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6th Septemeber 2015

The London Housing Market Again!

Could the Chinese Stock market burst London's Property Bubble?

A longer than normal break from writing this blog but I have been concentrating on a new book to be called 'An Interesting Theory; Why interest rates are important but not for the reasons commonly assumed'. A snappy tittle I am sure you will agree. It details in a concise way many of the points made in this blog and should be e-published later this year. As part of the process I have drawn together the data for lending, government spending and changes in the levels of spending to predict the UK economic performance. This features here.

In brief the figures to July 2015 show the UK economy remaining buoyant and whilst these figures do not included any data for the months of the third quarter the general trend would suggest GDP growth will above the last few quarters. However this is not to say all is well. Secured lending to individuals represents almost 68% of lending and continues to rise whereas the total lending to businesses saw a increase against the long term trend of reduced loans. This suggests that much of the growth we are seeing is being funded by the current property boom.

This brings me back to one of my favourite subject the state of the housing market. House prices and lending on property remain buoyant and there and there are no domestic reasons why this should change in the immediate future. However another dynamic is the international conditions, as noted in previous blogs and by other commentators much of the London housing market has been underpinned by overseas buyers who often leave the property empty, possibly for a quick sale if needed. This dynamic has remained remarkably resilient as London is seen as a safe haven by many although foreign criminals have also been playing a role. With increased turmoil in the world following the devaluation of the yuan and associated events one could expect more business as usual. However the capital's market resilience is built on very fragile foundations. Not on the strength of the domestic economy, as few locals can afford the prices charged but on the perceived value of overseas buyers and in these types of market which are beyond physical needs the balance of buyers to sellers becomes important. In the past each world crisis has just added to the number of buyers but the recent events in China have the potential to be different as the Chinese where already big investors in the London property market. Whilst there will be many investors looking for a safe sanctuary from the country's problems there may well be others who need cash in a hurry to cover the losses that come with such crises. Currently the anecdotal evidenced from estate agents suggests that we are still in a seller's market. One would expect them to say that even if conditions had changed but it looks like it is business as usual.

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