Global Property Bubble Set To Burst – UBS and Deutsche Warn

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The London property market is being increasingly recognised as a bubble and now even leading international banks are warning that the bubble may be set to burst.

Today, UBS has warned that London’s property market is “frothing” and last week Deutsche Bank were the property party pooper “calling time” on the London property “party.”

According to a new UBS report, England’s capital is home to the most significantly overvalued housing market of any major city in the world – and that means there’s a risk the bubble is close to bursting.

Deutsche bank’s research as seen in the latest edition of its Konzept magazine last week warned that:

“The dinner-party perception that prices for prime London property have always gone up is potentially a reason to worry. That everyone strongly believes they will continue to go up further is a cause for anxiety. Still, timing any turn is hard and it has long been a losing battle to call an end to the froth in this market. But perhaps we are close to the turning point.”

Deutsche describes previous examples of house-price slumps, notably in Hong Kong and Japan:

There are multiple catalysts to suggest that 2015 is the turning point [for London]. The most significant are: impending higher interest rates, tighter macro-prudential policies and a deepening politicisation of the housing issue. Again, all that needs to happen is for investors to think price outcomes are asymmetric, with low upside and large downside.

There is growing political risk embedded in prime London housing. It is not that prices cannot rise further. It is that the more they rise the greater the chance of a political backlash against further gains.

What’s more…

Valuations are high relative to history, falling interest rates cannot provide further support, and given current affordability home ownership cannot rise materially. London’s property is unlikely to enjoy the next 30 years as it did the last.

We clearly warned in December 2014, that the London property bubble looks set to burst. According to a host of different measures it appears overvalued and indeed severely overvalued.

A bursting of property bubbles in London and New York would be expected to have an impact on national economies and indeed on national property markets. Sentiment would be badly impacted.

Full article: Global Property Bubble Set To Burst – UBS and Deutsche Warn (GoldCore)

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