London real estate market booming – but not in a good way

Besides Monaco housing in London is the most expensive, but The Economist suggest there is not much good in this trend. If the market continues growth an average flat in the British capital will cost £1 million by 2020.

Prices in London are already higher than they were before the financial crisis while in other countries like the United States they are below that. But the increasing prices seem to slow down the economy: a lot of people don't have the money to buy flats near where they work, which means they waste a lot of time traveling.

Others take loans, but this makes them very vulnerable to changes in base rates. Many of these young people may very well be still paying their loans in their pensioner years.

There are multiple factors behind the trend: for one there are investors buying up estates and often not utilizing them. And there are the demographics: the population of England has increased by 11 percent in the last two decades while fewer of them live in marriages – which means demand is greater on the market.

Meanwhile the supply on the market is anything but strong, mainly because huge taxes are to be paid after a purchased estate. This leads to owners of larger estates not moving into smaller ones, because it is cheaper for them to maintain the bigger home even if they do not utilize it completely. And one other factor: local governments have basically seized to construct new homes after Thatcer, narrowing the supply further.

(Source: http://hvg.hu/ingatlan/20150925_Fel_lehet_lenditeni_a_lakaspiacot_csak_ne)