Hate to Burst Your Bubble But...London's in Trouble
Data from HSBC shows London’s housing bubble could burst at any time. The Big Smoke’s housing shortage has sent prices close to 10 times less affordable than the UK’s national average—based on a price-to-salary ratio. Ouch.
The gap between salaries and prices means that one big interest rate shift could put the entire market in shambles. First-time buyers are flooding the market, pushed in large part by record-low 0.5% interest rates, making money cheaper to come by.
Additionally, the government's Help to Buy program puts up 20% of the costs for buyers who can produce a 5% down payment, opening up the market for lower-income buyers.
Should rates go up even slightly, this segment could struggle to meet mortgage payments, putting the entire market under pressure, HSBC warns. [BI]
