Liquid error: wrong number of arguments (2 for 1) London now a "superbubble" ready to burst | Marsh & Parsons Sales and Lettings Estate Agents London

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London now a "superbubble" ready to burst

Tue 15 Apr 2014

London now a "superbubble" ready to burst

The London property market has been described as a "superbubble" following new figures showing prices rose almost 18% in the year to February.

Prices in the South East rose 8%, closely followed by the East of England at 7.7%, according to the Office of National Statistics.

UK house prices rose 9.1% over the past 12 months, although that falls to just 5.8% after stripping out London and the South East.

Oliver Atkinson, director of the online estate agents Urbansalesandlettings.co.uk, says London is now well beyond a bubble. "What we're witnessing in the capital is a superbubble. Buying in London is surely now a high stakes game. "Will the superbubble go pop? The extreme lack of supply in the capital will protect prices to an extent but anyone buying at current levels has to go in with eyes wide open." First-time buyers are now paying 10.5% more on average than one year ago, making them particularly vulnerable, Atkinson said. "Their exposure is increasing by the day. If the market moves against them, many could be left very quickly in negative equity."

By contrast, prices in the North East rose just 2.9% in the past year, said Stephen Smith, director of the Legal & General Mortgage Club. "Policymakers cannot make decisions that will impact the whole country based simply on what is happening in London. "The government needs to maintain a balancing act between stimulating growth in some areas and ensuring thatLondon and the South East don't become unaffordable to families."

The impending Mortgage Market Review should cool the market and dampen overenthusiastic growth, said Brian Murphy, head of lending at the Mortgage Advice Bureau. "Mortgage applications are likely to take longer initially as lenders and brokers get to grips with new systems, effectively limiting the number of applications that can be processed. "Tighter lending restrictions will mean consumers are only approved for mortgages after detailed affordability checks, ensuring mortgage borrowing is sustainable in the long-term. "However, what urgently needs to be addressed is the fact that housing supply is lagging far behind demand. "The extension of the government's Help to Buy equity loan scheme should give builders the impetus to ramp up production of new homes," Murphy said.

London's breakneck growth is unlikely to let up, said Peter Rollings, chief executive at estate agents Marsh & Parsons. "Internationally, prime London property in particular is still seen as an unshakeable pillar of investment, and until other forms of investments become more attractive, it will continue to be viewed as a global reserve currency."

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