No property segment has seen such an unbelievable increase than luxury housing in London. The inflation in prices has made it impossible for some buyers to think even about premium houses, bungalows, villas or apartments. Experts feel that there will be no change in the situation. Rather, prices may increase further in the coming years. Though all big cities and towns of the UK show similar trends, London is leading the fleet by breaking all earlier records. Not only residential but premium commercial properties have also revised their price tag recently. Irrespective of the fact that there isn’t so much increase in the paying capacity of people, the prices are just not coming down!

Price hike is not welcomed by average buyers

Certainly, there has been a growth in the economy and people are ready to spend. It is the reason; realty companies are more than happy as the top line figures touch the sky. Nevertheless, there are issues and concerns as well. Everything is not well everywhere. Such a speedy increase of property prices is alarming. Experts feel that there is something wrong somewhere. Serious and sincere players of the property market in London feel that the professionals should certainly grab the opportunities of the bullish market, but they shouldn’t forget about the Bears either. Concerns and worries are everywhere.

What is the status of luxury properties in London?

Everyone knows that luxury or premium houses are always sold at higher rates. However, nobody wants that the speed of downfall is more aggressively than the rise. Spikes of prices are not good signs. When properties of an area see a price hike in the range of 10 to 12 percent, an increase of 40 or 50 percent in luxury properties is something abnormal. It becomes further annoying if the prices of premium villas or apartments increase regularly without any known factor. Unprecedented price hike shows that it is not natural but triggered by some other factors. It is mainly due to a uniform increase in prices by all builders and construction companies in a planned way. When people do not have a choice, they have to pay a high amount, even if they are not very much comfortable with it.

Economists highlight another important aspect. Since the economic situation has been quite healthy in recent times, there are many buyers in the market who are eager for lavish properties. It is quite obvious that when sellers get many buyers, they do not compromise on pricing. In London, not only domestic buyers, but several foreign buyers also want to invest in the property segment. There is a hope of getting excellent returns in five to ten years down the line. It is the reason prices have increased steadily but consistently, and the trend seems to continue further. Increasing values of currencies like Dollar or Euro make property investment further lucrative. The ratio of luxurious properties versus investors indicates that there is no chance of a drop in the price because there are no buyers. Some unexpected and unpredicted reasons may change the scenario.

For example, there was a sudden increase in the US Dollar rate in the last quarter of 2014. As a result, the number of foreign investors in the US properties declined rapidly. If something similar happens to the UK market also, then the prices of luxury housing may drop. Otherwise, the chances are very high that the graph will go in the upward direction.

A few reasons builders put prices exorbitantly high for luxury homes

Everyone knows that luxury properties own a hefty price tag in London and suburbs. Many people wonder about it. Why do properties get overwhelmingly priced? There are reasons behind it. Sometimes, there is some rationale behind it. However, sometimes it is just a speculation. Let’s understand them one by one.

• Extraordinary assumptions of builders: It is a common psychology that a builder always feels that he possesses the cutest and the finest property in the town. Hence, he has got the legitimate right to price it as high as he can. However, in a majority of the cases, it is just the perception of the builder and not a reality. Since the same thought process prevails in the city, nobody lowers the prices. There is a feeling that buyers will underestimate the property if they lower the price. Mob psychology results in an overall inflation in the town.
• Builders who have done projects in localities that are expensive: When builders with an experience of launching luxury projects in expensive localities enter low-profile areas, they remain in the same old mindset. As a result, they put a higher price tag on luxury homes even if the existing prices are quite less. When people ask about the rationale behind it, they convince about the paramount quality and supremacy. Subsequently, it becomes a trend, and everybody else raises prices. The phenomenon has been observed in some areas of London. There, property rates overwhelmingly increased after one or two luxurious projects launched at incredibly high prices.
• When builders have deep pockets: It is another common observation that when a builder is not desperate for selling a property, he doesn’t compromise on price. Since there is no price drop even if the property doesn’t get sold for a few months, people feel that it is a premium property. Since some people are crazy for exclusive properties, they don’t mind paying handsome amount even when they are not much convinced about the quality of housing.
• Sometimes, buyers trigger a price war: Buying an expensive property is a matter of pride in some areas of London. People spend extravagantly and then popularize it in the society. Since there are other buyers who also want to show off, similar properties get sold in equivalent (or sometimes high) prices. As the new spreads, builders come out with matching projects at a further high price. Thus, it becomes a vicious circle. It has happened in some areas of London and downtown earlier.