Will 2017 be the year the London property bubble bursts?

Will 2017 be the year the London property bubble bursts?
Although the UK property market as a whole is faring very well, there are signs that the London market, particularly the prime central end, is running out of steam heading into 2017

According to the latest research and data from eMoov, a 2017 market crash could see £858 a week wiped from the average London property value.

eMoov's research highlighted the loss in value a similar market crash could have on current property prices across the capital, as well as elsewhere around the UK as it wasn’t just London that saw property prices plummet.

With house prices once again reaching a dangerously inflated level, eMoov looked at the decline in values between the end of 2007 and beginning of 2009 (21 months) across each region of the UK, before applying that percentage decrease to the current average house price to highlight the loss homeowners could experience this time round.

The United Kingdom

At the end of 2007 when the market was on the cusp of a meltdown, the average UK house price was £189,424. Property values then went into freefall until 2009, falling by 16.7% (-£31,618). If the same 16.7% drop in values was seen today on the current average UK house price of £217,928, homeowners across the UK would see £36,393 wiped from their property price, £399 a week over 21 months, bringing it down to £181,535.

London

It is of course in the capital where homeowners stand to lose the largest sum should the market crash again in 2017.
During the last market crash, homeowners in the capital saw their property depreciate by 16.3%, a loss of £48,421. However, since then the average London house price has soared to £481,648 but the same percentage decrease would result in a loss of £78,267 or £858 a week over 21 months, returning the average house price in the capital to just over £400k (£403,381).

Outside of London

Despite Londoners’ suffering the largest monetary loss, the capital didn’t see the largest percentage decreases during the last crash.
These were found in the South East (-17.6%), the East of England (17.4%), the South West (17.2%), the East Midlands (16.8%) and the West Midlands (16.5%), with homeowners in these regions seeing their property value fall by between £24,000-£42,000.

Although a market crash in 2017 would mean a smaller monetary loss than London, these homeowners would still be in line for a substantial hit, the lowest being a loss of £29,656 in the East Midlands resulting in the average house price falling to £146,868, climbing to £55,146 in the South East where the loss would reset the average house price to £258,188.


Scotland

The ripple effect of the 2007 crash did reach north of the border, however, at a drop of 7.4%, homeowners in Scotland saw the smallest depreciation in their property values with a loss of just over £10,000. With the current average house price (£143,033) only marginally higher than it was in 2007, the same decrease in 2017 would result in a similar drop in values and an average house price of £132,449.

Wales

During the last crash, Wales saw the third lowest fall in values behind the North East and Scotland. But the 15% drop still equated to over £20,000 being wiped from the average house price of £148,565.

The property market in Wales has struggled ever since and the current average house price has failed to reach the peak of 2007, still at just £146,742.

Therefore, it is the only region where a crash in 2017 would actually result in a lower monetary loss for homeowners when compared to the previous crash. A 15% drop would see £22,011 wiped in value and a resulting average house price of £124,731.

Russell Quirk, founder and CEO of eMoov.co.uk, commented: “Although the UK property market as a whole is faring very well, there are signs that the London market, particularly the prime central end, is running out of steam heading into 2017.

Even so, it is unlikely that we will witness a market crash as monumental as the one we experienced a decade ago, so homeowners should rest assured that this research acts as a warning of what the worst case scenario might look like with London homeowners losing £858 a week in property value.

However, it is a warning none the less and one that the majority of homeowners should heed. A turbulent year for the property market has seen many buyers and sellers back off from their sale or purchase and baton down the hatches to wait out the storm.

Whilst the market itself remains resolute, it will inevitably stutter to a halt without the buyer-seller activity it needs to operate. Those considering a sale now would be wise to act before it’s too late, as a reduction in asking price of a few hundred pounds in the current market climate, is a lot easier to stomach than a loss of up to £80,000 a year or so down the line should the market crash.”

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Latest Comments

Oliver Conway
Oliver Conway 18 May 2017

Making a neat inventory is a good idea, but if the seller is not willing to provide it, can the buyer demand it?

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Bertrand
Bertrand 17 May 2017

First step to nationalisation of the private rented sector IMHO. Nanny state poking their noses into things yet again. I object, as a decent landlord, sometimes having to deal with some pretty awful tenants,...

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Izzy
Izzy 16 May 2017

This is such a great a post. I love the detail you've gone into. It's a very useful article for helping those who are looking at deciding which sector they would like to go into! When I first started investing...

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paul burnham
paul burnham 30 Apr 2017

Jeremy Corbyn's pledge that a Labour government would build 500,000 new council houses must electrify the general election campaign. Reliance on markets and the profit motive has brought huge housing-related...

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CommercialTrust
CommercialTrust 28 Apr 2017

Sadiq Khan?s announcement of an online database of landlords and letting agents who have been convicted of housing offences, appears on face value to be a variation of the already implemented Database

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warren
warren 26 Apr 2017

You're very welcome Mary! Glad you enjoyed them :)

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Mary Ward
Mary Ward 26 Apr 2017

Thank you for the wonderful ideas. First impressions can make or break a deal. It's sadly that many homeowners drop the kerb to create an off-street parking space.

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Tony Gimple
Tony Gimple 14 Apr 2017

I'm not at all surprised that so many landlords are still confused about what the tax changes really mean and how it will affect them. In particular, the blind rush to incorporation is leaving landlords...

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MH
MH 13 Apr 2017

You are right that the bank holidays are going to be spoiled in looking for the properties. But people who want to sell their property and looking for the better relocation, they can get benefits of this...

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bnellyb
bnellyb 08 Apr 2017

There will be an exodus of private landlords over the next 5 years as tax changes take effect, private landlords provide an important service to the rental market, why do housing associations and councils...

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Fred Cassman
Fred Cassman 07 Apr 2017

"Make it look like you are at home": often people forget this and share on facebook their location!

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jared townsend
jared townsend 05 Apr 2017

It'll be interesting to see how & if the Government's asset sale regarding mortgages helps

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