Why the London and UK property bubble is all smoke, mirrors and hype!

Step back from the hype,

It seems that everyone has their two cents of the London and UK property markets at the moment, with many saying the market has topped out, or a bubble is forming. The truth is that nothing could be further from the truth.

I am a fundamentals investor so I look for areas that have good solid fundamentals; this means areas that have shops, schools, transport links, major employment and major investment. I then consider the property cycle and at what stage we are at in it. I call it the Property Trend Cycle. ‘Trends’ because the best you can do is to track trends, you cannot accurately predict it. You find areas that have fundamentals and your strategy is chosen based on the stage of the cycle.

Now if you look at the London and UK markets separately (which I always suggest you do) you will see the truth. For over five years there was very little property built. The rapid increase in values in London can be attributed to one thing – increasing demand from locals on the back of a lack of supply.

Now if you are looking at Zone 1 and even Zone 2 then prices have slowed somewhat, but they are still rising. Remember this is an area with the best fundamentals, the centre of this global city. Go out to Zones 3, 4, 5, and commuter towns, and the prices are still for the most part growing but largely untouched. Move further out to the towns and cities across the UK, and they are still creeping out of the recession. This phenomenon is called the ‘ripple effect’.

So what do you need to do to make money in London and the UK right now?

Look for the areas that have grown massively and move a bit further out where they haven’t and then wait. Always remember to buy with the best fundamentals. If you can find areas where huge investment is going on, then all the better. You are now competing against the local market which is a good thing; it means that you can sell your property if needed.

Finally, don’t deal hunt but fundamentals hunt, and if you don’t know where the best investments are then jump on my website and watch some of my videos that explain the latest markets. My latest property market update video for Q3 2014 is out next week.

Live with passion and fun,

Brett writes regular articles for the Singapore-based property portal, PropertyGuru. This article was originally published in Issue 59 of The PropertyGuru newspaper.

Brett Alegre-Wood
July 16, 2014

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