With 40% property price growth in London in the last 3 years is this bubble about to burst
Over the last 3 years property prices in London have grown 40% with the average property in London is now worth £530,409. In 2008 the average property was worth just over £300,000.
However there are a number of factors that may contribute to a property price crash or correction in London in the near future.
Foreign investment slowing
Over the 6 year to 2015 over £100bn of foreign money has been invested in London property. With high prices of oil and many foreign investors view London as a safe haven for their money. Also Britan encourage large tax incentive to attract money with the ability for investors to buy property through overseas companies. However in the past 12 months oil prices have dropped and the Chinese economy has had problems both resulting in many foreign investors disappearing plus George Osborne is now taxing prim property more and imposing extra taxes when property is held in a company. Both these factors are impacting property prices with prime property already showing a drop.
It is also reported by the Financial Times that more than 50,000 apartments in the £1m-plus target market are either being built or are in the pipeline. Demand for these types of property in a good year is about 4000 properties and with overseas investors drying up, many of these properties are now being sold at discounted prices.
Attack on buy-to-let
The government is attacking buy-to-let investors with a series of tax changes starting this Arpil. From April any second of more property bought will attract an extra 3% stamp duty charge at point of purchase. Then from next Arpil 2017 tax relief on a buy-to-let mortgage interest costs will be reduced over the next few years to zero. There is also added pressure from the Bank or England to restrict buy-to-let mortgages which will only help to reduce property prices.
When will London experience a property price crash is unknown but with many factors currently aligning this may be sooner than later.