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DEVASTATING STUPIDITY of UK Policies: (see posts on: The Long, Long wait !)

 

+ Excessive Housing benefits

+ Ultra-low interest rates

+ Excessive Loan-to-Value lending percentages*

 

Together they have worked to prop up UK property prices at "artificially high" levels.

 

It is time for people to wake up, smell the coffee, and help educate others about the insanity.

 

The responsible (savers, taxpayers) are being robbed to bailout the irresponsible and reckless

== == ==

 

*In Hong Kong yesterday, LTV rates were cut:

+ From 60% to 50% for properties over HK$10 million,

+ From 70% to 60% for properties of HK$5 to HK$10 million

 

this is the act of a responsible government, trying to encourage its citizens to also be responsible, not pandering to Buy-to-Let morons and over-borrowed owner occupiers.

 

When I read that nonsense about the UK, I think : "Hit 'em with a fecking brick!", and then I see HK do exactly that.

 

BTW, this new policy in HK may actually hurt me, since I am trying to sell a property now at a "full" price. Even though it is against my own interest, I applaud it because it is the "right" thing to do. I really got fed up watch the UK government under Gordon Brown's leadership ALWAYS do the "wrong" thing and then find some half-baked incredibly stupid way to justify it.

 

RANT OVER

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(This reporter earns an "F" - failing grade for writing such tosh.)

 

Wealthy Chinese are squeezing cash-strapped Britons out of property market

By DAILY MAIL REPORTER

Last updated at 8:16 PM on 13th June 2011

 

Cash-strapped Brits are being squeezed out of affordable housing by Chinese property speculators, housing experts have warned.

Chinese buyers spent £120 million in London over two months recently, according to new research by estate agent Knight Frank.

And one in three buyers of newly-built homes in Canary Wharf's financial district now comes from mainland China and Hong Kong.

 

article-2002999-052B461F000005DC-805_470x288.jpg

Property surge: The Pan Peninsula skyscrapers in Canary Wharf are said to be particularly attractive to Far Eastern buyers

 

The steep decline in the value of the pound and low interest rates have made properties in the capital and Home Counties a bargain for Chinese investors.

UK developers are mounting major marketing campaigns at trade fairs in China - and Far Eastern investors are jetting into Britain to view developments.

 

And only last week, a group of Chinese investors made a special trip to view Pan Peninsula in Canary Wharf, Europe's tallest residential tower.

Most of their purchases are in the £400,000 to £1 million price bracket, according to Knight Frank

 

 

Read more: http://www.dailymail.co.uk/news/article-2002999/Wealthy-Chinese-squeezing-cash-strapped-Britons-property-market.html#ixzz1PEF7SeeP

== == ==

 

RE-WRITE of the bogus article

 

Wealthy Chinese being duped into buying overpriced London properties

 

Far Eastern Buyers are paying prices which are 20-30% beyond what locals are willing to pay, often for expensive new properties in undesirable parts of London. Typically these properties are slated for completion in 2013 and beyond, and the buyer will expect to rent or resell upon completion.

 

Sadly for the poorly-informed foreign buyers, the rental assumptions being supplied by the vendors and their agents are pure fantasy. Typically the estimates are based on the sort of yields that an owner of a new property would want to achieve rather than any systemic analysis of the actual property transactions. The vendors almost never back up their estimates with hard data showing what secondhand properties in the area are presently achieving. And the impact of a huge number of similar flats being suddenly available on the market is rarely considered. "Rental guarantees" where offered are sales gimmicks funded by increasing the sales prices. Buyers are not sufficiently well-informed to see that sales prices are far in excess of secondhand sales in the same area.

 

The Coming Overhang

These flats being purchased by Far Eastern buyers may represent an important future source of supply, which will help to hold down rents or push down prices when the buyers unload them. Very few of the buyers expect to live in the flats. But in certain cases they may be hopeful that their children may use them as accommodation while they are studying in Universities in the UK. (A spell in the UK is expected to improve the English-speaking abilities of children, while improving their future job prospects.)

 

Rather than "squeezing Britons out of the property market", these naive buyers are likely to be providing British renters and future buyers with cheap property. Their purchases of expensive new properties added to supply when Britons were unwilling to buy. The smart Brit will not compete, but just let them get on with their money-wasting investments. The feast will come later for the patient ones.

 

It is the ill-informed foreigners who deserve the sympathy, not the "priced out" Brits.

 

(The Mail would not publish my comment - it seems that they prefer lies and distortion !)

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  • 3 weeks later...

Hmm, so I'm sure you have to agree now that it's not exactly "crash cruise speed" is it?

I haven't been talking "crash cruise speed" for months.

 

BDEV told us late 2010 and early 2011, that we could expect a "pause", and that is what we have been in for some months.

I reckon BDEV will signal with a sharp fall below 100p if/when the pause is going to be ending.

 

BDEV-chart

 

The fall through 100p may have begun from that recent "right shoulder", and the volume on the way down should give us an idea whether a sustained drop has begun

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Well, im still seeing price reductions after a slight perking in 2010. Land prices are battered behind the scenes, with some closed deals as low as I have ever seen. Realism is rife.

 

I have saved up a £20k cash fund. The question now is do I invest it, or purchase.

I think you will get paid to wait

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Another article mentioning the unthinkable! ("property ladder" may be a snake)

http://www.independent.co.uk/opinion/commentators/mary-dejevsky/mary-dejevsky-the-property-ladder-that-threatens-to-become-a-snake-2313834.html#disqus_thread

However most of the rest reminds me of the outpourings of MSE member 'julieq'.

They should call it a "Housing Elevator", and make it clear that the BofE (amongst others) has its finger poised over both the Up and Down buttons

 

Have people noticed the move in Barratt?

 

BDEV ... update

BDEV-jul.gif.jpg

 

Further downside may be dead-ahead, with a CROSS confirm a bigger move down in BDEV, to be followed by a break in UK house prices

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Barret down 3.6% today so far and now just under 101.

 

Looks like we've broken below the neck-line of the head-and-shoulders pattern that we've seen emergee over the last few weeks.

BDEV couldnt make it thru 100p on the first try.

But if this action spreads, it will soon have another go

July House price index: 70% of this year's sellers are still seeking a buyer

 

The July edition of the Rightmove.co.uk House Price Index is now available. Based on circa 90% of newly marketed property, the Rightmove House Price Index is the leading indicator of residential property prices in England and Wales.

 

% Change in month / % Change Past Year Ave house price

July HPI : -1.6% / 0.1% £236,597

 

/more: http://www.rightmove.co.uk/news/house-price-index/july-2011

 

Mo.: Rt'mov : London : Hometrack %/ Nt'wide H-oldSA Halif.SA Hal.NSA: HNindex : mom : DelusIdx

J. : : 240,394 : 438,622 : 153,550 - 0.1% / 168,205 = n/a = 163,049 163,642 : £165,924 :+ 0.70%

Jl : : 236,597 : 432,641 :

=====================================

mom: - 1.58% : - 1.36% : Est.DI: 142.6% / +0.60% := n/a = :+1.58% :+0.80% : + 0.70%

 

Crash Cruise speed may be back soon.

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I have begun to produce an Index for house prices in the UK outside London...

 

( From the thread entitled: Supply/Demand Law challenged )

 

I'm not having a dig but you have been expecting an imminent UK housing crash since circa 2001. Just saying after 10 years of the "bloody obvious" not happening, maybe the context within which people act needs to be factored in differently...

No Crash ? It really depends on where you live.

 

(I have just pulled down this data. How it was derived, I will explain later)

 

Do you recall my clear call of a Top in July 2007, on Commodity Watch Radio ? :

 

I forecast "crash cruise speed" in mid-2007, and then became bullish, expecting a Dead Cat Bounce in March 2009.

 

THE REST OF THE UK - what prices look like, when you remove London from the National data:

DeadCatUK.jpg

 

Since 2008, there have been two divergent pathways: London property, which fell for a few months and then recovered to fresh highs thanks to ultra-low interest rates (below the rate of inflation, and the lowest rates in UK history.) Despite the low interest rates, the vast majority of UK homes remain locked into "crash mode" with only a brief pause in 2009-10.

 

UknonLondon.gif.jpg

 

Peak : 166,265 - Sep.2007

Low- : 120,616 - Mar.2009 : - 27.5%

Rally : 135,331 - Aug.2010 : +12.2%

Latest 128,737 - Jun.2011 :: Down from the high : - 22.6% / -GBP 37,528

 

This certainly looks like an ongoing crash to me. Over 17 months, prices-outside-London retraced only 32.2% of their GBP 45,649 drop.

 

Yes, London is different - but London's day is coming too, I reckon.

 

Meantime, only about 12% of the UK's houses are in London, so the above chart represents reality for about 88% of UK homeowners.

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(1)

Your forecasts since 2007 were very good, up until nearly a year ago, when you started talking about the Crash cruise Speed and ~20% falls ahead over the next year.

True.

But I began to back off from that expectation when BDEV broke upwards above resistance - first breaking above a downtrendline, then the 76d MA and finally the 252d MA was broken. I called for a "pause in crash cruise speed", and so we have seen that:

 

Mo.: Rt'mov : London : Hometrack %/ Nt'wide H-oldSA Halif.SA Hal.NSA: HNindex : mom : DelusIdx

2011

J. : : 223,122 : 413,259 : 154,300 - 0.5% / 161,211 = n/a = 164,173 161,470 : £161,341 :- 0.33% :138.3% :

F. : : 230,030 : 430,680 : 154,000 - 0.2% / 161,183 = n/a = 162,657 161,680 : £161,432 :+ 0.06% :142.5% :

M : : 231,790 : 424,307 : 153,850 - 0.1% / 164,751 = n/a = 162,912 162,151 : £163,451 :+ 1.25% :141.8% :

A : : 235,822 : 431,013 : 153,850 +0.0% / 165,609 = n/a = 160,395 162,303 : £163,956 :+ 0.31% :143.8% :

M : : 238,874 : 430,936 : 153,700 - 0.1% / 167,208 = n/a = 160,519 162,344 : £164,776 :+ 0.50% :145.0% :

J. : : 240,394 : 438,622 : 153,550 - 0.1% / 168,205 = n/a = 163,049 163,642 : £165,924 :+ 0.70%

Jl : : 236,597 : 432,641 :

=====================================

mom: - 1.58% : - 1.36% : Est.DI: 142.6% / +0.60% := n/a = :+1.58% :+0.80% : + 0.70%

 

And I believe you will find that even when I was expecting crash cruise speed to ccntinue beyond a few months, I was careful to qualify that statement with a caution that Barratt and the other UK builders should be monitored closely. (For some reason, people seem to ignore these important qualifications. I think the accuracy of the Builder Bellwether has been near flawless, which I why I mention it so often.)

 

The chart indicates with a red circle where the bearish forecast required modification: BDEV-chart

 

BDEV=jul.gif.jpg

Circle----- : BDEV price breaks thru 252d-MA

Rectangle : 76d-MA crosses 252d-MA, providing confirmation

 

LATEST BDEV signals

=========

downline : broke downtrend in Dec.2010

76d-MA : break-above in Dec.2010

252dMA : break-above in Feb.2011

CROSS- : 76d-MA crossed 252dMA in Apr.11

 

Please note that the BDEV chart NOW looks as if it is about to signal an important breakdown. The above BDEV chart, please the comments from Rightmove and the 1%-plus drop in RM asking prices in July is signalling a probable return to a more serious price slide IMHO - and maybe a new period of crash cruise speed falls.

 

But stay alert and watch BDEV (PSN & BKG, etc), for possible contrary evidence

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(2)

I think BDEV could just as easily bounce of support here and several market watchers are now saying that since they have sorted their refinancing, they are in a fairly good position.

 

They are basing their assumptions on BDEV’s improving margins and, interestingly, state that this is why they expect better times ahead for BDEV, and not from house prices increasing (which they don't expect).

 

They are apparently trading at half their land book value too.

 

http://www.telegraph.co.uk/finance/markets/questor/8507581/Questor-share-tip-Barratt-is-a-play-on-rising-margins.html

A BDEV bounce is certainly possible, but I am not expecting that, partly because of that recent Rightmove report. But I cannot rule a bounce out, we need to wait and see what actually happens. And also, wait to see if the 76dMA will cross below the 252dMA, providing a sort of "confirmation."

 

I don;t know how accurate their book values will be. In a falling market, who would buy their land at book value?

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Barratt Close:

UK:BDEV: 98.50 Change: -0.80 /// chart

Open: 98.70 / High: 100.20 / Low: 95.25

Volume: 5,796,207

Percent Change: -0.81%

 

that's well off the low, but still down on the day, and below 100p

Probably next week, we will know how "real" the break of support at 100p is going to be.

I still think it is a very meaningful break

And below the 252 day moving average - I just checked.

Here's the 3 months chart ... update : 24mos : 5yrs

BDEV-jul3mos.gif.jpg

 

The way I see it:

+ BDEV broke below the 252d MA this past week

+ Then on Friday, Barratt rallied back up, and closed just on the 252d MA

 

To me, this looks like a "Kiss it goodbye" move, and if BDEV slides further down next week (and especially if it does that on continued high volume), then the break is confirmed, and my favorite bellwether will be signalling a renewed slide in UK prices.

 

I would then like to see : PSN do the same to confirm the signal.

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BDEV as a bellwether - has last week broken support at 100p

 

Why the UK House price slide could begin to get serious soon (ie return to Crash Cruise speed)

 

+ "NHS Cuts to start in earnest"

 

+ "Hsbc To Cut 10,000 Jobs On Monday"

 

+ "50,000 Protest Soaring Housing Prices"

(ie govt action: propping up housing is no longer so politically acceptable)

 

Well, that's based upon the titles of threads on HPC, which is not the most reliable indicator, since the last headline for example relates to a Protest in Tel Aviv (!) But there is no doubt that many in the UK will share that protest sentiment

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According to Philippe Aldrick and Emma Rowley, in the Telegraph today, disposable incomes in the UK are falling by 3% per annum, by 0.5% pre annum in the EU, but are rising in the US at 2% per annum.

AND the US is well down the road in getting through its housing crash

 

So is "the rest of the UK" btw

.................Greater London Price (Rightmove) . . . . . . . . . . . . . .: ................. Rest-of-the-UK (GPC's calculation)

UkGrLondon.jpg.UknonLondonR.jpg.

 

But Greater London hasn't even started to face the crisis of Falling Property prices yet

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UK PROPERTY WARNING - Don't Buy Now !

 

Dear Bubb, that graph:

Both lines have a mildly extended dead-cat-bounce look :)

How would it look with a non-fiat vertical axis superimposed?

The Chart on the right certainly looks like the Rally in Outside-London price index is about ready to die -

right on the 12 months MA, which has historically acted as support.

 

Yes. We are now at a critical resistance level (!)

The Dead Cat bounce looks very tired, especially outside London.

UkWideVsRest2.jpg

 

If the Rest-of-UK Index fails to push through the 12 months MA...

 

Month: H&Nindex : RestOfUK : 12mosMA

May= : £164,776 : £128,189 : £129,860

June :: £165,924 : £128,986 : £129,414

July= : ? ? ?

 

...Then I think the whole ediface of UK property prices may come tumbling down.

And that may begin within the next few weeks.

 

BDEV is also flashing its own warnings, having fallen below support at 100p.

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:o Do my eyes deceive me, or do you also think the nominal bottom may be within -10% from here?

 

Yes (especially with the banker layoffs), but with 50% of London purchases coming from buyers outside UK, the £ devaluation effect also has to be considered. This will mean their nominal peak to trough could be significantly less that the rest of UK.

No.

I think it is too soon to start talking about Lows in UK prices, even outside London.

 

UkWideVsRest2.jpg

 

I can easily see Rest-of-UK falling to and below GBP 100,000

 

UkWideVsRest3.jpg

 

The Foreign FOOLS will stop buying in London at some point, and you will see them turn net sellers of their new properties when they realise they have made a mistake in overpaying.

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marceau, on 02 August 2011 - said:

Last time I looked it was an utter dog of a company. What did they do with all that debt in the end? They must have done something or they wouldn't even be around.

 

1ugly.jpg

(Barratt is an ugly dog, even if they try to dress it up- DrB)

 

Their reported book value was also dependent on some highly optimistic valuations..

 

True, but you know what, the true contrarian in me is thinking of picking up a few BDEV for the old long term fund B) .

The time to become a contrarian buyer is when the selling volume is dwindling, but the price is still low.

Then you have a better chance of owning it ... when the force is with you.

 

BDEV isnt at that point yet.

 

Meantime, we have seen property prices trade up on light volume, and we know there is now a huge overhang relative to property buying demand. That's the sort of time you want to be a seller, or at least avoid buying.

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It is CLEAR now...

Another UK Housing Bear, is Tim Morgan:

"The likelihood of mortgage borrowing increasing materially must be rated at close to zero, at least until property prices fall to a level at which affordability (which we regard as a price/earnings multiple of less than 3.5x) is restored. This would require prices to fall by a further 22% from their 2010 average, which was itself 23% below the 2007 peak.

 

Unsecured (credit) lending has already turned negative, and is likely to remain

so unless consumers are sucked into using credit to pay for necessities (rather than for discretionary purchases) as real incomes decline. That this may well occur is implied by the past rate at which the cost of necessities (such as utility bills and fuel) has consistently out-paced both earnings and reported CPI."

- the Armageddon Report.

 

In short:

Inflation (in costs) is not going to help housing, and the SQUEEZE IS ON.

 

Can someone post this chart on HPC?

 

UkWideVsRest2.jpg

 

Tell them: "DrBubb says: the Writing is on the Wall."

 

A renewed slide in UK home prices could be dead ahead,

and Barratt is warning the same thing.

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I am in the midst of reading the Tullet Prebon Armageddon Report and was particularly interested to see Tim Morgan hint at property in the executive summary.

 

And the hint was?

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BDEV rallied on very thin volumn and fell and much stronger selling. Check the charts. Banks were also hammered.

And we had a strong 252 MA cross which is part of what the bellweather is about.

The Carnage continues... : BDEV-intraday

 

BDEV-intraAug.gif.jpg

 

The elephant-in-the-room (Inflated prices) may soon be on the prowl.

 

4597009-elephant-step-on-house-isolaten-on-white.jpg

 

BDEV : 87.45 / Change: -3.70 // Percent Change: -4.06%

Open: 92.70 / High: 92.80 / Low: 87.00 // Volume:4,332,997

 

I wonder if the reckless folks who bought homes recently, understand that their housing dreams

may be eviscerated - in the sense that they may soon slide into Negative Equity.

 

Where are the other warnings coming from now ??*

Are we headed for a big August or September surprise in the UK housing indices?

Why are so few now talking about that (strong?) possibility?

 

== == ==

 

*we did get warnings back in 2007:

 

House price crash warning

 

on 6th December 2007

 

The housing market may be heading for a sharp fall, a leading expert will warn today. Economist David Miles says property prices will probably drop dramatically in the next few years.

 

The collapse will come when the rapid rise in prices starts to tail off, according to Mr Miles, who is a former adviser to Gordon Brown.

 

Demand has been heavily influenced by the expectation that prices will continue to rise quickly. When the big annual rises fail to materialise, 'significant' falls are likely.

'A sharp fall in real house prices is likely at some point in the relatively near future, though it could yet be one to two years away,' his report concludes.

 

Read more: http://www.thisismoney.co.uk/money/mortgageshome/article-1604590/House-price-crash-warning.html#ixzz1U3lMbplo

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Looks as if the 21 day MA will cross the 252 MA in a couple of days of trading. BVS and PSN have also crossed the 252 MA in the last few days. For these the 21 day MA is a little behind the 252 MA - but we see the same pattern emerging after bearish head and shoulder action in the weeks before.

 

Not sure about the timing of HPI falls. I thought the the builders shares led property by a few months, the really signifcant falls happened in 2008 and where halted by ZIRP.

 

 

 

The Carnage continues... : BDEV-intraday

 

BDEV-intraAug.gif.jpg

 

The elephant-in-the-room (Inflated prices) may soon be on the prowl.

 

4597009-elephant-step-on-house-isolaten-on-white.jpg

 

BDEV : 87.45 / Change: -3.70 // Percent Change: -4.06%

Open: 92.70 / High: 92.80 / Low: 87.00 // Volume:4,332,997

 

I wonder if the reckless folks who bought homes recently, understand that their housing dreams

may be eviscerated - in the sense that they may soon slide into Negative Equity.

 

Where are the other warnings coming from now ??*

Are we headed for a big August or September surprise in the UK housing indices?

Why are so few now talking about that (strong?) possibility?

 

== == ==

 

*we did get warnings back in 2007:

 

House price crash warning

 

on 6th December 2007

 

The housing market may be heading for a sharp fall, a leading expert will warn today. Economist David Miles says property prices will probably drop dramatically in the next few years.

 

The collapse will come when the rapid rise in prices starts to tail off, according to Mr Miles, who is a former adviser to Gordon Brown.

 

Demand has been heavily influenced by the expectation that prices will continue to rise quickly. When the big annual rises fail to materialise, 'significant' falls are likely.

'A sharp fall in real house prices is likely at some point in the relatively near future, though it could yet be one to two years away,' his report concludes.

 

Read more: http://www.thisismoney.co.uk/money/mortgageshome/article-1604590/House-price-crash-warning.html#ixzz1U3lMbplo

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Not sure about the timing of HPI falls. I thought the the builders shares led property by a few months, the really signifcant falls happened in 2008 and where halted by ZIRP.

That's true. Especially in London.

 

But now we may now get a fall that cannot be stopped thru ZIRP,

as would-be buyers find that their incomes cannot stretch to pay high prices, when banks are looking at what is happening to their loans to the Builder sector, and the decide they want to tighten their property lending criteria even more.

 

BTW, I don't think lending has been tight the last 2-3 years. It has merely been somewhere near what should be normal. From here, we can move to tight.

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That's true. Especially in London.

 

But now we may now get a fall that cannot be stopped thru ZIRP,

as would-be buyers find that their incomes cannot stretch to pay high prices, when banks are looking at what is happening to their loans to the Builder sector, and the decide they want to tighten their property lending criteria even more.

 

BTW, I don't think lending has been tight the last 2-3 years. It has merely been somewhere near what should be normal. From here, we can move to tight.

 

9:00 am and check out the action on BDEV. Down 6.47% already. 21 MA 252MA cross imminent.

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But now we may now get a fall that cannot be stopped thru ZIRP,

as would-be buyers find that their incomes cannot stretch to pay high prices, when banks are looking at what is happening to their loans to the Builder sector, and the decide they want to tighten their property lending criteria even more.

 

BTW, I don't think lending has been tight the last 2-3 years. It has merely been somewhere near what should be normal. From here, we can move to tight.

 

I think you're right about the banks and lending, their stocks are getting hammered too. Could this be the start of a second credit crunch.

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Housing-related EXCERPTS

 

A fantastic post by FOFP on HPC years ago- Posted 16 August 2007

....Housing in his bubble has been unprecedented in garnering 100% loans and even 110% or 120% for pretty much anyone who could fog a mirror.

 

...It's going to hit the tax take and it's going to hit the property rental markets. A great many properties are very suddenly going to find themseves missing tenants. This will drive rents down and it will produce a large number of landlords racing each other to sell first while there are still any buyers. This will be the point that Charles Mackay called"Devil take the hindmost".

 

Needless to say, by this point housing prices will be falling. This will ratchet them down further.

. . .

Another lesson from credit bubbles past is that they end in "revulsion" (Kindleberger's term I think). Those whose financial lives have been destroyed by debt will refuse ever to countenance taking it again in their lives, which is fine because there essentially won't be any offered anyway - revulsion happens to those creditors who lost their all too. Also, they'll teach their kids not to take on debt. Those kids will grow up and teach their kids the same thing but with the bust becoming history, they'll probably take it out for serious purposes.

 

He might be right... eventually

 

The predicted housing price slide has not really happened yet in Greater London, where there are about 3 million homes - thanks to the magnetic power of London jobs, and also the convenience of living in London, which is a great "walkable" city.

 

Close-up : H&N Index (ave. of Halifax & Nationwide) ... Rightmove's London Offering prices

UKHaN.jpg.UKLon.jpg

 

Ultra-low interest rates (at ZIRP, they can hardly go lower) have also been a great saving grace for UK homeowners. Also helpful has been an extremely generous housing benefits policy, making it easy for landlords to get tenants, where the state pays market rents. But these rents may be capped in the future, helping to push state-supported tenants out of the more expensive areas, like central London. If rents fall there, it could undermine property prices.

 

A correction in "UK, Outside London" (where there are 19 million homes) is now well underway:

 

UkWideVsRest.jpg

 

In July, the "Outside London" price managed to push slightly above the 12 month's Moving Average

at £128,990. I think this will prove very temporary.

 

Might the housing correction soon spread to London, as austerity at last hits, as the FOFP post anticipated ?

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