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The UK Property Crash - Has it been avoided, or just delayed?

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DESPERATION?

(When only uninformed foreigners are buying, what do you do?)

 

Pidgley takes Berkeley into rented housing

 

Veteran house builder Tony Pidgley is diversifying into building and owning affordable rented homes.

 

The chairman of Berkeley Group said the house builder was setting up a rented housing fund to build 380 homes next year.

 

This is Berkeley Group’s second foray into a homes for rent deal and comes after Chancellor George Osborne unveiled plans to offer grants for rental homes pegged at 80% of the market rate.

 

Pidgley said the move would help finish sites as buyer demand slowed and take advantage of the new Government funding initiative.

 

Berkeley’s first rental scheme was built under the Housing and Communities Agency’s private rental initiative, which sees the agency retain a 20% stake in the homes.

 

This latest deal is being set up with a council and will see Berkeley own and manage the homes.

 

Pidgley predicted that more developers would follow as long as mortgages remained hard to secure and rents remained high because of housing shortages.

 

He said: “The industry has got to change its approach. The days of a house builder buying it, building it, selling it and walking away are, I think, gone.

 

“If the sites don’t get developed there will be no homes. So what we’re saying to local authorities is that we’ll lock them in and we’ll rent them at a discount. It’s just a private sector company doing what the RSLs do.”

 

/source: http://www.constructionenquirer.com/2010/1...rented-housing/

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DESPERATION?

(When only uninformed foreigners are buying, what do you do?)

 

Pidgley takes Berkeley into rented housing

 

Not necessarily. Notwithstanding the housing recession, for about 5 years there has been a gradual shift towards building to rent, with commerical property developers coming onto the turf of the housebuilders, and doing JVs with large pension funds and institutional investors, to own more rented stock.

 

The level of rented stock in the UK is much lower than in Germany for example, and there is an undercurrent and structural shift to move towards the latter's model. Why not have more rented stock? It can take decades to create such a change.

 

The seeds of this were planted well before 2007.

 

Institutions and pension funds will not buy or develop UK resi property unless the portfolios are very large, for obvious transactional reasons. Having housebuilders build them, with their finance, is entirely logical, if your investment horizons are say 20-40 years, as they are not looking at 1-5 or 5-10 year cycles.

 

 

 

 

 

 

 

 

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I

(2)

"In the north of England lots of properties are in the 3 to 3.5X earning bracket, so does this mean they are unlikley to suffer large falls in the future?"

Sorry to barge in, Bubb, but I have to disagree with this. The salaries in the North of England (I am talking Newcaslte, Carlisle et cetera) are somewhat around the £15-18k average, for those fortunate enough to be in work. The fallout from Northern Rock still has to be felt and some will start losing their homes due to the change to the mortgage relief contribution.

 

I accept prices are far lower up here, but so are salaries.

 

I don't really see the average house price to be in the region of £60-75k. More likely twice as much, and people are on nowhere near £40k.

 

Even if you consider household income, that's still way below.

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Not necessarily. Notwithstanding the housing recession, for about 5 years there has been a gradual shift towards building to rent, with commerical property developers coming onto the turf of the housebuilders, and doing JVs with large pension funds and institutional investors, to own more rented stock.

The reason I talk about "desperation" is that UK residents have stopped buying newly constructed houses.

 

Something like 70-80% of London area properties are being sold to foreign buyers, and maybe more than

that in marginal areas, which are being advertised as "prime." Prime prices, but not prime locations.

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Interesting bounce after the US QE2, not sure why, maybe an increased chance of QE2 in the UK.

Bounce? Yes.

But I don't think it will amount to more than that.

 

BDEV's getting faded today: 83.60 Change: -1.75 // Percent Change: -2.04%

Open: 85.75 High: 85.90 Low: 83.00 // Volume: 5,152,600

 

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I have read this thread with interest and thought it may be timely to update it.

 

Has a crash been averted? Or is it just crashing in slow-motion? I'd be curious to hear what posters think.

 

This story from The Independent suggests that only a recovery in the economy will stop the downward trend. Like that's gonna happen.

 

Home prices post worst annual slump since 2009

 

Property prices slumped 4.2 per cent in the last year. The average home saw £6,688 shaved off its value – £18.32 a day – according to the latest Halifax House Price Index.

 

The annual fall in prices is the fastest for 19 months, leaving the average home worth £160,519. However, over the quarter to the end of May prices have fallen just 1.2 per cent and have actually risen by a minuscule 0.1 per cent – £126 – over the month.

 

Martin Ellis, the housing economist at the Halifax, said the property market was continuing to drift modestly downwards. "Low earnings growth, higher taxes and relatively high inflation are all putting pressure on household finances," he said. "Confidence is also weak as a result of uncertainty about the economic and employment outlook. These factors are constraining housing demand and applying some downward pressure on prices."

 

The figures are considerable bleaker than those from the Nationwide, published last week, which showed an annual decline of 1.2 per cent. But Mr Ellis predicted the property market would stabilise later in the year.

 

"An improvement in the economy during the remainder of 2011, combined with continuing low interest rates, is likely to support housing demand. This should prevent a further fall in prices and help to stabilise property values."

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Perhaps a useful indicator of enthusiasm for property is how widely it features as a topic for podcasts.

 

I recently searched iTunes for podcasts with the keyword "property" (I chose this term purposely to exclude foreign podcasts using "real estate" as keywords) and found very little has been published recently. So it seems the enthusiasm of old has turned to disinterest at best, though I doubt we are anywhere near the "revulsion" phase.

 

However, I read with interest today that Kirstie and Phil of Location Location Location fame have just launched an iphone app to help people find and assess property. house hunter app

 

It's £3.79 or i would have downloaded it. :)

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Perhaps a useful indicator of enthusiasm for property is how widely it features as a topic for podcasts.

 

I recently searched iTunes for podcasts with the keyword "property" (I chose this term purposely to exclude foreign podcasts using "real estate" as keywords) and found very little has been published recently. So it seems the enthusiasm of old has turned to disinterest at best, though I doubt we are anywhere near the "revulsion" phase.

 

However, I read with interest today that Kirstie and Phil of Location Location Location fame have just launched an iphone app to help people find and assess property. house hunter app

 

It's £3.79 or i would have downloaded it. :)

I wonder if they will find much audience through iphone?

Perhaps the average guy using the iphone is more clever than K & P, and would rather not lend their time to rewarding selfish efforts like those of Phil & Kirstie

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http://www.home.co.uk/asking_price_index/HAPIndex_JAN17.pdf

 

YoY price falls increasing in London

Greater London
Jan-17 : Average Asking Price : £538,074
Headlines
Greater London slips further into negative territory with prices having lost 1.1% over the last year.
• The number of properties entering the market has increased in all regions with the
largest rises in the East of England (+18%) and Scotland (23%) (Dec 16 vs. Dec 15).
• Average home price for England and Wales shows no significant change since last month’s fall.

Regional Market Round-up
Looking at the regional level we can see clearly that the tables have turned. No longer is London
storming ahead with blistering price rises. In fact the opposite is true. Prices are in retreat in the
capital region and the market in the South East is also slowing rapidly. Meanwhile, it is the East and
West Midlands that are the new shining stars of the UK property market.

 

Interesting.

I went to a property sales presentation here in HK, and there were some hints that prices were negotiable

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I found links to these two articles

 

/ 1 /

Economists Explain Why Our Economy Crashes Every 18 Years

www.theepochtimes.com/.../2000510-economists-explain-why-our-economy-crashes-...

Mar 25, 2016 - ... economist and director of the Land Research Trust, Fred Harrison. ... Harrison predicts the midcycle recession will hit in 2019, and the current ...

 

/ 2 /

Are we heading for a crash? | Albert Edwards, Aditya Chakrabortty ...

https://www.theguardian.com › Opinion › Global economy

Jan 29, 2016 - Fred Harrison: A British recession will happen in 2019. Fred Harrison ... Fred Harrison is an economics commentator and author of Boom Bust ...

 

 

Fred Harrison: A British recession will happen in 2019

FredHarrison.png?w=300&q=55&auto=format&

Britain is on course for a recession in 2019, a year before the general election. The crash will not happen before then because politicians and central bankers will appear not to lose their nerves.

The QE (quantitative easing) solution to the 2008 crash has rendered monetary policy useless as a fine-tuning instrument. Policymakers failed to adopt fiscal reforms that could have rescued the UK, so politicians have no tools to guide Britain out of the current turbulence.

Worldwide, central bankers will talk up any good news, hoping to persuade consumers to spend, even as wages continue to be battered. In the US the Fed will not take any chances in the run-up to November’s presidential election. Oil producers will finally do a deal to drive up petrol prices, which will be sold as a step towards normality. Debts will continue to grow, until a peak in house prices in 2019. Then the game will be up.

 

There is also this:

When's the Next Property Crash? - Share The Rents

www.sharetherents.org/whens-the-next-property-crash/

By Fred Harrison on 13 July 2010 in Global Downturn, UK Economy. Finally ... It is ultimately, as Mr Harrison argues, a ruinous way of running our affairs.”.

 

relevant analysis of what caused the Depression of 2010. ...

 

... the new realism began when Martin Wolf analysed my book 2010: The Inquest in the Financial Times (July 8). He summarised the mechanism that drives the economy to distraction in these terms:

 

“Buyers rent property from bankers, in return for a gamble on the upside. A host of agents gain fees from arranging, packaging and distributing the fruits of such highly speculative transactions. In the long upswing (the most recent one lasted 11 years in the UK), they all become rich together, as credit and debt explode upwards. Then, when the collapse comes, recent borrowers, the financial institutions and taxpayers suffer huge losses. This is no more than a giant pyramid selling scheme and one whose dire consequences we have seen again and again. It is ultimately, as Mr Harrison argues, a ruinous way of running our affairs.”

 

That message has to sink into the heads of economists if they want to guide the western economy out of the depression...

. . .

Unless the Wolf realism infects mainstream analysts, expect the disarray to continue and for the next property cycle to terminate in 2025. Wolf has just been appointed as one of 5 experts to the new Financial Policy Committee within the Bank of England, which will operate “in parallel with its existing Monetary Policy Committee”.

Will Wolf be able to influence the Bank of England? Not likely. So a lot of traps await the unwary between now and the Crash of ’25.

 

So perhaps he means: a mid-cycle recession in 2019, followed by a bigger peak, and larger Crash in 2025.

That means the UK would be 1-2 years behind the US cycle.

I do note however that London never had much of a correction in 2008-9, so this 2019 drop could be something more serious for London.

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Coming Down!

UK homeowners slash house prices by over £25,000 on average as property market slows

Stephen Little
 
Figures from Nationwide show that house price growth went up 0.1 per cent in November: Getty

UK homeowners desperate to sell their property in a slowing market have slashed their offer price by an average of £25,562, according to new figures from property website Zoopla.

An analysis of house price data across its website for November reveals that 35 per cent of properties on the market had been marked down, with average prices in London being cut by more than £50,000.

As a proportion of property price, Stockton-on-Tees saw the largest reductions, with homes in the town marked down by £13,350 – or 8 per cent on average – since being listed.

This was closely followed by Darlington and Bishop Auckland, where property was reduced by £12,285, or 7.88 per cent, and £10,573, or 7.86 per cent, respectively.

In London, 39 per cent of property listings were reduced in price, up from 37 per cent that were cut during the month of July. The average price reduction in London was £53,251 – or 7.4 per cent.

Kensington and Chelsea was the most discounted borough in value terms, with prices knocked down by £129,559 on average – representing 7.9 per cent of the total property price.

==

> more: https://uk.finance.yahoo.com/news/uk-homeowners-slash-house-prices-120200518.html?hl=1&noRedirect=1

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