Meralti

BDEV closes at 110.8, a two week low and UK banks feel pain as reality reasserts itself.

UK builders see value of orders collapse How BDEV looking?

This seems remarkably complacent and smacks of bull-ramping. I see no sign of wages rising anywhere near the rate of inflation. Nor are they simply garrenteed to rise, especially with rising unemployment. But more importantly cost are likely to increase for other reasons, removal of implicit tax payer support for mortgage lending. The end of the special liquidity scheme began last month, and repayment are due to start this month. The money mnade available is due to be repayed by January next year (I think this is the right date). But I haven't seen any comment about this in the press. Lenders who need to repay money they have borrowed from the scheme will not be able to lend at low prices. Those that were not involved in the scheme will probably raise rates on mortgage deals because of lack of competition. There was talk of a £300bn funding gap opeing up between what property buyers wanted to borrow and the available funds. This will naturally lead to rising rates. I talked about this a few month ago when I posted about changing government policy. Isn't it time to admit that the only thing supporting pices is an ultra low base rate; and domestic rates can rise independently of base rates and probably will unless the funding shortfall can be met by other means. In this way the BoE can let domestic rates gradually rise while doing nothing with base rates. Therefore if prices fall due to lack of mortgage availability it isn't their fault - it's the domestic banks.

Yeah, classic electioneering by Brown. Give-aways before and election, pain afterwards as it's clawed back.

Sorry for the typo (I wasn't concentrating) it is the deficit that is the highest, however the total debt is continuing to grow regardless of the planned deficit reduction (which is what I meant). But the point that you're missing is the deficit reduction is dependant on growth. If GDP begins to fall then the deficit will actually increase. This is a bind: if GDP increases, we get growth and upwards pressures on inflation, leading to upward pressure on interest rates. If GDP fall the deficit increases, leading to either the necessitity for further cuts or an increasing cost of borrowing - increasing yields. The line being trodden is extremely fine and vunerable to external shocks. Ok, so the end of the world will be avoided at all costs. For what it's worth I'm looking for a 20% fall over the next 2 years or so. That said, a European bank failure could wreak havoc.

And yet it continues to increase every month and it at it's highest level ever. Uk government debt is one of the higheest in the developed world. You yourself have stated that cuts are not really being implemented and so can be discounted as having any effect on the market. Now you claim the deficit is under control. Simply stating that thing are not a desperate as it is for the PIGS does not mean that there will be no nominal fall. I'm beginning to see reductions in asking prices for the first time in 18 months. You bulls really do need a fresh tranche of QE to get thing moving again.

The inflation argument is nonsense. If anything inflation will decrease prices further. There are two kinds of inflation, cost push and demand pull. We're seeing cost push. Demand pull is where rising wages drive price increases; this is what is needed to make the mortgage more debt affordable are we're not seeing it. Cost push is where prices rise because of rising costs to foreign manufacturers or home currency devaluation. This does not decrease the relative debt levels measured in the home currency. It simply reduces even further the amount of income that can be expended on debt repayment and interest.

Looks like it's happening on low volume though.

Taken from the forex factory Release Date Actual Forecast Previous ------------ ------ -------- -------- May 9 2011 -1.4% 0.2% 0.0% May 7 2010 0.1% 0.6% 1.0% Revised From 1.1% May 6 2009 -1.7% -1.0% -1.9% May 2 2008 -1.3% -0.6% -2.5% May 10 2007 1.1% 0.7% 1.2% Revised From 1.0%

Latest Halifax data is is -1.4% MoM, against a forecast of +0.2%. See forex factory So much for the spring bounce, that's a return to crash cruise speed.

It represents the total debt secured against property. So, certainly the fall in MEW is included along with the absolute fall of new mortgage lending. I don't think that it includes the paying down of debt as that is not new lending.

This chart is taken from a report produced by the office for national statistics. So this chart shows flow and therefore represents the flow money from new lending into housing.

Take a look at UK private debt posted here on the property board.

Here's a good chart taken from the following blog: Cynicus Economicus It shows total, debt secured against property and consumer credit for the UK. The shape will be pretty familiar to followers of property. Compare this chart to that of UK house prices and we see that it leads by about 4 years. The pattern shows the same peak, local mimumum, suckers rally and secondary top as property (but preceeds property by 4 years or so) take look and what happens next. If uk property continues to follow private debt we are duw to see some specactular falls soonish, with a trough in mid 2013.

This looks like a great call. Relatively high volume on the formation of the shoulder lowish at the head and really low now the right shoulder seems to be forming.

These bulk purchases will be for repossed properties from banks and new builds from developers. The market is now stalled and propped up by low interest rates. These bulk transactions will take place at hefty discounts, perhaps as much as 50p on the pound. This will lower prices but may not be fully reported to the indices.

It may provide some support. But it looks as if it is principally aimed at banks and housebuilders. This will allow banks to sell large portfolios of repossessed properties and housebuilders to sell large numbers of unsold new builds to institutional investors at a tax advantage. This will allow the market for these sort of properties to clear, at least in part. Which actually may well put downward pressure on the market. Any support will come from large bulk deals done behind closed doors and off-market, as it were. The tax break is therefore a subsidy for banks with bad loan books and housebuilders. I'm not sure it will do much for the small scale BTLer or anything at all for people selling their PPR. It should also stimulate new building if housebuilders start to clear their stock. Construction boosts GDP while simple changes of ownership do not. Oh yeah, institutional investors entering the rental market on a large scale will probably start to push down rents after a while. The kind of properties that will be most effected by these changes were always destined to become social housing anyway.

And he doubless referred to the recent data from Zoopla to back up this sentiment. Happy days indeed.

Agreed and a good post. This tread was losing it way a bit, thanks for helping to bring it back on track. The top tier is driven by the City. A fall in equities would effect it. The lower is sliding and the middle sticking or sliding a bit. I'm seeing this were I am.

Bubb, In a rigged market this isn't completely irrational. There is no fear, or very little. It's hard to express the degree of complacency in the UK regarding property. It's going to take a really big wrench to change it and very few people seem to believe that a real change can or will happen. I was mocked again at work for my opinions only last week. Dispite explaining the last six months of falls. Low interest rates are propping up a stagnant market. There's less than half the volumne of money going into property than 4 years ago but it is being spent on somewhat less than 40% of the number of transactions at a similar time. So prices haven't fallen much. Despite the terrible fundalementals people who have bet on property continue to be rewarded for it - for the time being; and most don't lool beyond this.

Most have moved towards this. Mortgages are now difficlut go get and getting more expensive.

You're dead right there tallim. However, your argument assumes a fully functioning financial system where true prudence, self-reliance and sound investment are rewarded. This isn't the case right now. The renter in your scenario must speculate in order to receive the compounding of interest you mention and my loose if (s)he makes a mistake. Of course this has been done deliberately to heard people into property and support prices. It looks like it worked with BaB. This is one of the reasons that people like this still think property is a good "investment". It's just another speculation - one that has been up until very recently been supported by government intervention. Of course his arguments for property rely on this policy remaining as it was under Brown. Something he never states explicitly.

Land registry figures for January +0.2% MoM -0.9% YoY See more details here

Land reg regional breakdown: London - MoM 1.6 YoY 2.4 South West - MoM 1.6 YoY -0.4 South East - MoM 0.5 YoY -0.1 East - Mom 0.4 YoY -0.2 West Midlands - MoM -0.4 YoY -1.4 East Midlands - MoM -0.5 YoY -1.9 North East - MoM -0.6 YoY -2.5 Yorkshire & Humberside - MoM -1.3 YoY -2.6 North West - MoM -2.0 YoY -2.1 Wales - MoM -4.2 YoY -6.1 Outside of London the falls are looking quite high.

Land registry figures for January +0.2% MoM -0.9% YoY The average price in England and Wales is now £163,177; down from the previous figure of £163,814. However, the previous figure for December 2010 has been revised down to £162,897. Which is why we are seeing a MoM rise. See Land Registry data