Tuesday, November 19, 2019

There is a real danger of a house price bubble in London. Discuss Essay - 11

There is a real danger of a house price bubble in London. Discuss - Essay Example House price increase in London indicates that property dealing in London is not a sustainable one. London house prices are becoming unaffordable by citizens as well as immigrants (Ogonna, Chris and Charles, 2013). The house prices are currently eight times higher than that of salary of first time buyer. It has been observed that house prices have a significant impact on economy and banking sector of a geographical region. Increase in house prices clearly denote that middle income group is not being able to purchase a house in London or nearby locations (Tyson, 2003). On the other hand, increased house prices in London are not only a problem for this region but shall also have an impact on surrounding regions. The house price bubble is well represented in figure 1. It is clearly evident that demand towards real estate is significantly high in London. Domestic and overseas demand in London is high so as to sustain real estate selling. People having normal wages are not able to afford f lats or residential places in London. First-time buyer average increased to  £159,804 in the previous financial year. A speculative bubble shall be formed in the coming years due to high prices of houses in London. It is a real danger since maximum percentage of individuals would not be able to afford such high priced houses (Telegraph Media Group Limited, 2015). This might adversely affect economic conditions due to lack of residential places in the region. The argument is based on increasing gap between wages and house prices. Individuals need to possess sufficient funds in order to afford housing property. Market demand in real estate sector of London is triggered through prices bid by investors and buyers being inclined towards purchasing real estate properties. In the present scenario, price of a house in London is approximately 600,000 pounds. Other region in UK accounts for low prices much below pre-crisis peak and hence there seems to be a little danger

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