Chartered Surveyor

Give the man some due. When weakness has been expressed against BDEV deflationary pressures have taken ther toll on UK house prices. The difference is a free market versus and centrally controlled market that we now have in the UK. So any weakness in BDEV is a buying opportunity. The QE effect raises the asset value in nominal terms when valued in sterling. Set against gold has been a different matter. In the Soiuth East over the last 6 - 9 months sterling has out performed gold against house prices, but my view is that this is about to term again.

Those that work in the construction industry traditionally were always the first to see a slow down in the economy. Equally a pick up in this sector usually heralded that green shoots lay ahead. Bubbs uses the BDEV chart as a gauge to an economies health ie that being the construction industry. If he is seeing signs of weakness based on this data and on strong volume then things may not be looking too rosy in the near future.

Why do you see a marked downcast in London property after the Olympics Bubb. What will be the driving force behind such a fall in values? I must say I am hearing from people that London properties never crash, or its a safe haven or the powers that be will never let it fall. Same mantra I heard up till September 2008 to March 2009 before they wacked in ultra low interest rates and money printing.

Little antidote Over the last three weeks a growing number of estate agents and borrowers in prime London have been asking me if they consider the London market is about to correct. All are of the opinion that prices being achieved and have gone up to fast and to far. There are alot of nervous people out there. Those working in the City are the most pessimistic with job security their main concern, and so they should. No job no money to pay the mortgage. Simples

When you have a centralised and controlled economy to a great extent as now, then inside information such as how much QE will be injected into an economy and when, then one can plan ahead with a degree of certainty. The rest of us have to second guess which makes one a speculator not an investor. Stacked deck.

New Build Flats BDEV up today you say Bubb. This does not surprise me. All of the new build flats across West London I have being monitoring over the last 4 years. All of them have all come to completion right on time for Spring 2012. I have always wondered why some were taking so long to build. Was the answer staring me in the face? Did the major builders know something we dont. ie get their sales in and completed before the Spring of 2012 to obtain the new market highs before a correction? Sceptical maybe, but sometimes you do have to ask the obvious question staring right at you.

Secretly I suspect the banks want a market correction especially London. Market rises 4 steps then drops 2, moves up 3 drops 1 and so forth. I am not ruling out a correction shortly to reignite the market to enable it to move forward again. The present market is abnormal and is very unhealthy. Rising London prises may be grabing all the headlines but in fact its stagnating. If left on its present course it will turn in on itself. The major lenders have over the last 4 years each built up very healthy mortgage books. The present trend will eat into this.The banks want to lend but they also want to manage that risk, and at present it is my view that they see risk is back on the table. They can see the new highs being obtained in London as being artificial due to a distorted market through ultra low interest rates. The Bank of England has lost control of interest rates yet it is the high street lenders one should now look to, to see the direction they are going. Higher mortgage rates as well as higher saving rates. This may seem odd but higher saving rates shows a glimmer of hope that some banks are repairing their books. They would rather have 5 sales at lower prices than one one sale reaching a new market high. Market prediction: short correction to start 4-6 months time. .

If the analysis was to be contineud on that chart would one be correct in saying that by extending the red lines that you have drawn, the point of convergence would meet at 50oz for the average UK house price ending sometime in 2014?

Is Goldfingers latest chart suggesting a market bottom is almost in when priced against Gold?

This is diary post I made on HPC a 2009 -2010. I promised GEI that I would do an update on the London Housing market which I am still working on, but for now I thought I would re issue that diary post to see if any of my comments were right or help explain were we are today. PART 1 - Diary 2009-2010 For now I wish to give some of the reasons as to why I am bearish on property values over the medium to long term. The simple answer is DEBT and the level of DEBT both private and public. Thers is tonnes of it. Since early 2009 interest rates have been set at dangerously low levels. As a result (a year later) we are seeing the first glimpses in unsustainable asset price inflation. ( I wonder how small a Wagon Wheel will go this time). With low interest rates this has brought out the less cautious borrowers. They seem to think that these low rates can be maintained and will not go up, so out they go in the belief that they can buy a big house. This to me helps explain why prices have gone up of late, although it must be mentioned on very low volumes. Gordon Brown’s optimistic view for the UK economy is all smoke and mirrows. Whoever gets in after the election will have to address the problem of all this DEBT. The economic outlook for the the UK looks awful. I would even go as far to say that I think the conservatives are even trying to lose the election. There is so much ammunition for them to use against Labour yet they remain strangely silent. The UK national debt and balance of payments deficit is unsustainable.? How is it possible for a country to spend more than it earns. That is why the papers have been talking about a currency crises and a possible bond strike. It is a reason to also consider taking flight out of sterling if that is the currency you hold. So this country is stuck between a rock and hard place. A catch 22 situation if you like Print more money and you get a currency crisis, raise interset rates, then it is back to square one with a banking crisis. The 'A- level economics that I read taught me that the market was always bigger than government intervention and so interest rates will have to go up with government spending cutback or the crisis will get worse. It is at this point that I am doubting my own thinking. Are we in a new era. Are we embracing communism? If we are then it will be a long wait till you get your correction. My view is dont buy a house now if you are taking on alot of debt. Rising interest rates and falling prices go togther. The housing market can only bottom out during a period of high interest rates. Current low mortgage rates are therefore artificially maintaining the very high price of property in the UK. For me now is time to sell, for the next leg down towards something approaching more reasonable long term average house prices surely can not be far away. How long can this market be propped up.? Indefinitely? Remember the only time to invest in property is when prices are on the floor and yields high. With 3-5% yields for a London Buy to Let., you would have to be mad to go out and grab one now. PART 2 - 2009-2010 As a surveyor I have always been well fed with work from all of the major lenders though with the onset of the recession my workload is way off its peak 2007/2008, So were are we today. From February 2009-September 2009, my workoad boomed largely due to the massive intervention by the government though money printing and a lack of competition from other surveying firms that simply folded. Throughout this period those that were buying were the following social groups: a) cash buyers, and a few smart City Boys (probably with inside knowledge) young affluent families who were taking the long term view that they were buying a family home and in it for the long haul. c) those that had been waiting in the wings for a market bottom, or those who were previously priced out of the market and now saw an opportunity to buy without understanding the fundamentals of what could happen if the market continued down. I must add that most of the Loan To Values ranged from 30 to 75%LTV, with 60%LTV being the mean. d) Government Approved Housing Schemes. I really do pray for these poor simple souls. These are very poor buys just on economic/fiscal judgement alone. I can see a public enquiry one day investigating why the Government actively encouraged the banks to lend on these whilst at the same time giving a back door bailout to the distressed House Builders. This Housing scheme is a horrible scam. In my view, in nominal terms at least, the market bottom was reached in March 2009, and will remain so, although I would like to be proved wrong on this. Since September 2009 to December 2009 things started to turn ugly again with sales drying up and I was very much anticipating a second dip. This never materialised due to a further injection of QE. This brings me to were we are today January 2010. With QE running out next month (February 2010) I was on guard for tough times ahead and feeling bearish once again. Instead I have been surprised with the new year thrusting out of the blocks with some gusto. The re-mortgage market is back in town with sales up and agreed sales prices up, although I must add that quite a large percentage of those agreed purchase prices I have valued less than the agreed purchase price as these cannot be supported by recent sales evidence. In addition to this I am surpised at the LTVs, we are back to 75, 85 and I hate to report I did my first 95%LTV just last week. I am also seeing more of the old lenders come back into the market who before where nowhere to be found. This, suggests to me that they are getting access to funduing from the money markets. How long this will last I dont know., and I would welcome any feedback on this. So to conclude this post I am Bullish on the housing market for the very short term (3months) and bearish over the medium to long term. Whilst I hate to say it, I do not consider a violent downturn in property values, not just yet anyway. Instead this very much looks like it will be a long drawn out affair. There is a power game in place with big money involved. The banks and governments will do whatever it takes to protect and preserve their position. It will be the tax payer that will pay the price. For me housing is a horrible investment to participate in especially BTL. For me hard and soft commodities is were I see the money, Leveraged housing stock and sterling are not what one should be holding just right now.. Price fixing/controls may work for much longer than most people anticipate. Price fixing and rationing worked in the USSR from circa 1929 till 1991 - is anyone prepared to wait 62 years.

When I get time I will do a little report for GEI readers as to what is happening in the market. Are valuations meeting puchase prices, and are houses actually selling. For now the market is very thin and not in good shape.

Same with myself although I sold some of my position a few weeks back, which was alot more than what I bought it for back in 2008. At the end of the day a profit is a profit and thats the best way to look at. Otherwise its just greed and what if. May I ask which dealer in London you sold your physical gold to and what % below spot they offered.

Background Information to the New Buy Scheme starting 12 March 2012 Under the NewBuy Scheme, many of the lenders signed up to the scheme will offer a mortgage up to 95% of the value of the property. Builders will contribute 3.5% of the sale price of a new build property into an indemnity fund which will be administered by Jardine Lloyd Thompson (JLT). The builder’s contribution will sit in a cell for up to seven years, at which point it will be returned to the builder. In addition to the fund provided by the builder, the Government will provide a further 5.5% of each sale price as a guarantee. In the event that the property is repossessed and the lender suffers a loss, they will first seek to recover losses from the borrower’s deposit, followed by the builders’ indemnity fund, then the Government guarantee. The Government will support the scheme up to 100,000 transactions or a maximum liability of £1billion and it will run for up to three years (just in time for 2015 election). ELIGIBILITY FOR THE SCHEME The following criteria apply: · New build houses or flats, being sold as residential properties for the first time or for the first time in the current form. This would include unsold new build stock, housing association new build developments for the open market, conversions, refurbishments and renovations. · No shared ownership or shared equity · No buy to let or second homes · Property value up to £500,000 · No incentives allowed · England only · Borrower is either a UK citizen or has indefinite leave to remain <B style="mso-bidi-font-weight: normal"><BR style="mso-special-character: line-break"><BR style="mso-special-character: line-break"></B>

Would you care to expand and share with us what you were told all those years ago. As you say all the little things do add up. A womans intuition is something not to be dismissed.

Advice and opinions sought Which Uk/London bullion dealers at the moment are offering the best premiums on sale back of Kruggerands 1oz.. Are there any offering spot price? Also can anyone talk me through the process. ie what documents I need, proof of purchase etc. as I am cashing in some profits for other needs.

Last November I wrote that I was hearing on the grapevine that hedge funds were turning their attention to the UK and were looking to attack UK gilts over the next 3 months to obtain a higher rate and that this would have an effect on UK house prices as the cost of credit would become more expensive. A similar tale I heard February 2011 was on Italian bonds and look were they went to 6 months later. It may appear that the banks are anticipating this and pricing this in to maintain their margins, as seen by recent rate rises by RBS, Halifax and Santander. Another whisper I heard in January 2012 was from the former owner of certain well known estate agent in Central London who implied an increase in rates was on the cards this year. It would appear these whispers are beginning to hold more wait. All the same London is a very large connected village with micro markets within. Some will continue to do well, others will level off, some may just simply melt away. My tip for future security in London is Richmond - Teddington - large family housing, excellent schools, good communication links to London, and great community village feel.

They are worried There is the old saying watch what they do not what they say. In this case there is something to be read in what they say. I have read into this as meaning that low interest rates are here to stay as they have no other choice. All borrowers I encounter are not paying off the capital and do not have the ability to do so either. It is a case of how much can I borrow and how much is the interst each month. These controls will come into play to prevent a price spiral especially in the south east. Therefore leverage up and buy providing you can hedge any interst rate rise and that leverage my friends should held against the golfd and silver you hold.

Investment in German residential property portfolios surges Tuesday, February 07, 2012 Source: Property Wire Transaction volumes across German residential property portfolios of more than 50 units increased by 44% year on year to €6.12 billion in 2011, new research from CBRE has revealed. The number of traded residential units also increased by 27% to around 92,000 units within 194 transactions, indicating that the market for large portfolios of over 1,000 units has regained momentum. The demand for residential units in Berlin was particularly strong. The capital city traded around €2.3 billion and more than 32,300 residential units last year, which accounts for 37 per cent of the registered investment volumes and 37% of all residential units in Germany. Source: Property Wire

You beat me to it Bubb. With reference to another thread if the markets are looking to attack UK gilts over the next 3 months to obtain a higher rate then this would have an effect on UK house prices as the cost of credit would become more expensive. In London the market has slowed down over the last two months with a number of falls in prices being achieved. The City is the key driver to London Housing. With talk of bonuses now being cut and layoffs starting to happen this may help explain the fall in values from a summer peak to low sale volumes experienced at the moment. In Prime London, there is a wall of money looking for a home. Today I was informed by an agent that he has buyers with cash ranging from £500,000 - £20,000,000 looking to park their money in housing. Is this a sign of desperate people looking to get out of fiat at all costs and into a tangible commodity, this being bricks and mortar. The same conversation revealed the same fiscal group buying gold and farm land with one chap buying 50,000 hectares of farm land in Zimbabwe. Lower down the scale there is alot of buy to let buying going on especially the affluent 50 -65yr age group that are removing their savings from banks and putting it into bricks and mortar as they view a 4% yield better than money held on deposit with the bank. In fact many of these buyers inform me they dont trust banks with their money which I have never heard from the buyers before.

May I suggest this title is changed to No HPC, this time its different, unless you measure the crash was and still is in gold and silver. The nominal low in London was March 2009, since then without notice the market has crept back to peak and above. Outside London values range greatly but it can be said there is a range between house values returning back to peak (2007) or some 5-20% below 2007 peak. Added to this we have a minimum of 15% real values falls due to inflation. Like a tide London leads the way and I am firmly of the opinion that we have are now entered the start of a crack up boom that is moving at a great pace now. The domestic cash rich buyers in London has slowed dramatically from 2 years ago. I am now of the opinion that for the last 2 years this demographic group were the main driver behind buyers returning to the London market in an attempt to get rid of fiat money ie pound sterling. What I am seeing today is a secondary rush of buyers although this group can only command loan to a value range between 70 -90%. In view of this I am now interested in the opinions of the readers of this site as to the effects of a crack up boom on debt, housing in the UK, is housing a good buy and the speed that a crack up boom gathers pace. As a side note I am great buyer of antiques trading pieces from time to time. The prices being achieved on furniture, silver, paintings has gripped the auction rooms I attend. Prices are up and people in my view are looking for tangible objects versus holding fiat money. NB. Housing investment or BTL is too mainstream as an investment for me. To many people in the game. Future prediction. Rent controls to be enforced due to political implications and heavy taxation. 5-10 years to take effect.

Martin Armstrong wrote an article about the Fate of Gold and Oil, 4 July 2011, and how Paulson may get caught up by the sharks.

A further point to add are the cycles over the year. Just before each quarter there is a spike in market activity. I can only conclude that next month is when the City wizz kids get their third yearly bonus. I am informed that they are juicy bonuses each time although the media will never report this, hence the booming property prices. I must add that there are markets within markets in London although the ripple effect is starting to take hold.

London update Top end houses/flats are setting new highs and at volume. The flood of work on my plate and the prices being achieved is breath taking. Are we at the start of a crack up boom as the money just keeps on flooding into residential property.

So those without gold (mr Goldfinger) would you still advocate those late to party still buy and hold even now. My own view is yes as your £ or $ would at least keep up with inflation.

These are good questions you raise which should be put to the forum to answer. Has UK housing reached a bottom against gold and silver and what ratios are people looking for. ie the historical average for UK houses is 100 ounces of gold. We are a long way off from this. So gold has a lot of upside.