More great news for homeowners in the capital!
Following on from Tuesday’s revelation that London house prices shot up by an eye-watering 13.2 per cent in the year to January, research out this morning claims that our city’s property market is the third biggest economic boom of all time.
An Office for National Statistics house price index for London is now 22.8 per cent above its pre-financial crisis peak, with an average price of £458,000 – a level that many analysts expect to surpass the half-a-million mark later this year.
But hold on there, all you smug mortgage-holders. Looking at the list of top economic booms of all time, the London property market has some uncomfortable bedfellows.
One place ahead of it is the Dot Com bubble of the late 1990s and early 2000s. We all remember how that ended.
In eighth place is the South Sea bubble, the infamous eighteenth century crash that stemmed from investors pouring more and more money into the South Sea Company.
And one place below that is the Dutch tulip bubble of the previous century, an even more infamous event which resulted in a single bulb being worth over 10 times people’s annual incomes.
The top 10 was compiled ahead of Klondike, a drama about the Gold Rush airing at 9pm on the Discovery Channel tonight. The list is as follows:
Canadian Tar Sands Oil
(1970s – Present)
|40 years||£9.52 trillion||In 2011 the average male worker earned £81,000|
Dot Com Bubble
(1998 – 2004) Worldwide
|6 years||£3 trillion||80% of US investment went into IT in 1999|
London Property Boom
(2009 – Present)
London, United Kingdom
|Housing prices in the capital are 12 times annual income|
The Gilded Age
(1860 – 1890)
|30 years||£1.2 trillion||In 40 years, the U.S. economy grew by 400%|
The Gold Rush
|100 years||£3.5 billion||A mine would cost up to £24,200,000 in today’s money|
(1835 - 1850)
|Between 1844 – 1846 a total of 6,220 miles of railway were built|
(2012 – Present)
|2 years||£600 million||Currency increased by 6,200% in in one year|
The South Sea Bubble
(1711 – 1720)
Share prices increased by 1,000%
|Sir Isaac Newton lost £20,000 in shares - equivalent to about £268 million in present day value|
The Dutch Tulip Bubble
(1636 – 1637)
Market inflated by 95%
|The cost of a single tulip was 20-30 time higher than the average annual income and could be traded for an entire estate|
(1921 – 1923)
|2 years||Prices increased by 1,500%||Money became so worthless it was used as fuel – in 1923 a loaf of bread cost 200,000,000,000 Deutsch Marks|
So is the London housing market heading the same way? The question depends on whether the sharp increases in prices seen in recent times are a symptom of bubble-like behaviour or if it’s simply a matter of supply and demand. On the one hand we have government-sponsored easy money programmes such as Help to Buy, and on the other we have economists such as Kate Barker warning that there is a shortfall of at least 1m houses in the UK.
The Great London Housing Crash of 2015? Time will tell.