London at risk from "devastating housing bubble"

London now the second-most unaffordable city in the world

London is facing a housing bubble risk as it’s “by far the most overvalued market in Europe”, UBS has warned.

UBS’s Global Real Estate Bubble Index, which looked at 15 cities including Hong Kong, Sydney, New York, San Francisco and Geneva, found that London could see a “substantial price correction”.

The report pointed out that London property is now the second-most unaffordable of the 15 cities, behind only Hong Kong.

It also found that between 1985 and 2009, whenever the index exceeded 1.0 “a real price correction of on average 30% began within three years 95% of the time”. That’s why London is at risk of a housing bubble as the capital rated 1.88 on UBS’s bubble index.

Claudio Saputelli, one of the authors of the report, said: “A mix of optimistic expectations, favourable economic fundamentals and capital inflows from abroad has caused valuations to soar in certain cities in recent years.

“Loose monetary policy has prevented a normalisation of housing markets and encouraged local bubble risks to grow.”

 

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