Concerns about the likelihood of interest rates rising, the strengthening pound and uncertainty over next year’s general election are already dampening property price growth in the capital.
In a research note called Strong growth not built to last, Deutsche Bank expects UK interest rates to increase to 1% by the end of 2015.
“Coupled with the end of ‘easy money’ on global capital markets as central banks rein in loose monetary policies, Britain’s housing market could come crashing back to earth as the influx of foreign buyers dries up,” the Daily Telegraph reports.
Nick Marr, of property sales website, The Little House Company, said it predicts “a period of slower, or zero, price growth in non-super prime London”.
Average London prices, which according to the Land Registry stood at £435,000 in April, have been boosted in recent years from overseas investors led by Asia, Russia and the Middle East, seeking a safe haven for their investments.
To counter fears that London is entering a market bubble, leading lenders Lloyds and the Royal Bank of Scotland are clamping down on large mortgages, by restricting lending on loans above £500,000 to a maximum of four times income.