House prices in London ’50 pc overvalued’, giving rise to correction fears

The London property market is overvalued by up to 50 percent, raising fears of an impending correction, according to a leading global rating agency.

S&P Global Ratings, part of S&P Global, used long-term average real estate prices for the calculations and compared them with income data.

Alastair Bigley, a researcher for the agency, warned that prices were likely to fall.

“A combination of low rates, the stamp duty holiday and excess savings during the pandemic have pushed property prices up, particularly in London and the South East where long-term income overvaluation is as much as 50 percent,” he said. he.

“We expect a larger correction in property prices in an overvalued market.”

Outside of London, S&P estimated that real estate was overvalued by 20%.

Mr Bigley said the rise in house prices was “a consistent trend” during the pandemic, which initially went undetected due to the disruption of the international economy. Since the start of the pandemic, prices across Europe had also risen sharply.

The overvaluation didn’t necessarily affect homeowners, as higher prices gave them more equity and minimized defaults.

House prices in the UK hit a new all-time high on Monday, dropping nearly £6,000 in one month, amid a rush to buy before mortgage costs climb further.

According to property website Rightmove, the average home now costs £354,564, the first time asking prices have risen above £350,000.

It came as homeowners raised their asking prices by an average of £5,760 or 1.7 percent in March, the biggest monthly spring increase since 2004.

Rightmove’s Tim Bannister said the market is expected to slow in the second half of the year as economic headwinds dampen consumer confidence.

“We have just seen interest rates rise again, and further incremental increases are forecast for the year that will raise mortgage rates for some,” he said.

“Inflation and the rise in the cost of living are also likely to affect buyer affordability and market sentiment.”

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