What does 'Property Bubble' mean when buying a property?
Find out what Property Bubble means when you are buying a property. 'What does Property Bubble mean?' plus over 150 other property related terms and jargon in plain English
A property bubble occurs when property prices rise to an unsustainable level. When they drop back down the "bubble has burst". Note a bubble only occurs when the above happens in isolation from other factors - e.g. there is no major recession on the overall economy.
In the lead up to the Credit Crisis of 2008 a Property Bubble caused a recession. Too many people were given mortgages they would not be able to pay back which drove up the price of properties. When those people stopped paying their mortgages the bubble burst and the values of the properties dropped to previous levels.
However because global economies were so tied into the higher property values this lead to a wider recession which then drove property prices lower.
As such there has never actually been a property bubble in the UK as value drops only occurred when the wider economy goes into recession. This includes 2008/2009 when prices dropped because of a recession, not a bubble.
This compares with the dot-com bubble which burst even though the rest of the economy (and house prices) continued to grow.
To find out more about how you can work out what is going on with property prices pick up a copy of my ebook How to Really Buy a Property.