Tags: London | home | prices | bubble

Surge in London Home Prices Sparks Talk of Bubble

By    |   Tuesday, 22 October 2013 01:11 PM

Home prices are soaring in London, jumping 10 percent in the early weeks of October alone, and that's spurring speculation that a bubble is brewing, The Wall Street Journal reports.

Even the mayor is concerned.

"This phenomenon has helped . . . fuel the anger of professional people who cannot afford to live in districts where their parents grew up and who cannot see how their kids will ever be able to afford to buy in London," Boris Johnson writes in the Daily Telegraph.

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The 10 percent spike in London home asking prices this month, reported by real estate agency Rightmove, compares with an increase of 1 to 4 percent in most of England and Wales, according to The Journal. Prices even fell in two regions.

"We are watching for signs of overextension on the part of the banks and the public, especially signs that borrowers weren't in a position to withstand an eventual rise in interest rates, signs in general that a more speculative market might be developing. These might be expected to attract our attention," Martin Taylor, a member of the Bank of England's Financial Policy Committee, tells The Journal.

As for London, it looks like the price ascent will continue, though the pace may slow, the paper reports.

"There won't be another 10 percent rise next month," Miles Shipside, Rightmove's housing market analyst, tells The Journal. "That's not to say we won't see some further rises in London, because there's still momentum, and there's still a shortage of supply."

Nobel laureate economist Robert Shiller, who at times has expressed concern about a housing bubble in the United States, tells the BBC that Britain's housing market is frothy, The Huffington Post reports.

"It looks somewhat like a bubble, prices are going up pretty fast," he explains. "Whenever you have easy credit, that helps promote a bubble."

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Home prices are soaring in London, jumping 10 percent in the early weeks of October alone, and that's spurring speculation that a bubble is brewing, The Wall Street Journal reports.
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Tuesday, 22 October 2013 01:11 PM
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