The UK Housing BoomHow do you know when house prices really are TOO high and the UK housing boom has run it's course? As I am sure you know, with the low interest rates of recent years and what can only be a serious imbalance between supply and demand, the prices of residential property have rocketed Europe wide. Central London prices have 'taken a breather' earlier in the year whilst the rest of the UK catches up. Back in the late 90's, you could tell that the Internet boom (and bubble) would end when there was no logic related to the stock market prices. I remember reading of a company about to float (the name I have forgotten) who were to invest in new and internet related technology start-ups. That was it. The entire prospectus was in that one sentence. A group of people thought we can do this internet thing too, we can make it up as we go and make a ton of free money. That is when you know a market is suffering from a high level of greed and madness. It has to end. On the BBC's London news I have seen a similar thing in London housing. A property owner has taken a spare room in his building and registered it with HM Land Registry, decorated it and put it up 'For Sale'. The room is 10 feet by 9 feet. The bed is suspended from the ceiling as there is not enough space in the room otherwise. This 'compact living space' is in Earls Court. It can be yours for just £140,000. A bargain, I am sure. The vendor seems to think so. I suppose someone has too... The big lenders and economists in the UK use phrases like 'soft landing' and 'mild adjustment' when they talk of future house prices and the possibility of lower or falling values. As you have just seen, interest rates are starting to rise and are now predicted to rise by a full one percent by the end of 2004. This will increase the high costs of maintaining the huge levels of debt now held by the average UK household. In turn, that means loan defaults will come. Repossessions to follow? Prudence has left the building. Back to boom and bust? * This article was first published in December 2003 * To read more about related subjects, please also visit:
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