I am not an expert in the housing market, so I wanted to ask your opinions. Is this price rise in London sustainable? I look at the price declines in the USA and Japan and ask why the UK is different?
Of course prices are not sustainable. The average salary in London is approximately £30,000. If you want to live in an area that doesn't have alcoholics and gypsies defecating in your front garden a house will cost half a million pounds. Loans to income levels are ridiculous.
I know of an apartment near Mare Street, Hackney which sold for £600,000 to a Chinese investor. Totally bonkers. Mare Street is known as "murder mile" and smells of piss every morning after the vagrants have cleared off.
Prices might not be sustainable, but they still might go up further before coming down. The Chinese investor might be lucky if he exits at the right time.
And it's not just the Chinese but big money from Russia,bmiddle east etc has been flowing into London, NYC, Canada, Australia etc foe 3-4 years now. A safe haven / geo politic play, not a profit play at that level.
For the Middle-upper class it is different. Interest rates are basically zero so money in the bank is shrinking due to inflation (even when it is 'subdued'). This means people look for ways to profit elsewhere - and where is an uptrend occurring? Stocks and RE! Put your cash in and see it double in a few years. Buy, flip or renovate works equally well in hot, incentivised markets.
For the lower to middle class it is about biting the bullet. Do you try and get a foothold and buy with a big mortgage and hope the party continues until you sell or pay down the principal enough, or do you continue to try and maintain your inner city life whilst being robbed by rental increases and food inflation? Some are forced to give up by either downgrading or moving further out of metro areas to bring down living costs. Problem is once u move out its hard to move back.
Everyone asks if it is sustainable. I have no idea and not enough experience, knowledge or education to be of assistance, but I do know when and if it all goes tits up ( ie when govts lose control of economic levers) then everyone will cop it, but the middle class will hurt the most.