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

Tom Allen
Tom Allen 20 Sep 2017

Absolutely agree with you!

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RyanGeo
RyanGeo 18 Sep 2017

A sharp correction would be a less dramatic expression to use. That is already underway in certain sectors in Reading where I practice as Chartered Surveyor

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sean benton
sean benton 01 Sep 2017

Identity theft is a thread for any profession. So,people should stay alarmed. I once take help from a letting agent and came to know that letting agents are taking every precaution to prevent fraudulent...

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Mark N.
Mark N. 30 Aug 2017

We have seen a surge in instructions over August and that should continue into September too.

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Chris
Chris 30 Aug 2017

Unfortunately, all the legislation bears its force on Landlords and ignores, naively, the effect of Rogue Tenants on the ability of landlords to keep houses in repair and offer properties for rent at reasonable...

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Christian Donovan
Christian Donovan 18 Aug 2017

The write-down on house values, combined with the fall in the GBP saddled the fund?s property portfolio with a 1.4% loss in the second quarter. The shocking amount of $240 million.

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Samantha Goodman
Samantha Goodman 11 Aug 2017

Interesting point of view.

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Samantha Goodman
Samantha Goodman 11 Aug 2017

It depends on the people, some older adults decide to make a long-distance move in order to live closer to their children or settle in a place with a lower cost of living.

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brandonlee10
brandonlee10 24 Jul 2017

The financial ramifications of the triggering of Article 50, the starting gun for Britain's departure from the EU, are far from clear. Buyers will be most cautious in London, given that buying a home in...

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IrisJ.
IrisJ. 19 Jul 2017

Great advice, but may I also add that when buying an already built home, make sure you do all of the proper inspections. Most importantly pest inspection because people tend to get surprised when they

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IrisJ.
IrisJ. 17 Jul 2017

The third point is, in my opinion, the most important one. People have become too inconsiderate and careless when it comes to rented properties. If a landlord wants to protect their property, regular visits...

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cornishalan
cornishalan 10 Jul 2017

Added to the cost of purchasing these village properties are the above average maintenance costs. Particularly where the property is a listed building or requires specialist building skills such as thatching...

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