Will the (UK Property Market) bubble burst?

Fedee Global

One of the biggest pressures on consumer prices (although not fully registered in consumer price indices) is the cost of housing. This, in turn, is a huge driver on middle income pay expectations. The collapse of a property price bubble, triggered by the mass failure of toxic mortgages, was a major factor in the last recession. So, what has been happening to housing prices since we came out of the last recession?

There have been several types of housing bubble – as measured, according to the OECD, over the period 2010-18.

* Starting with the stable countries – South Korea, Japan, France, Poland and much of the EU (except Germany and the UK) where prices have risen since 2010, but by only a modest amount.

* Then there are the rapidly inflating bubbles of India (+256%)), Brazil (+89,9%), Canada (partly driven by money laundering), China, Mexico, South Africa, the USA and Australia – with China and Mexico accelerating to bursting point.

* Finally, there are the ailing countries – principally Italy (-16.5%), Russia (-9.5%) and Greece – where house prices have been tumbling, although both levelling off slightly in the last two years.

The most disturbing trend has been in Germany (+38.9%) where relatively high economic growth, a low level of construction activity and a rising immigrant population have been putting pressure on house prices – giving rise to an uncomfortable burstable bubble at the heart of the EU.

To date in 2019 most of the trends we have detected have just been largely compounded.

* In Germany apartment costs rose by a staggering 9.2% during the first quarter of the year.

* US house prices started off the year as generally unchanged, although there was activity at the starter home level, where recovery from the 2008/9 crash was felt most. Since the Spring, the sale of new homes has rocketed due to lower mortgage interest rates and seemingly cheap house prices. As a result, prices have risen sharply, and a property bubble has re-emerged.

* In China property prices cooled during the course of 2018, but recently the conditions for further price inflation have been set by curbs on building capital fund sources and refusals to give developers planning rights in several major cities. This will tip the scale and regenerate rapid price inflation as demand continues to exceeds supply.

* In the UK, house prices peaked in August 2018 and have fallen slightly since, especially in the south-east of England. Undoubtedly, this has been largely due to the Brexit effect as the economy feels the effects of widescale disinvestment in the UK economy. For many a recession has already begun here.

Finally, there is Ireland, where the collapse in property prices was particularly dramatic during the last recession. However, lessons have not been learned, and the same pattern of bubble growth is happening once again. During the first quarter of the year, prices were up 11.4% in Limerick and 10.3% in Waterford and have since continued to climb rapidly everywhere – except the capital, Dublin.

We have been predicting a major recession by Q3 2020 for many months now” pointed out Robin Chater, The Secretary-General of the Federation of International Employers (FedEE), “but the question is, what will spark it? Brexit is an economic disaster, but all the wise money has already left the UK economy. The US-China trade war will certainly hurt the USA more than China and it is by no means certain that oil supplies will seriously be hit by troubles in the Strait of Hormuz. But house prices were a major factor in the last recession and are almost certainly going to be again. Look out for Germany and Ireland for a sudden, uncontrollable collapse sometime later this year.”

Shared by: FedEE

EAN Breaking News

Breaking News from the team at Estate Agent Networking. Have a new story to share with us? Then please get in contact today! When and where we can we will refer to third party websites with a 'live link back' where news was released first.

You May Also Enjoy

Rightmove logo
Breaking News

Rightmove’s Weekly Mortgage Tracker – 01/07/25

Average rates for 2-year and 5-year fixed-rate mortgages   Term Average rate Weekly change Yearly change 2-year fixed 4.57% -0.05% -0.83% 5-year fixed 4.55% -0.04% -0.45%   Lowest rates for 2-year and 5-year fixed-rate mortgages   Term Lowest rate Weekly change Yearly change 2-year fixed 3.69% -0.13% -0.98% 5-year fixed 3.87% -0.01% -0.36%   Average…
Read More
Breaking News

Housing Insight Report Covering May 2025

Sales On average, there were around 11.5 homes placed for sale per member branch in May 2025. Lettings The average void period reported by member agents increased to just over three weeks in May 2025. We are seeing an average of 37% of housing transactions taking longer than 17 weeks to complete. The timescales are…
Read More
Breaking News

Rental Market Hotspots Drive National Growth

New analysis from FCC Paragon reveals modest national growth in rental demand across England in Q2 2025, up by 1.2% to 29.4%. However, this overall increase masks significant regional variation, with several counties experiencing substantial quarterly surges that are driving the market forward. The research shows that rental demand across England strengthened in Q2, up 1.2%…
Read More
Breaking News

Nationwide House Price Index for June 2025 – Thoughts from the Industry

Nationwide House Price Index for June 2025 shows House prices fell by -0.8% between May and June of this year. On an annual basis, the average house price increased by 2.1% although this rate of growth had slowed from 3.5% the previous month. As a result, the average UK house price now sits at £271,619.…
Read More
Breaking News

Clarity still needed on key areas in Renters’ Rights Bill

Ahead of Report Stage of the Renters’ Rights Bill in the House of Lords later today, 1 July 2025, Propertymark is urging the UK Government and Peers to amendment Bill, so it is fit for purpose. There remain long-standing concerns about the capacity and capability of the Courts, with the time from claim to hearing…
Read More
Cozy Pet Cat Tree Grey
Breaking News

Pet deposits only option following UK Government U-turn on Renters’ Rights Bill

Ahead of Report Stage of the Renters’ Rights Bill in the House of Lords which kicks off later today, Tuesday 1 July 2025, Propertymark is urging Peers to support an amendment that would allow for an additional pet deposit now that the UK Government has tabled amendments to remove pet insurance requirements. Since the introduction…
Read More