When markets are near a top, “irrational exuberance” is often obvious. Here are five signs that property markets – London’s in particular – are more overheated than you might have realised.
1. Silly money: London’s cheapest flat has just sold for £79,000. The “tiny studio” in Clapton, east London – which had to be bought for cash, because it’s too small for lenders to lend against – cost “more than £1,000 per square foot”, reports The Guardian. There’s an annual service charge of £250.
2. Gouging the tenants: potential tenants in parts of London are being “charged more than £100 just to see a list of properties” by “appointment-making agents”, says The Guardian, while some landlords are charging “£10 to have a friend to stay over”.
3. Return of “buy-to-flip” lending: despite wobbles in London’s luxury new-build market, lenders are once again starting to write loans to fund buyers of “off-plan contracts” – properties bought while still under construction – reports the FT.
4. Return of the liar loan: SelfCert.co.uk, which has sidestepped UK regulations by setting up in the Czech Republic, is making “self-certification loans” (where the borrower declares their income without having to document it) available in the UK again. It already has 4,000 customers on its waiting list and has been forced to shut its doors to new applications.
5. Mortgage lending is at a post-crash high: mortgage lending hit a seven-year high of more than £220bn in 2015, reports the Council of Mortgage Lenders, partly due to a rush for buy-to-let properties ahead of a stamp-duty hike later this year.
• Bonus red flag – the skyscraper index says “sell”: globally speaking, a wave of skyscraper-building is often a warning sign, and this year, more new skyscrapers are being built than ever before – up to 135, 27 of which are 300 metres or more (the height of London’s Shard) – reports the Council on Tall Buildings. Much of the demand is coming from China, says Jonathan Morrison in The Times.