garage block that has annexe potential.
A contemporary house spread over three storeys, this three-bedroom detached home has large sliding doors that open out to the River Quaggy.
Moored in Chelsea's Cheyne Walk, this houseboat offers two double bedrooms and a teak deck that's ideal for al-fresco dining.
This former village bakery, dating back to the 17th century, is now a three-bedroom detached home just a few miles from the East Sussex coast.
On the picturesque Isle of Man, this four-bedroom character home has a ground-floor shop that's currently run as a newsagents and a flat that would make an ideal holiday let.
In a new collection of flats, this first-floor two-bedroom apartment offers ample entertaining space and a prime view of Furze Green from a private balcony.
This three-bedroom stone-built cottage currently trades as the village store with a restaurant in the annexe and family accommodation on the upper floors.
Previously two semi-detached properties, this five-bedroom home is spread over three floors with a large breakfast kitchen, orangery, office and gym on the second floor.
This five-bedroom home enjoys countryside views over the Blyth estuary to Southwold, offering flexible living space with a ground-floor annexe - ideal for use as a holiday let.
Close to the market town of Eye, this four-bedroom detached home offers a double-height living room which takes the place of the original, 19th-century, chapel nave.
Dating back to the 19th century, this four-bedroom home needs modernising. Spanning three storeys, the red-brick house has a fireplace, a small terrace and a cellar.
Just outside of Cambridge, this single-storey home offers three double bedrooms, a living room with vaulted timber ceiling and ladder steps that lead to a mezzanine study area.
This six-bedroom Georgian home is on three floors with open fireplaces, a two oven Aga, an annexe, and cottage gardens with outbuildings and a car barn.
A former coach house, Glebe Farm Stable is now a three-bedroom cottage with a double car barn, an attached office, kennels and an outbuilding that's currently used as a gym.
Located beside an impressive Victorian viaduct, this four-bedroom home has an open-plan living area that is glazed on two sides, with skylights and high ceilings.
A former furniture workshop, this three-bedroom home has high ceilings and painted brick walls, in a village setting only fifteen miles from the coast.
This five-bedroom stone townhouse features a pine staircase and an Inglenuk fireplace, double doors from the lounge give access to an enclosed courtyard.
This five-bedroom, detached home blends traditional and modern design; the sleek kitchen features a gas hob and oven set within an exposed chimney breast.
Capitalise on the fabulous views of Trevone Bay by taking two homes and creating one spacious boutique B&B. Just a cliff-top walk from Padstow.
Surrounded by woodland, this five-bedroom manor house has plenty of outdoor storage space in the form of three converted loose boxes, two smaller outhouses and a woodstore.
This six-bedroom home is set amongst three acres of grounds. Currently a large family home, Clift Hill has potential to make a B&B or countryside retreat, subject to change of use permissions.
This Grade II-listed three-bedroom home is situated on a private road, just a short walk from the sandy beaches of Frinton-on-Sea.