Bank warns London house bubble could burst

One of the world’s leading financial institutions, UBS, says any sustained economic recession triggered by Britain’s departure from the EU could lead to a “significant decline” in London house prices.

It’s latest Global Real Estate Bubble Index puts London behind only Vancouver in terms of world cities vulnerable to a house price crash.

UBS says a wider economic downturn in this country could halt what it describes as the “unsustainable growth” in the capital’s house prices, which have increased around 50 per cent in the past three years thanks to high levels of overseas investment buying and a relatively small number of mainstream homes being built to meet demand.

The firm says London now beats Hong Kong, Stockholm and Sydney as property markets most at risk of a bubble. All of these locations have what UBS has called “excessively low interest rates” sustaining booming housing markets.

“What these cities have in common is excessively low interest rates, which are not consistent with the robust performance of the real economy. When combined with rigid supply and sustained demand from China, this has produced an ideal setting for excesses in house prices” according to Claudio Saputelli, head of global real estate at UBS Wealth Management’s chief investment office, told the Bloomberg financial news organisation.

In recent days, estate agency Savills has also warned about possible London house price falls.

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Written by: Houseladder