DrBubb's Property Diary : tinyurl.com/GPC-Diary

[desertorchid]

Hong Kong property prices finally gone parabolic:

 

Hong Kong property prices

 

Rises of 7-10% PER MONTH not uncommon. It is surely now too late for the government to intervene to prevent anything other than a nasty outcome for this market.

[drbubb]

Some think that UK property prices are near a bottom.

 

I am not at all convinced by their arguments...

...I think the continuining excesses now, and the temporary nature of distortions from "ultra low rates", may mean this correction will ultimately be far greater than the prior one.

The "target" that I am showing below could occur if we get a deeper slide on the same time frame

[drbubb]

TAX INCREASE coming ?

Do you see a PATTERN here ?

 

(threads from HPC):

 

+ "Property Levies To Reduce Income Tax" / Top end...a start

 

+ Those Who Benefitted The Most Should Contribute The Most

 

+ Why Do Newbuilds Suck?

 

There's a BIG RISK (of tax rises) for anyone buying expensive new property in London now, but no one is talking about it.

 

BTLers are (eventually) going to be a target. Look at this cigarette butt and think: BTL:

 

[drbubb]

Nationwide up 0.5% (NSA up 2.2%!).

Crash cruise speed cancelled.

Never underestimate the UK public.

Please !

ON PAUSE, not "cancelled."

 

Property prices are still down on a 6 months horizon. This is within the range of a "normal seasonal bounce" so far.

 

UK Builder prices have been giving a warning for weeks that some sort of "pause" may be coming.

 

== == ==

 

SOBRIETY CONTINUES in this report from Hometrack, which was also released today:

 

London first region to register price rise for 8 months

Time on market suggest pricing across most regions to remain weak

By Richard Donnell, Director of Research, Hometrack

 

Summary- - - - - - - - - - : Jan-11 Feb-11 Mar-11

Monthly price change (%) - 0.5% - 0.2% - 0.1%

% change in new buyers

.registering with agents... - 9.5% +14.7% + 4.2%

% change in volume

.of property listings......... - 5.4% + 7.5% + 5.2%

 

Note: Supply rose faster than Demand, despite the season

 

Results

 

The number of buyers registering with agents has been positive for the second month in a row, growing by 4.2% over March.

This is a slower increase compared to the strong seasonal pick up seen in February, but it is consistent with the level of growth seen over the same month in previous years.

 

The volume of sales agreed grew by 12.6% over March following a 25.4% increase in February. However, this figure comes off a low base. Adverse weather and the seasonal slowdown which characterised December and January resulted in low levels of sales agreed.

Despite increased demand and rising sales volumes, average prices fell by 0.1% over March. The average price of a property is now £153,100.

 

The year on year growth rate stands at -3.2%.

 

Prices were down across 27% of the country in March while 8% of the country posted price rises.

London registered the first monthly increase in prices for 8 months on the back of rising demand and dwindling supply. Central London was the primary driver of a 0.2% increase in prices across the capital.

 

Across all other regions prices moved lower by between 0.1% and 0.3%. House prices in the South West were unchanged.

The time on the market stands at 9.9 weeks but in three regions the average is over 3 months. In two other regions it is just under 3 months.

 

Rising sales volumes have led to a firming in underlying pricing levels with the proportion of the asking price rising from 91.9% in January to 92.7% in March. Despite this improvement the proportion of the asking price achieved is still down on the level seen 12 months ago (94%).

 

The supply of housing continues to grow on the back of improved levels of market activity. Listings were up 5.2% in March - greater than the growth in demand over the month. Continued expansion on new supply over the coming months could put pricing under further pressure.

 

/more: http://www.hometrack.co.uk/commentary-and-analysis/house-price-survey/20110331.cfm

[drbubb]

From the Zombie Homeowner thread...

 

doesn't work like that.

 

the banking system is a confidence trick designed to ENSURE that x% of the populous file for bankruptcy each year, and the banks seize their assets.

 

the end game is the bankers end up owning everything.

 

in America, the banks now own a greater share of the housing stock than the american people do!:

 

Great chart!

If the Debt (red line) had risen much more gently, then maybe equity could have kept growing.

Ramp up debt too hard and you destroy equity, because the long term balance gets destroyed, and homes get built in the wrong places.

 

Too many homes were built quickly in the outer ring suburbs. Raise oil prices, and it becomes uneconomic to live there. Raise oil prices far enough and fast enough, and the whole "suburban project" becomes naught-but-malinvestment.

 

The US should have been imposing taxes on oil to slow the spread of suburbs, not cutting rates to near zero to speed up their development.

 

The wrong move created more zombies. But at least in the US many zombies are now being buried, and few new ones are being created. The US is working through its housing nightmare, while the UK has barely started to do so.

[drbubb]

Dr Bubb

 

I would suggest you warn Hong Kong/.Chinese buyers about new builds in London. I recall Dickens yard you mentioned in Ealing. I have just advised a couple of lenders on the background to a new build in Ealing Common were the vast majority were Chinese investors who bought under companies held in the Virgin Islands. These new builds are trying to be resold onto the market. Surveyors are marking the value of these flats with very big haircuts. It would appear that fraud is still alive and well except new suckers are being sought in the far east.

THIS HEADLINE (from an full page advert in today's SCMP) was so bizarre, I had to share it with you:

 

"When you grow rich, head to Shoreditch."

 

(I wonder if this is meant in jest?)

 

The ad goes on to say:

"Famous English nursery rhyme features a trendy London area where a 25-storey will be the ultimate in luxury living."

 

/source: http://www.avantgardetower.com/

 

It goes on to promote a development called :

Avant-Garde, "a striking new Zone 1 landmark development for The City of London"

(Prices start from Pds 250,000.)

[drbubb]

This is from the first page of: http://tinyurl.com/UKtrap , where

 

I RE-WROTE THE DESCRIPTION IN THE HEADER...

 

Barratt / BDEV.L ... update : Longer Term : Last 12 months : 6 mos

 

BDEV has given us excellent early warnings of TURNS in UK house prices.

 

From a low in July 2008 (at 22p), Barratt/BDEV had a long rally into a Sept. 2009 high at 280p. We noticed a key point in the rally, and in early April 2009, predicted a 12 months "Dead Cat bounce" in UK property prices, and that duly arrived.

 

We watched BDEV for a sign that the house price rally was petering out. And from Sept. 2009 and the 280p peak (184p, on a split-adjusted basis), BDEV began to fall. This drop in the share preceded a fall in actual house prices, as measured by various property indices. A key point in the decline, was when BDEV slid back below its 250 day/1 year moving average. That occurred in Feb 2010. Within a few weeks, in Spring 2010 a second downleg in UK property prices began. And it was clearly reflected in the H&Nindex (the average of the non-seassonally adjusted Halifax & Nationwide indicies), which peaked in April 2010 at £169,287. The new slide in UK prices came despite continued ultra-low interest rates.

 

BDEV continued to fall for most of 2010, but the rate of decline slowed and the stock bottomed in late Nov.2010 at near 71p, which was well above the Nov 2009 low of 31p. Then, a year-end rally in BDEV stock began, taking BDEV back near 90p by the end of 2010. We watched to see if the bounce in stocks was going to be strong enough to push back above the 250d/1 year MA, and if that occurred, if there would be a reverse the downturn in UK property prices.

 

In early 2011, Homebuilder prices rose further. BDEV rose above 110p, and pushed beyond the 250d MA, suggesting a Spring 2011 "PAUSE" in the decline in UK-wide home prices. Will the house price rally last? I think not. The failure of the Homebuilder rally and a drop in BDEV back below 100p on high volume (If we see that), would be a sign that Crash Cruise Speed (with falls averaging more than 0.5% per month), is likely to resume.

 

 

I still expect a long slide in UK House prices into 2012/13 or later.

Next Buy signal would be: after the Builder shares break up above key resistance levels on high volume.

[drbubb]

DELUSIONAL SELLERS in Rightmove's Survey raised their April offers by +1.7% - But buyers aren't biting...

 

The rising offer prices haven't helped London based builder : Barratt/ BDEV

 

It is hard to take advantage of rising offers, when NO ONE IS WILLING TO PAY THEM:

 

"But the leap in prices in March is due to misplaced optimism, as homes are not selling.

The mismatch between supply and demand led to the number of unsold properties on estate agents' books rising at its fastest level since May 2007, to an average of 74 homes per branch.

 

Rightmove warned that with interest rate likely to rise, vendors wanting to take advantage of the traditional spring window needed to adopt 'serious sales tactics'."

 

Read more: http://www.dailymail.co.uk/news/article-1378011/Overly-optimistic-sellers-raise-house-prices-1-7-market.html#ixzz1JsAXilJx

[Meralti]

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.

[drbubb]

Here's a good chart ...

 

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.

Great chart.

Now here's a dumb question: Is this "stock" or "flow"- ie total Outstanding or volume over a year?

 

If total outstanding debt, then the debt amount may just need to move sideways for another 1-3 years, and the market may be closer to a low than I had thought.

[Meralti]

Great chart.

Now here's a dumb question: Is this "stock" or "flow"- ie total Outstanding or volume over a year?

 

If total outstanding debt, then the debt amount may just need to move sideways for another 1-3 years, and the market may be closer to a low than I had thought.

 

This chart is taken from a report produced by the office for national statistics.

 

Total net lending to individuals by banks, building societies and other lenders is a measure of the

value of new loans, less repayments, over a given period. Figure 6 (the chart) shows flows of net lending to

individuals over the past 23 years

 

...

 

The increase in total net lending between 1993 and 2004, adjusted for inflation, was driven

primarily by growth in new loans for house purchases secured against those dwellings. The flow of

net lending secured against dwellings fell in the recession of the early 1990s, and then started to

gradually increase after 1996, and more rapidly from 2000 onwards with the acceleration in house

prices. In Q4 2003 the flow of net lending secured on dwellings peaked at £33.1 billion, followed by

a decline and subsequently another peak at a similar level in Q4 2006. It then decreased again,

with the pace of decline increasing sharply at the beginning of the economic downturn which began

in 2008; falling to £2.0 billion in Q2 2009, increasing to £4 billion in Q4 2009 and falling again to

reach £2.1 billion in Q2 2010. The flow of total net lending reached a low point of £1.4 billion in Q3

2009, increasing slightly to £2.3 billion in Q2 2010. Although the flow of net secured lending in real

terms remained positive during the recent financial crisis, the real stock of loans outstanding has

fallen since Q1 2008.

 

So this chart shows flow and therefore represents the flow money from new lending into housing.

[John Doe]

Great chart.

Agreed, I hadn't seen this one before.

 

Question is, is this just showing the end of MEWing and the move towards paying debt down?

[Meralti]

Agreed, I hadn't seen this one before.

 

Question is, is this just showing the end of MEWing and the move towards paying debt down?

 

 

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.

[drbubb]

Great chart.

Now here's a dumb question: Is this "stock" or "flow"- ie total Outstanding or volume over a year?

 

If total outstanding debt, then the debt amount may just need to move sideways for another 1-3 years, and the market may be closer to a low than I had thought.

I should have looked more closely. It is "flow" - ie new lending per quarter.

 

I reckon that loans outstanding will be coming down, but not so fast as they used to, because of the large number of interest only loans.

 

To get at "stock", ie loans outstanding, it would be necessary to start with prior loans, the add new lending and subtract loans repaid.

[drbubb]

How long before we see this?:

PROTEST SIGN...

Carried in front of No.10

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

 

"I AM SAVER - I AM BEING ROBBED...

 

SO MY LANDLORD CAN SURVIVE,

 

AND ROB ME AGAIN THRU HIGH RENT !"

 

END Ultra-low Rates !

They are ruining the UK

[drbubb]

Seasonal comparisons show a market that is "running out of momentum":

 

MORE Seasons...

 

Mo / Aver. :: =2004= : =2005= : =2006= : =2007 : =2008= : =2009 : =2010= : =2011= :

J. : - 0.38%:: +0.29%: - 0.47%: - 0.45%: - 0.03%: - 1.50%: - 0.37%: -0.11% : -0.33% :

F. : +0.68%:: +2.76%: +0.29%: +1.17%: +1.85%: +0.28%: -1.08%: -0.51% : +0.06% :

M.: +1.23%:: +2.76%: +0.98%: +2.08%: +1.75%: -0.83%: +0.38%: +1.53% : +1.25% :

A.: +1.50%:: +2.72%: +1.23%: +2.18%: +2.23%: -0.06%: +0.29%: +1.88% : +0.31% :

M.: +0.53%:: +2.59%: +0.61%: +0.68%: +0.62%: -2.56%: +1.09%: -0.06% : ? ? ? ? :

J. : +0.11%:: +1.74%: +0.55%: - 0.14%: +0.70%: -1.63%: +0.12%: -0.55% : ? ? ? ? :

==========

SB +3.26%:: +8.07%: +2.82%: +4.94%: +4.60%: -3.45%: +1.76%: +3.41% : 1.56% :

*Seasonal bounce: March-May.

(May not included yet in 2011.)

 

2011 seems to be running well below the seasonal average.

[drbubb]

"Nor did we have the huge oversupply of building"

 

Again, we are NOT Greece or Eire.

 

Nor did we have the huge oversupply of building that US, Eire and Spain had.

 

I REALISE that this is a commonly-held belief - But I just don't buy it !

 

I have a different point of view:

 

+ The UK's generous benefits (including housing benefits) have encouraged dependent Europeans and dependents from other countries such as so-called political refugees to migrate to the UK.

 

+ Overly-generous housing benefits have encouraged household formations, by those who would otherwise live with friends and family (single mothers come to mind.)

 

THE COMBINATION of these two have pushed up housing demand and created an artificial shortage, boosting rents and boosting house prices.

 

But these excesses are now being addressed, and benefits will be much less generous in the future, and that will REVERSE the trend of growing household formations, and Britain will soon wake-up and discover there is no shortgge of supply, but rather a surplus. That will help to drive house prices down. And the UK will finally get the correction it is due - even in London.

 

== ==

 

Press Releases

 

Seven out of Ten Lib Dem Voters Want Net Immigration sharply cut: New poll shows strong support for Cameron’s target

10 May, 2011

 

A new YouGov poll has found that 72% of potential Liberal Democrat voters want net immigration of 100,000 or less per year. A majority (55%) of Lib Dem supporters wanted to see a much lower figure of 50,000 or less. Only 8% wanted the present level of 200,000 a year or more.

 

Results for Labour voters were almost identical. 74% of potential Labour voters favour net immigration of 100,000 or less a year and a majority (64%) want 50,000 or less; only 7% wanted 200,000 or more.

 

Conservative voters were 92% in favour of 100,000 or less while only 2% wanted 200,000 or more.

 

Taking the public as a whole, 79% favoured 100,000 or less while 5% wanted 200,000 or more. This underlines the strength of support right across the political spectrum for David Cameron’s aim to cut net migration to the “tens of thousands” during the course of the Parliament.

 

The poll also found strong support among potential Liberal Democrat voters for the Government’s measures to limit the number of economic migrants to Britain. 76% supported a limit while 18% opposed it, of those 4% strongly opposed. Labour voters took the same view while 96% of Conservatives supported a limit to economic migration, with only 3% opposing.

 

/more: http://www.migrationwatchuk.org/

[bob monkhouse]

Evenin Gents.

 

Its been a while. Ive been focusing on my career to build up a reasonable enough drip feed into investments. Its a dirty word I know, but I want to get into residential investment in order to diversify my income. I also hope to reduce the hours I spend in the office and turn my focus elsewhere. I have a couple of Q's which I hope will stimulate discussion;

 

Never time the market - it feels like we are nearing the bottom. What are your thoughts on the factors facing the UK housing market. I know the returns I can make in the current market...but the whole macro inflation/deflation issue confuses me...what are your inf/def ex[ectations and what effect might they have on the housing market?

[drbubb]

Never time the market - it feels like we are nearing the bottom.

What are your thoughts on the factors facing the UK housing market. I know the returns I can make in the current market...but the whole macro inflation/deflation issue confuses me...what are your inf/def ex[ectations and what effect might they have on the housing market?

Bob,

I cannot see any evidence for a "bottom".

Indeed, I think it looks as if Buyers are deserting the market (apart from the total FOOLS from places like Hong Kong who are determined to throw their money away on overpriced new London properties).

 

The following figures might put the unhealthy balance into perspective.

 

UK ASKING PRICES - at ABSURD levels : 145%+ is the highest on record

 

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 :

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

mom : + 1.3% : -0.02% : Est.DI: 145.7% / + 0.52% : = n/a = : - 1.55% : +0.09% : + 0.31%

 

What are the vendors smoking?

 

Even Miles Shipside mentions the unlikelihood of these prices "sticking":

 

Shipside adds: “The increase in agents’ property stock levels combined with a reduction in the number

of properties coming to market suggests that the number of buyers has fallen even faster than the

number of sellers, and transaction volumes will therefore remain low as we move into the traditional

summer slowdown. Estate agents usually see their stock turnover more quickly during the spring, but

this year’s slower market suggests that stock levels may exceed Rightmove’s previous record of 79

properties per branch over the next few months.

 

/more: http://www.rightmove.co.uk/news/files/2011/05/may-2011.pdf

== == ==

 

Useful chart / suggests possible cliff's edge ahead:

 

/source: http://www.housepricecrash.co.uk/forum/index.php?showtopic=152362&st=165

[Vicarious]

article on market oracle today

[drbubb]

article on market oracle today

interesting

[Van]

interesting

 

 

This chart says to me that it is very nearly time to sell gold and buy houses..

[drbubb]

FRom the Main section

 

http://thescotsman.scotsman.com/scotland/Millions-trapped-by-property-slump.6776563.jp

reality beginning to hit home ?

sounds like it from the comments

Here's what the article said:

"The study reveals 53 per cent of homeowners aged 18-34 would like to buy a new home within the next two years but 44 per cent think it is unrealistic that they will be able to do so because of the low value of their property, the difficulty in finding a mortgage and a lack of suitable properties for sale."

 

WHY DO they have such difficulty writing the truth: ???

 

MOST PEOPLE THINK property is very overpriced, and does not represent good value.

 

That is THE TRUTH, I think.

 

Here's what I responded in to an email from an agent from HK trying to get me interested in a London property called the Tower:

 

"I am in London now.

My friends here think that the flats are expensive, and the layouts not optimal."

 

And in response to an email on another property in Manor House, by Berkeley Homes:

 

"The property and its immediate environment are quite beautiful.

It is a pity about the greater area in which it is based. It will take many years to improve it enough for me to consider living there."

 

Let's get the TRUTH out.

 

http://www.youtube.com/watch?v=dlzrNKN3rZI

 

Speaking the truth in a respectful and polite way might actually make some difference - if enough people do it !

[TrueNorth]

I am very torn, STR pre-crash, been renting for ages now. Just moved to the north of England, very little on offer that is, let's say, as luxurious as I would like. The only option seems to be buying. Frankly, I am sick of renting. I'd like to be able to bang nails in the wall and hang some of my art collection.

 

However, I still think places up here are overpriced. The selection is good, however, as far as for sale properties go, versus rental properties. Saw two places today, both were vacant family homes at the high end of the market. Both families have moved "down south", leaving their five bedroom town houses vacant and on the market. They don't seem to be in any rush to lower the price to get a sale. Perhaps they are not in a rush, and are taking a wait-and-see approach.

 

While I am tempted to buy my dreamhome here, as it is discounted at the mo, I am equally tempted to buy something very affordable so that any further falls in the market have a proportionately smaller impact on my home.

 

We expect to be here for five years. I suppose I may come out even if I buy. Really, quality of life is rearing it's ugly head and saying "Buy you suckah! Buy!"

[drbubb]

...from a thread about Tung Chung property...

 

Interesting Bubb, I'd love to get your take on the Irish property market. We had 14 years of rapidly rising property prices from 1994 - 2008, and we have had nearly four years of even bigger falls from 2008 to now. House prices have dropped between 40-50 percent since 2006 and are now back to 2001 levels. It has been argued that the falls have been so big because Irish banks are trying to reduce the size of their loan book and are not lending for property. The level of mortgage lending in Ireland fell from EUR 40 billion in 2006 to just EUR 2 billion in 2010 - that's a 95% drop in lending! So virtually the only buyers out there are the cash buyers who are bottom feeding. How much further do you think prices can fall?

It is hard to make much of a comment without seeing long term charts going back 2-3 Long cycles.

 

You say:

"Falls have been so big because Irish banks are trying to reduce the size of their loan book ."

 

And that is the action that usually leads to the bottom - forced selling 3-5 years after the peak.

 

Even so, the lows might stretch to 6-7 years, or property might "bump along the bottom" for most of/ all of the first 7 years of the next cycle. We saw something like that in Japan after its long cycle peak.

 

/note: I will also post this on the Irish property thread, if I can find it.