Since reports recently named London one of the world’s most desirable locations in which to buy real estate, the local market is clearly operating in a manner that will prove that to be true. “What’s happening here is absolutely ridiculous,” says one analyst at MarketWatch, “and then you realize that the prices are in British pounds and that to convert to dollars you have to add another 60 percent”[1]. Some experts are going so far as to call the entire situation a bubble in the making.
Other experts describe London property as “the Swiss bank account” of real estate, explaining that real estate in this area is perceived as an ideal vehicle for capital preservation. In fact, some people view the area as a superior place for their money than in a bank account when it comes to earning power and security. The fact that London has strict zoning laws means that the housing supply is likely to remain limited means that real estate has a built-in scarcity not necessarily available in areas that are open to lots of development, and the area is also becoming a vacation destination for many international travelers as well as becoming the “financial capital of Europe.”
The question on most analysts’ minds is: will values continue to climb? At present, interest rates are low and home values are high. However, when interest rates rise many people could find “unmanageable” loans on their hands. Do you think that this time is nearing, or is London still a great place to buy?
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[1] http://www.marketwatch.com/story/the-worlds-hottest-real-estate-market-2011-04-19?reflink=MW_news_stmp
