Tim Harford, my favourite skeptical and eminently readable economist, asks the question: Is London experiencing a housing bubble? He is hesitant to be definitive on this, but makes a very good case for the idea that London housing prices are inflated and heading for a crash.
But have prices outpaced rents, suggesting a bubble? It seems so. US house prices are at historical norms relative to rents, and German and Japanese prices are unusually cheap to buy rather than rent. Yet in the UK, house prices are one-third above their long-term value relative to rents. And in London, gross rental yields are lower than in other UK regions at a slim 5-ish per cent. Such returns look low, given the costs of being a landlord. Logically, either rents should soar or prices should fall.
Yet London prices have lost touch with London earnings and with the price of houses in London’s commuter belt, and they continue to rise quickly. All this seems unsustainable, and when interest rates finally rise, surely the distressed sales will begin?
But there are three counter-arguments. The first is that housing is different. The second is that London itself is different. The third is that this time around is different.
Let’s dispense with the argument that housing is somehow bubble-proof. Bricks and mortar seem reassuring but there is no law of economics that says money is safe in housing. Real Japanese house prices have almost halved since 1992. Real house prices in the US have soared and slumped and are now cheaper than they were in the late 1970s.
When a man is tired of London house prices
(Image: anger...and bubbles, Lena Vasiljeva, CC-BY)
Greenpeace has handed newspapers 240 pages of current negotiating documents from the Transatlantic Trade and Investment Partnership (TTIP), a secretly conducted trade deal between the USA and the EU, which has run in parallel with the notorious Trans Pacific Partnership (TPP).
The first McDonald’s in Quetta, Pakistan has opened in Millennium Mall, in the militarized Police Lines neighborhood, prompting an official position from the Taliban.
When Norway — historically one of the poorest countries in Europe — struck oil in the North Sea, the country put the proceeds into a “sovereign wealth” fund that invested it in other industries and used the returns to pay for an extensive welfare state that has given Norwegians one of the highest standards of […]
You may not love Microsoft Word, but you’ve definitely used it. Other than being one of the most ubiquitous programs on the planet, it’s been the go-to word processing system for more than a quarter-century because it’s as basic as it gets. But occasionally, you’ve got assignments that beg for a lot more options than simple […]
Almost everyone has their smartphone in a case of one kind or another. Beyond simple protection, finding a case that can charge your phone on its own, but doesn’t feel like it’s also adding a couple pounds to the phone’s weight is the tricky part. Billed as the world’s thinnest battery case, the ThinCharge iPhone […]
You never know when new projects, ideas or opportunities can drop into your lap at a moment’s notice. That may require you to learn a new programming language like Python. Or maybe you need a primer on 3D game development. Or you might realize you could use a serious brush-up on iOS mobile creation.Point is, […]