One of the UK’s most high-profile property groups has sounded a warning that the surge in the London residential market cannot last.
Grosvenor is the first major property group to warn that the bubble could burst.
Grosvenor Group, which owns most of Mayfair and Belgravia, is controlled by the Grosvenor family, headed by the Duke of Westminster – the country’s seventh riches man, according to the Sunday Times Rich List.
London property prices have risen above their previous pre-credit crunch peak, with Greater London prices now 25% above their low of 2009 and prime house prices now 53% ahead.
The prime London market, largely driven by foreign investors pouring cash into what they see as a safe haven, has prompted the likes of Grosvenor to convert some office buildings back to their original use as homes.
Grosvenor chief executive Mark Preston told Reuters: “The extremely high rate of growth over the last two to three years is a thing I’m concerned about and I think it’s probably unsustainable. We’re reaching values in prime London that are just extremely high by historic standards.”
Preston said the organisation will diversify into the private rented sector to offset the risk of slowing price growth in the luxury housing market.
Grosvenor’s profits before tax last year were up 12.5% to stand at £354.4m.
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Comments
London property prices are at least 50% overpriced and with using the common sense it's easy to figure out what will happen next? I don't know when but it will happen, mark my words, and the crash will be something! This is a good news - finally ordinary people will be able to buy their first house and greedy investors get burned!
The London property market is caught in a pincer. Benefit caps will strangle overleveraged BTLers while foreign demand can only go down.
BTLers are already trying to bail out as this shows:
http://propertyspotter.blogspot.com/2013/05/btl-portfolio-closing-down-everything.html
Patricia - what you write about London is interesting. There does appear to be a vast amount of houses over a million, and often many millions, for sale in London.
I get the impression that the buyers who can buy at such prices are not limitless - even in London.
I'm wary of saying that it could never happen again - that's one of the main reasons that bubbles happen in the first place...
That said, short of a huge change in the credit worthiness of the UK compared to everywhere else (very unlikely) the flood of money coming in from abroad that is making this bubble is unlikely to stop on its own.
We are a safe haven and London housing is considered ultra safe in terms of investment value, even though yields are rubbish.
What would you rather? Gamble your euros on a 50/50 chance of losing it all, or put it somewhere where you will almost certainly see a rise of 10-15%.
When it does go pop, I think it is going to be very nasty.
What happens to us poor normal people when it does?
Although banks are involved, it won't be their fault this time, it'll be us greedy estate agents, won't it?
Pee Bee - Just my humble opinion as a Central London agent.
Patricia
The "influencial stakeholder" you mention has a good reason for welcoming prices coming down - they already own a large chunk of the market (which they are highly unlikely to wish to be rid of...), so acquiring another chunk at lesser prices than todays would be more icing on their cake - and with yearly profits of a third of a billion a year to sink into further investments, they will be VERY good buyers I have no doubt!
I also have no doubt that the Duke of Westminster is NOT signing up to the HPC website...
I think I am rather inclined to take notice of what an influential stekeholder like the Grosvenor Group have to say about the market, rather that the daily ill informed articles (usually from property portals) we get on EAT lately about the market booming. The fact is the Central London market - rental and sales, is definitely showing signs that prices have peaked and are on their way down. If we see interest rate rises starting in 2015 the market as a whole will look very different to what it is now.
One day... just one day... one of these "experts" will get their timing right with these crystal ball projections of doom.
Until that day happens, we'll just keep reading the stories...