There is one topic of conversation in Britain right now: The insane price of property, both to own and to rent. People on modest, middle class incomes who bought houses for a few hundred thousands pounds in marginal areas like London’s East End during the mid 2000s have suddenly found themselves living inside assets worth more than £1 million ($1.68 million).
The Bank of England has kept interest rates virtually at zero since the crash of 2008, making mortgages incredibly cheap. That has driven a wave of buyers into the market, pumping up property prices.
But Britons’ incomes haven’t kept pace with those prices, and now it appears we may be reaching some sort of breaking point. Some Londoners have begun “panic-selling” their houses, according to The Telegraph, in fear that this may be their last chance to cash in on the property ladder lottery before the housing boom comes crashing down.
The numbers show that fear may be justified.
Housing prices in the U.K. declined in July, according to Rightmove, as new buyers pulled out of the market. The BofE is not likely to raise interest rates soon, according to the Guardian, so that dip may be seasonal or temporary.
However, it came at the same time as the real estate agent chain Savills reported that the London market was topping out. In its earnings call, Savills reported these stats for the first half of the year, according to the Financial Times:
- London average property values: flat.
- London volume of exchanges: up 9%.
- Outside London average property values: up 9%.
- Outside London volume of exchanges: up 20%.
The Financial Times says Savills group chief executive Jeremy Helsby told analysts that Londoners were getting out while the getting was good:
Good price rises in London have encouraged people to move out … They’re going into the home counties, and filtering further up and further out. Previously, the country had been quiet.
Another sign of the top came in the form of the house price-to-earnings ratio as tracked by Halifax, the mortgage lender. Prices have again crested over five times the income of buyers. The last time they did that was right before the 2007 crash, The Telegraph notes, although at their peak prices hit 5.83 times earnings.
Hometrack, the housing data company, published this scary chart full of downward-pointing red arrows showing that in London, price growth is declining, fewer people are buying houses, fewer sales are occurring, and asking prices are in decline:
All the signs are suggesting that prices are now so high no one can afford to actually buy houses in London any more, and that’s fueling a stampede for the exits among those sitting in Britain’s most expensive real estate.
Want another stat? The Halifax Housing Market Confidence Tracker reported that 60% of owners now believe they must sell their houses in the next year, “the highest score of this measure since the survey’s inception,” as The Telegraph put it.