The London property market is becoming “unhealthily overheated”, raising the spectre of a housing bubble, the executive director of a bank has warned.
Noel Meredith, executive director of United Trust Bank, said much of the speculation of a house price bubble had been generated by the price increases seen in the capital.
Some areas of London, such as Lambeth, had seen increases of nearly 30 per cent.
Mr Meredith said: “What most people in property agree is that in order to bring about property market stability we need to build a lot more homes.
“Although builders are increasing activity and new home starts are rising, we need to build in excess of 200,000 new homes a year for the next 20 years to tackle the inherent problem.
“To do that, developers will need backing from flexible, experienced lenders who understand the market and have a desire to fund diverse and interesting projects.”
July’s Land Registry data indicated that London house prices had increased by 19.3 per cent in the previous 12 months, the highest annual increase for a decade.
His comments came following a poll of of 119 brokers and developers in July and August by the bank, which found nearly half believed the market was getting overheated.
Key figures
48 per cent believe that the London property market is becoming unhealthily overheated.
41 per cent do not think house price will rise in the capital.
30 per cent could envisage a substantial drop in property prices within the next three years
69 per cent of respondents do not think prices will fall
Source: UTB
Adviser view
David Norman, director of Wokingham-based Davon, said: “I think there has been a cooling off of buyer activity particularly at the higher end of the London market and I believe price growth is also slowing as a result.
“I do not see substantial price drops on the horizon, however. Demand remains strong for realistically priced properties a little further out from Central London.
“I also believe the industry has underestimated the impact that speculation about the possibility of increased taxation has had on the upper end of the London market and this uncertainty will continue at least until after next year’s general election.”
