How to spot a property bubble

Wednesday, July 14, 2010 | Posted by: Fiona Cullinan
Categories: Protecting your wealth | Tags: property, tips, market, Dubai, investments, crash, bubble, boom, resale, rental yield

What are the four things to look for when spotting likely property bubbles, either in the UK or overseas? Stuart Law, the CEO of property investment company, Assetz, advises on some simple indicators.

1. Beware of markets where a high proportion of properties are owned by investors. During the Dubai property boom, about 80-90% of off-plan properties were owned by investors. In the UK, it’s about 10-20%.

2. Be wary of markets where a large number of holiday homes are being built. This may indicate that there will not be enough buyers to soak up the properties.

3. Calculate the annual rentable value of your property. Assetz aims for an 8% gross rental yield on clients’ residential properties. So for a £100,000 property you would want a rental income of £8,000, leaving just over £5,000 profit after management costs, etc.

4. Check that there is a strong resale market. How easily will you be able to sell your property?

Image of Dubai Marina: © Paul Keller / Flickr, 2006

This article originally appeared in Bespoke magazine, alongside the cautionary tale of the Dubai property bubble and fears over a property bubble building in China. Find out what else is covered in the summer 2010 issue of Bespoke and how to get your free copy.

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