DEBATE: In light of the results of the latest RICS survey, is the London housing bubble slowly deflating?

London’s housing market is becoming Tokyo-on-Thames (Source: Getty)

In light of the results of the latest RICS survey, is the London housing bubble slowly deflating?

Camilla Dell, managing partner at Black Brick, says YES.

The difficulty with surveys, whether they are from RICS, Nationwide, Halifax or others, is that each one is based on different sets of data and as such they can conflict with each other.

The London property market has been significantly affected by Brexit and the 2014 changes in stamp duty, particularly for higher value properties in prime central London. Knight Frank and Savills recently reported that prices have bottomed out, following reductions of up to 15 per cent across prime central London.

The biggest impact on the prime central London property market has been that many who own property don’t have to sell, and therefore we have see a reduction in volume and supply. This has supported prices in London.

However, the sign of a healthy market is the volume of transactions as opposed to the values, and this has certainly reduced in recent years. Uncertainty is expected to continue as we journey through Brexit and stamp duty land tax remains unreformed.

Read more: Should we brace for falling house prices?

Bruce Dear, head of London real estate at Eversheds Sutherland, says NO.

Normal bubbles deflate, but the London housing market is not a normal bubble. It is an iceberg made of ultra-low interest rates, global capital inflows, and constrained supply.

True, there have been adverse signs: Foxton’s profits falling and deals for £1m+ homes stalling. But this “priceberg” will not shrink significantly without a substantial economic shock or material hike in interest rates.

Even with Brexit, neither looks immediately likely. Interest rates are at a 320-year low, making ultra-cheap mortgages.

Help-to-buy buoys the capital’s sub-£600,000 market.

Weak sterling, and some modest price falls, still give enthusiastic overseas buyers up to 25 per cent discounts on London homes.

Underlying all is a structural shortfall: every year we build about 20,000 fewer homes than London needs. This market is not deflating. It is going into a long term zombie high-price freeze.

London’s housing market is becoming Tokyo-on-Thames.

Read more: Double, double, London house prices bubble?

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