The Blog

The Bubble Won't Pop

Concerns of a real estate bubble in London are overblown - in fact, we must not be concerned, we must change our perspective. We should be thrilled by the multiple benefits and opportunities that London's housing boom has provided and will continue to provide.

Property in London is fast becoming the gold standard. Some people even believe that the property market has played a major role in keeping the country afloat during the global recession. Of course, Londoners are not the only ones with stake in the housing market. London has always been a destination for both British and international professionals on the hunt for better economic prospects. However, now, more than ever before, London is seeing an influx of people from all over the world looking to buy property in the city. Young and mobile professionals from Italy, Spain, and France join other internationals in their search to for stake in valuable London property.

We must ask: why is London the hot destination for international property buyers, and is the surge in foreign money good for the economy of London? The answer is yes.

For one, we must consider the economics of buying. For nearly five years, at 0.5pc interest rates in Britain have been at an historic low. In deliberate attempt to stimulate economic recovery, borrowing money has become more affordable. This, in turn, has had a positive impact on the housing market. However, according to the Nationwide Building Society, UK house prices rose by 8.4% in 2013. Moreover, the report suggests that average prices in London are now 14% higher than their last peak in 2007. The typical London home now costs £345,186.

On top of low interest rates and increasing property values, London is an attractive, cosmopolitan city where people want to start a life. It is a world financial centre; London represents the pinnacle of residential living and investment. Architectural projects strive for perfection throughout-- with an unrivaled attention to detail and an unflinching pride in the work. Demonstrations of this brilliance increasingly puncture London's skyline.This, in-and-of-itself, has helped to make Britain a safer place to invest in high-end property.

On top of the increased demand to simply reside in London, home buyers crave beautiful buildings in truly pioneering landmark locales. Not only have we seen an increase demand for quantity, but we also have seen an increased demand in quality. High-rise residential developments in London have become ubiquitous. Pleasing aesthetics, an inspiring local community, functionality, and service, in addition to an array of the best amenities and attractions within the areas where they live are a common demand of buyers. Consequently, increased demand for the biggest and the best causes all property prices to rise. Pair this conclusion with the notion that London property is a safe haven for the investment for world's super rich--some people claim this pairing creates a recipe for trouble. The bubble will eventually burst.

Although the thriving housing market has arguably sustained London's economy through out some of the world's toughest economic times, the varying consequences of increasing prices have certainly been felt throughout the city's classes. Although wealthy homeowners have distinctly benefitted from this sector's growth, everyone but the most elite have been cut out from the opportunity of home ownership. According to Reni Eddo-Lodge's article in the New York Times on October 27, 2014 the average home in London costs nearly 20 times the average salary in the same city. She argues that housing is no longer for people who need it, but rather, for those who are interested in accumulating capital. In this way, many Londoners have been forced, like much of the world's middle and working class, to become renters.

While this is certainly a harsh change of reality for many Londoners who are accustomed to a culture in which the average person owns a home, this is not necessarily a change for the worse. As previously discussed, the increased demand on the housing market has not only increased prices, but it has also increased the quality of new properties as well as the quantity of these new, high-end properties. This means renters can perhaps now afford to rent a space that they would not have previously been able to afford to buy. Additionally, of course, an influx of international cash has stimulated the economy in a way that carries benefits across the economic sectors. Contrary to popular discourse, the housing boom in London has actually benefitted the city as a whole.

As London's housing market moves in the same direction as much of the Western world, we must acknowledge that it is hugely unlikely that we will see a reversal of this trend. And, as those most affected by this change, we must realize its benefits in order to take ownership of our situation. We must realize that renting gives us relief from the perpetual stresses of homeownership. We must realize that we have entered an era that allows us the freedom to move around at our will. We must realize that renting provides us the opportunity to make choices based on our ever-evolving wants and needs. We are no longer owned by home-ownership. Instead, we can own our own lives.

Concerns of a real estate bubble in London are overblown - in fact, we must not be concerned, we must change our perspective. We should be thrilled by the multiple benefits and opportunities that London's housing boom has provided and will continue to provide. Housing developers are still seeing return on investment, the economy is booming, and increased housing opportunity (both to own and to rent) creates a cyclical effect which allows for increased international investment. And, on top of it all, we have been given the opportunity to pursue a new lifestyle in which we truly own our lives.