Don’t panic! London’s not going to crash, yet.

After several years of headlines heralding London’s property boom, the conversation is changing. Now, property developers and industry luminaries are whispering in hushed voices about a potential crash, as early as 2017. With London prices at an historic high, market analysts warn that the only way is down.

Academics from Lancaster University predicted that if real house prices in London continue growing at 2.75 per cent every three months, they will enter into bubble-type behaviour phase in six quarters. This suggests a London bubble could be blown in 2017, if prices continue rising at the same rate.

With repeated warnings of a wider economic cool-down, a property crash would have huge consequences, not just for the London market, but also across the country. London’s growth has seen a ripple effect extend throughout the “commuter belt”, and such locations would be just as impacted by a downturn.

But rest assured, a London housing crash (if ones comes) is a few years off yet. Whilst growth may be slower in the coming years, until the housing shortage is fully addressed, demand will always outstrip supply. Whilst the Governor of the Bank of England, Mark Carney has previously warned of deep-seated troubles in the UK property market, his warnings have increased the pressure on the government to speed up the planning process and row back on reforms that have devolved house-building decisions in England to local authorities.

Both of London’s likely Mayoral hopefuls, Zac Goldsmith (Conservative) and Sadiq Khan (Labour) have pledged to prioritise housebuilding. If ambitions plans to at least double housebuilding in London are met, London may begin to see the market stabilise as supply starts to keep up with demand. Whilst this is good news for first-time buyers and developers, it could lead to thousands of homeowners losing out on the gains others have enjoyed over recent years. In the worst case scenario, it could mean homeowners going into negative equity on properties bought at the peak of the market.

Whilst George Osborne might be predicting storm clouds gathering, the housing market in London is far from seeing these doomsday scenarios start to occur. Few predicted the surge in property prices that we’ve seen in recent years. In the same vein, there is a certain amount of crystal ball gazing involved when it comes to predicting the next market fluctuations. So whilst we are unlikely to see the same pace of growth continue, nor the rapidly escalating returns for home owners, investing in bricks and mortar in London remains a sound investment decision.

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