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Property bubbles

Property bubbles

Nothing changes price and value more rapidly than houses. Property can be the best investment you've ever made but if you buy at the wrong time, at the wrong price then it could quickly become the worst purchase you ever made. When the recession first hit the UK there was a significant drop in house prices and it took a long time for house prices to start to move back up. However, in recent years house prices across the country have risen considerably but not in all parts of the UK. This sudden recovery and increased property demand is believed to partly be because of the backing from government funded schemes as well as low mortgage rates on offer from lenders.

Many experts and also government figures have warned that with the recent rise and demand that the UK is at risk of another property bubble. With property gurus such as Right Move admitting that the housing market has already exceeded their predictions for 2013, could a property bubble be on the horizon? Many are blaming the increased demand on the government for their home buying schemes. Guaranteed mortgages and loans for deposits has meant that those not normally being able to get on the ladder are now able to take advantage of these offers and are reportedly signing up in the masses.

Ultimately, the increase in demand will only cause an increase in property prices which seems to be continuing to increase at a phenomenal rate. The biggest concern has to be the amount of mortgages being granted. As this number rises, there is a significant chance that things could spiral out of control and the property bubble will be upon us. The major risk comes from mortgages being granted to those who simply cannot afford the mortgage repayments and are likely to default. However, whilst there are now guaranteed mortgages, banks are still operating sensibly and even the governments guaranteed mortgages come with a strict criteria.

Those with an incredibly poor credit history, no deposit at all, are unemployed or earning very little are still highly unlikely to secure a mortgage. Perhaps the threat of a property bubble is simply coming from people scaremongering who don't agree with the governments backing. Banks will still have to operate within safe guidelines otherwise they are at risk of creating another banking crisis. There is no denying that a continued growth rate like this could be dangerous to the economy but it could just balance out and peak. Either way the trend is something that we should be watching closely and should not underestimate.

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