London is at risk of a housing bubble – with average house prices more than three times higher than in Northern Ireland or the north east by 2018 — but the rest of the U.K. looks set to escape wild gyrations in the property market, according to a report by consultancy EY.
“Prices in most regions are below previous peaks in cash and real terms,” the EY ITEM Club Special Report on Housing noted. “Both affordability and household debtlevels look much better than before the financial crisis.”
However, it added: “The exception is London, where limited supply and strong demand have driven price-to-income ratios and income multiples back to previous highs, signaling the potential for overheating.”
U.K. house prices rose at their fastest rate in over four years in December, according to the latest data from the U.K.-based Nationwide building society. House prices in the U.K. rose 1.4 percent in December and were 8.4 percent higher year-on-year, with the single-month increase the biggest since August 2009 with London house prices leading the trend, having risen 14.9 percent year on year.
