London real estate bubble has been re- inflated to dizzy unaffordable heights of pre Lehman days and is ready to pop:
By Daniel at 7 February, 2010, 1:43 pm
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It is the “paper equity” of the real estate appreciation that makes people feel “wealthy”, while savings rate down to zero/negative. same thing happened in California.
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LONDON—The one-bedroom co-op apartment is only a short walk from Hyde Park, and it boasts high ceilings and a purely decorative balcony.
Yours for a mere $1.5 million. It seems quite a high price, especially for a property whose ground lease will eventually expire, leaving you with nothing.
If you’re looking for something bigger, you can get a duplex with two bedrooms in the center of town … for $3.3 million. And if you’re willing to slum it a bit and cross the River Thames to the unfashionable South Bank, you can get a modern three-bedroom apartment with a genuine balcony, and views of the river, for $4 million.
Looking at the real estate listings here is like stepping back in time to that unreal, giddy world of three years ago—before Lehman, before subprime, before AIG. Back to a period when everyone was either rich or on their way, either from flipping condos or running hedge funds, and the only direction was up.
But these prices are now, and they contain an ominous message: The London real estate bubble, arguably the biggest one of all, still hasn’t popped.
If history is any guide, it surely will. Burst bubbles typically fall a long way, in due course, and there is no reason to believe this one will be any different—despite the usual rationalizations you hear in this town today, and which you heard in, say, Florida in 2005 and Tokyo in 1988.
http://online.wsj.com/article/SB10001424052748703357104575045253856927146.html?mod=WSJ_hp_u
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