London Residential Property Market Assignment Example | Topics and Well Written Essays - 2000 words

London Residential Property Market - Assignment Example It affects almost our entire lives, from the quality of our lives, our health and well-being; it determines not only our choice of transportation means but also our choice of work, and status (Baker 2003). Housing also affects our economic wellbeing, family structure, choice of friends and status in the society. It is with no wonder that, Abraham Maslow classified it under basic need of shelter in his social pyramid. Most often, investors see valuation as the first step toward intelligent investing. It has been argued (e.g. Penman 2003) that an investor can make informed decisions about where to invest once the value of shares are determine based upon the fundamentals. This is so because, without this value investors can either buy high or sell low. Investors who trade on these stocks are often forced to ask themselves whether they are buying or selling at the right price. (Penman, 2003). In the face of this situation and their quest for an alternate answer, investors turn to various media including internet chat rooms, printed press, "talking heads" on television. ). In addition, investors consult investment analysts who provide an almost endless stream of information and recommendations to sort out. There are often claims that some shares are undervalued and vice versa. (Penman, 2003). Against this background, the aim of this paper is to carry out an analysis of the United Kingdom London residential markets so as to enable investors make informed decisions as to a buy, a hold or sell decision. The next section provides an overview of the London residential markets. 1.1.2 Overview of the London Residential Market Property prices in United States, the US began falling in 2005 making sub-prime mortgage loans more risky as the borrowers are normally expected to exercise their options to default. Consequently, the US subprime mortgage market is suffering from foreclosures arising from falling real estate prices and borrowers exercising their options to default. (Schumer and Maloney, 2007). Investment banks such as Merrill Lynch, Goldman Sachs and CitiGroup all fortune 500 companies have witnessed significant declines in profits, share prices and are planning to lay off workers as a result of the sub-prime crises. (Ellis, 2007). With regard to the United Kingdom UK particularly London, large empirical literature examined the determinants of the two booms experienced by home prices in the early 1970s and the 80s. Findings from these studies provide tentative evidence in support of the view that speculation on expected future house prices must have been an important force driving actual house prices (Muellbauer & Murphy 1997). Concerns over an ongoing house price bubble in the UK have been repeatedly raised by both the press and policy makers. Over the last thirty years, UK house prices have risen in real terms by around 2 % a year and according to HM Treasury (2003) report this stands in contrast to other European countries such as Sweden, France, and Germany where real house prices have decline or remain