When will the next Housing Bubble burst?
The risk of the UK going towards another housing bubble is very high due to rising property prices, low rate mortgages, Government intervention, and pension changes, which encourage retirees to buy houses. All these factors contribute to the growing demand and the emphasis on the tight supply. The UK housing Bubble is driven by the house prices in London, which are highly overvalued (valued 128% over their historic price to income ratio).
As mentioned, the foreign investors who spent their money in the capital play a huge role in creating the Bubble and pushing up house prices to unrealistic levels, especially in central London.
However, London’s Chancellor has targeted the wealthy foreigners and has planned on putting an inheritance tax from 2017 for those …show more content…
This is known as a trickle-down effect, which means that a good is initially so expensive that only certain people can afford it. However, over time, it reduces in value and becomes available to the general public.
Furthermore, the government must be aware of the consequences it will face once they change their policies towards foreign investors, because it maybe can cause a positive drop in house price, but there should be an alternative to replace the foreign money coming into London.
Nevertheless, this is only a prediction of what could happen and there might be many other reasons for a burst of the housing market.
Of course a rise in interest rates could affect the demand on houses and stop the growth of house prices.
Likewise stricter mortgage approvals can limit the ability to get on the housing ladder.
Some of these causes for the burst of the housing bubble are summarized in the table below:
However, when any of these factors are likely to happen or if they will even occur is unknown and can only be speculated by economists and house market
The risk of the UK going towards another housing bubble is very high due to rising property prices, low rate mortgages, Government intervention, and pension changes, which encourage retirees to buy houses. All these factors contribute to the growing demand and the emphasis on the tight supply. The UK housing Bubble is driven by the house prices in London, which are highly overvalued (valued 128% over their historic price to income ratio).
As mentioned, the foreign investors who spent their money in the capital play a huge role in creating the Bubble and pushing up house prices to unrealistic levels, especially in central London.
However, London’s Chancellor has targeted the wealthy foreigners and has planned on putting an inheritance tax from 2017 for those …show more content…
This is known as a trickle-down effect, which means that a good is initially so expensive that only certain people can afford it. However, over time, it reduces in value and becomes available to the general public.
Furthermore, the government must be aware of the consequences it will face once they change their policies towards foreign investors, because it maybe can cause a positive drop in house price, but there should be an alternative to replace the foreign money coming into London.
Nevertheless, this is only a prediction of what could happen and there might be many other reasons for a burst of the housing market.
Of course a rise in interest rates could affect the demand on houses and stop the growth of house prices.
Likewise stricter mortgage approvals can limit the ability to get on the housing ladder.
Some of these causes for the burst of the housing bubble are summarized in the table below:
However, when any of these factors are likely to happen or if they will even occur is unknown and can only be speculated by economists and house market