How to Predict a Housing Bubble
A housing bubble occurs when house prices grow above their average levels due to speculation by experts that the housing market is going to boom, increased demand and exuberance. However, this can only last a short time before demand eventually subsides and house prices take a sudden downturn, known as a bust.
You can predict that a housing bubble may be taking place by looking out for the warning signs. One of the key indicators is that if the average house price is increasing faster than the average salary. This situation is clearly unstable and will lead to a decrease in demand. If interest rates generally rise, more people may become cautious about lending which in turn adds uncertainty to the market. Another indicator is the market experts. They may predict that a housing bubble is taking place, however, even if they’re wrong – it is likely to start a panic in the housing industry.
Brexit has added another degree of uncertainty to the market. After the announcement, the UK saw a record low in the amount homes sold, although prices remained consistent. However, it’s not all doom and gloom. A housing bubble brings about opportunities for savvy investors to take advantage of. If you sell your property during a boom, your assets are likely to be able to go further when the market has returned to its normal state. If you rent your property, you may be able to get better deals during a bust as there is more selection due to oversupply in the market.
