London housing market shows bubble risk, warns EY Item Club

[LONDON] London's housing market is beginning to show "bubble-like conditions" as overseas investors bid up prices and buyers take on more debt to purchase properties, according to a report yesterday by the EY Item Club.

Homeowners are now borrowing as much relative to their income to purchase real estate in the UK capital as they were before the financial crisis, the London-based group sponsored by EY, formerly Ernst & Young, said. The average London home will cost about £600,000 (S$1.2 million) by 2018, it estimates. It is around £404,000 now, according to the Land Registry.

Prices across most of the UK "remain well below their pre-crisis peaks, and there seems little danger of a bubble", Andrew Goodwin, senior economic adviser to the EY Item Club, said in the report.