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What would bring on a crash in London property?

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If we are getting any clues now from Barratt etc. / BDEV-chart : PSN

They are currently suggesting a continuing move in an UPWARDS direction.

 

42391399.gif

 

Looks nice.

I've had 20% of my pension parked in builders for the last few years.

Time for some sector rotation, I reckon...

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Looks nice.

I've had 20% of my pension parked in builders for the last few years.

Time for some sector rotation, I reckon...

 

Has been a nice hedge for those who want to own homes.

But the builders tend to turn down BEFORE House Prices do,

as this old video from 2007 shows:

 

http://www.youtube.com/watch?v=prCGctq3Gj8

 

Comment from there:

========

 

BubbFromGEI 3 years ago

Chain of events - for the way Up :

+ Interest rates are moved lower, eventually hitting a "trigger point"

+ Sentiment picks up

+ Insiders start buying builder shares

+ Deals closed pick up, and Loan applications shoot up

+ House prices begin to rise on stronger demand

+ Data is compiled by Halifax and Nationwide

+ House price indices are released to the public

+ The mainstream press and EA 's get busy talking about the "signs of recovery"

+ Home buyers "follow the bandwagon", (modified)

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Hong Kong also has a problem of Too High Home prices - maybe worse than London & the UK

 

BUT AT LEAST THE LEADERS in Hong Kong ARE DEALING WITH IT

(Unlike the UK, which ignores it, & even encourages price rises !):

http://www.greenener...showtopic=17302

 

HK is seeking to build on New Land, and is even considering opening up housing in Caverns,

 

+ They limit Loans to a maximum of 50% LTV, (over a certain price), and

+ Have imposed a 15% Buyer's Stamp Tax on puchases by foreigners

 

MEANTIME, the UK gives tax incentives to foreigners who buy in London, pushing up prices to the disadvantage of locally-based buyers

 

Very curious to see such big differences !

Who has this right ? UK or HK ?

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MEANTIME, the UK gives tax incentives to foreigners who buy in London, pushing up prices to the disadvantage of locally-based buyers

 

What tax incentive? As a foreigner planning to buy, I'd like some of that.

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Why do they come?

I think they come for:

+ Jobs

+ Benefits

+ The ability to live in one of the most walkable cities in the planet, with many cultural riches

 

The first two of these are under threat, and the competitive advantage of London may fade, as other cities "get it",

and make themselves more walkable. (I suggest looking to the cities that do "get it", and are improving their

"walkable experience.")

 

Jobs: Threat? Maybe, maybe not. Very sector dependent. IT is now in a wave of in-sourcing again and London's already quite the tech hub.

Benefits: I doubt this props up the housing market. Councils pick housing from the bottom 30% percentile (for that size/location).

Walkability is great and a boon, but surely not a driver for immigration, except perhaps for those in the prime market segment. Economic opportunity & education is probably the main reason for the bulk of people.

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What tax incentive? As a foreigner planning to buy, I'd like some of that.

Several. Example:

No income tax on the first XXX GBP of rent

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If / when Britain leaves the EU, London property will crash

 

That seems LIKELY to me. But How imminent is a departure?

Is 2017 the earliest possible EXIT date ?

 

Au Revoir, Europe: What if Britain Left the EU? by David Charter: review

 

Could Britain be stronger if it left the EU, asks Philip Johnston, reviewing David Charter's Au Revoir, Europe.

johnston_main_2448291b.jpg

David Cameron at the European Council: Can Britain go it alone? Photo: AFP

 

By Philip Johnston / 15 Jan 2013

 

From a British perspective, one of the great mysteries of the European project has been the willingness of most member states to subsume their individual identities in a supranational construct. For some countries, this was understandable. Germany, for instance, wanted a definitive break with its nationalist past and France was anxious to encourage its often dangerous neighbour along this path. Other nations had their own reasons for enthusiastic membership: emerging only recently from the grasp of home-grown dictatorships, like Spain, Portugal or Greece, or keen to get out from under the influence of a bigger neighbour, like Ireland.

 

Harder to rationalise has been the reaction of countries that spent decades under the yoke of the Soviet Union, notably Poland, which has become a cheerleader for greater federalism in Europe. The expansion of the EU, which had been championed by Britain as a way of dissipating its centralising tendencies, has failed to halt the march towards “ever closer union” set out in the Treaty of Rome.

 

The eurozone crisis, which might have been expected to make member states want to leave, has had the opposite effect. On the continent, the answer to the EU’s problems is now seen as “more Europe”. As David Charter observes in this timely contribution to the debate 40 years after the UK joined what the country was assured would be a Common Market and no more, the strategy of “wider not deeper” has failed.

. . .

the-economist-hollande.jpg

 

For the first time in 40 years there is a serious discussion not simply about how we can negotiate a new relationship but whether we can survive outside the EU. To that end, Charter engages in a bit of crystal ball gazing, imagining that all the parties enter the 2015 general election committed to a referendum on membership. Labour wins power and holds the vote in 2017 on the basis of a renegotiated settlement which the three main parties support (as they will, whatever the terms) but which the country rejects.

 

The UK leaves the EU and finds itself by 2023 still an economically powerful nation, trading as before with Europe, though more closely allied to North America, an independent state once more.

 

The roof hasn’t fallen in, we have saved about £100 billion in “membership fees” to the EU and our own unemployed fill the jobs taken by European workers. Britain remains intertwined with Europe and its single market but is no longer subject to its writ, rules, directives and jurisdiction. We still have by far the biggest financial centre in Europe – and why would banks flee from London to an over-regulated zone subject to central diktat?

===

/more: http://www.telegraph...ter-review.html

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"Our own unemployed fill the jobs taken (& left behind) by European workers"

 

abbao.jpg : Exodus - can be reversed

French bankers in London, walking home

 

When all those Europeans "go home", they will leave behind plenty of empty flats !

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ADD the Demographic Shift (boomers leaving London), to an exodus of Europeans

on a UKexit, and you have A Formula for a serious CRASH in London prices:

 

http://www.greenener...showtopic=17314

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John Bruton : What to expect

. . .

 

In the latest poll, 49 percent of UK citizens say they would vote to leave the EU, and only 32 percent that they would vote to stay - in a large margin of 17 points AGAINST STAYING IN.

 

If possible results of a renegotiation are hyped up in the next British General election, and if there is lots of talk of "red lines," the margin could widen even more, if, as I expect, the actual results of the negotiation then prove to be paltry.

 

If the UK had left the EU, it would be entirely free to restrict immigration from these particular EU countries. But as a continuing member of the EU, the Republic could not restrict the entry of EU citizens.

 

So if the UK wanted to prevent these EU citizens entering the UK through the Republic, it would have to introduce passport controls at Newry, Aughnacloy, Strabane and on all other roads by which such immigrants could cross the border from the Republic into the UK.

 

http://www.huffingto..._b_2323058.html

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ADD the Demographic Shift (boomers leaving London), to an exodus of Europeans

on a UKexit, and you have A Formula for a serious CRASH in London prices:

 

http://www.greenener...showtopic=17314

 

I don't believe there is or will be an exodus of pensioners from London.

 

Nor do I think the sort of people who are un-immigrating themselves would have much bearing on the family homes market.

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I don't believe there is or will be an exodus of pensioners from London.

Nor do I think the sort of people who are un-immigrating themselves would have much bearing on the family homes market.

 

You could be right, and you could be mistaken.

It totally depends on what decisions people make at the time - Not what they think or say they will do now

 

ukhaliwratio.png

 

Personally, with Greater London prices more than 3X Rest-of-UK ( the greatest premium ever ! ),

I think they would be nuts not to consider carefully the sensible "arbitrage trade" of selling in London,

and buying elsewhere. But I am not a British person, rooted to a single spot in his big country.

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(Remember when?

Now these old sites are getting developed, increasing supply):

 

 

Millennium Dome: Property crash endangering Greenwich project ...

www.guardian.co.uk › UK newsMillennium Dome - Cached

Jul 16, 2008 – Land surrounding O2 arena could be left derelict for decades, with ... could be left derelict for decades if there is a sustained property crash, due to the ... Europe, said: " This is a 20-year, complex regeneration programme and ...

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Is there a Wake up call coming for greedy BTL landlords ??

 

Rent Arrears Rise Sharply

 

Rents fall in December ... but it's just a 'seasonal blip'

 

There are signs of a slowdown in the rental market, but long-term there will be no let up for struggling tenant

 

...Found that the average rent in England and Wales was down 0.9% in December to £734, with London enjoying a fall of 1.5% and the east of England and the north-east dropping by 1.7%. Only the West Midlands, the south-west and Wales saw small rent rises over the month.

But despite December falls, 2012 marked another year in which rents outstripped average pay rises. LSL said that on average in London they rose by 6.3% over the year, while in the south-east they were up by 3.9%, compared to pay rises running at less than 2%

. . .

David Newnes of LSL said: "The amount owed hit levels not seen since last Christmas. In the absence of real salary increases in 2012, the additional burden of higher rents was met by tenants cutting back on other essentials.

 

(Meantime, banks are still fueling a house price bubble):

Buy-to-let landlords face few problems accessing finance, according to figures from Arla, the association of residential letting agents. It said lending to landlords jumped by 8% in the final quarter of 2012 to £4.2bn, with the average number of buy-to-let properties owned by a landlord rising from seven to eight in 2012. Ian Potter of Arla said: "The latest data suggests landlords are carefully but concertedly increasing their portfolios; activity is returning to the buy-to-let market.

 

===

/source: http://www.guardian....r-seasonal-blip

 

(Similar economic problems in America, where houseprices have already been allowed to adjust -

When will struggling renters and wold-be homebuyers take to the streets??):

 

35 Statistics About The Working Poor In America That Will Blow Your Mind

Economic Collapse | In America tonight, tens of millions of men and women will struggle to get to sleep because they are stressed out about not making enough money even though they are working as hard as they possibly can.

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... the average number of buy-to-let properties owned by a landlord rising from seven to eight in 2012.

 

You can look at this as greedy landlords pushing up property prices, in their pursuit of bigger property portfolios,

or as:

Smart homeowners offloading their properties at record high prices on stupid greedy BTL landlords, who will wind up as "bagholders" in the next property slide.

 

I choose to see it as the second !

(But it will depend on what happens to the market from here)

 

The fact that rents are so far ahead of incomes, is a very important WARNING SIGN imho !

 

1962-magoo-bob-cratchit.jpg

 

The BBC story mentions Christmas:

He added that the increase in unpaid rent was typical of the festive period.

"December always sees a step backwards, and last month was no exception. In the absence of real salary increases in 2012, the additional burden of higher rents was met by tenants cutting back on other essentials," he said.

"But over December, the month's extra spending has led to many more falling behind again. In the longer term, with rents likely to rise, falling arrears will be tied to the labour market moving forwards, rather than retreating."

 

But even this landlord-favoring group realises that "the labour market" will need to "move forward", if rents rises will come back.

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ADD the Demographic Shift (boomers leaving London), to an exodus of Europeans

on a UKexit, and you have A Formula for a serious CRASH in London prices:

 

http://www.greenener...showtopic=17314

 

A european exit is an interesting scenario, but it will very much depend on how much of an exit it is. Just because there's a passport check, doesn't mean it's the end of the world. Existing EU residents in the UK could get indefinate leave to remain by default, there could be all sorts of grandfather rules. If it's harsh policy, then yes, I can see it having a significant impact. Unlikely I suspect, because London would be shooting itself in the foot quite severely. A lot of businesses would suffer badly if their EU employees were forced to leave, decimating headcounts. Expect serious resistance from business interests.

 

Baby boomer exit? Doubt it. In the borough of Haringey, that would free up about 75 houses over a 5 year period, in a borough of 250K people. That's going by projections on the 60-64 year old people, assuming 2 people per house. between 2011 and 2016. No such drop by 2026.

Same thing for all of London: 5000 houses for sale, over a 5 year period.

 

GLA population projections projections for Haringey (one of londons larger boroughs). The % is growth over 2011 figures.

2016 Age Males Females Persons 0 - 4 10,031 9,807 19,838 104.20% 5 - 9 8,084 8,129 16,213 110.79% 10 - 14 6,476 6,685 13,160 106.72% 15 - 19 5,706 6,099 11,805 102.49% 20 - 24 9,309 10,994 20,304 99.14% 25 - 29 15,854 17,133 32,987 106.75% 30 - 34 14,452 14,932 29,384 107.66% 35 - 39 11,233 11,625 22,857 107.71% 40 - 44 9,041 8,855 17,895 102.02% 45 - 49 7,603 7,515 15,118 100.72% 50 - 54 6,429 6,679 13,108 113.93% 55 - 59 4,689 5,370 10,059 112.42% 60 - 64 3,526 4,189 7,715 98.10% 65 - 69 3,009 3,731 6,740 111.74% 70 - 74 2,234 2,860 5,094 96.69% 75 - 79 1,837 2,398 4,234 100.00% 80 - 84 1,341 1,761 3,103 111.30% 85 - 89 659 1,123 1,782 109.98% 90 + 288 858 1,145 123.38% Total 121,799 130,742 252,541 105.60%

2026 Age Males Females Persons 0 - 4 9,674 9,461 19,136 100.51% 5 - 9 7,993 8,037 16,030 109.53% 10 - 14 7,078 7,323 14,401 116.79% 15 - 19 6,431 6,858 13,289 115.38% 20 - 24 9,067 10,721 19,788 96.62% 25 - 29 14,570 15,889 30,459 98.57% 30 - 34 14,103 14,586 28,690 105.12% 35 - 39 11,728 12,063 23,792 112.11% 40 - 44 9,256 9,642 18,898 107.73% 45 - 49 7,364 7,893 15,257 101.65% 50 - 54 6,244 6,489 12,733 110.66% 55 - 59 5,406 5,708 11,114 124.21% 60 - 64 4,475 5,017 9,492 120.70% 65 - 69 3,253 3,971 7,223 119.75% 70 - 74 2,426 3,086 5,513 104.65% 75 - 79 1,962 2,666 4,628 109.29% 80 - 84 1,297 1,888 3,185 114.26% 85 - 89 846 1,347 2,193 135.34% 90 + 559 1,237 1,797 193.52% Total 123,732 133,884 257,616 107.72%

 

 

 

GLA projects for all of London 2016 Age Males Females Persons 0 - 4 318,020 303,742 621,762 104.15% 5 - 9 279,471 269,407 548,879 113.85% 10 - 14 232,449 228,302 460,751 105.72% 15 - 19 212,325 212,739 425,064 100.67% 20 - 24 276,629 305,078 581,707 99.38% 25 - 29 412,274 439,251 851,525 106.48% 30 - 34 391,870 405,634 797,504 107.28% 35 - 39 330,769 344,812 675,581 103.14% 40 - 44 293,824 298,040 591,865 98.35% 45 - 49 273,986 276,464 550,451 102.47% 50 - 54 240,132 255,537 495,669 113.25% 55 - 59 193,228 207,011 400,239 112.00% 60 - 64 151,091 166,495 317,586 96.58% 65 - 69 134,574 154,530 289,104 114.69% 70 - 74 100,244 120,988 221,232 105.10% 75 - 79 79,727 99,904 179,631 102.58% 80 - 84 58,991 80,190 139,181 102.94% 85 - 89 35,408 58,960 94,368 106.88% 90 + 21,373 51,472 72,845 130.25% Total 4,036,387 4,278,559 8,314,946

105.25%

 

 

2026 Age Males Females Persons 0 - 4 312,339 298,312 610,651 102.29% 5 - 9 282,229 272,238 554,467 115.01% 10 - 14 266,162 260,217 526,379 120.77% 15 - 19 246,270 245,211 491,482 116.40% 20 - 24 270,569 299,104 569,673 97.32% 25 - 29 383,989 413,212 797,201 99.69% 30 - 34 394,719 409,966 804,685 108.25% 35 - 39 360,993 373,351 734,345 112.11% 40 - 44 306,515 322,424 628,939 104.52% 45 - 49 258,869 281,054 539,923 100.51% 50 - 54 235,084 250,834 485,918 111.02% 55 - 59 220,794 232,294 453,088 126.79% 60 - 64 186,795 206,878 393,673 119.72% 65 - 69 144,120 164,142 308,262 122.30% 70 - 74 111,366 132,930 244,296 116.05% 75 - 79 96,756 122,480 219,236 125.20% 80 - 84 66,629 91,388 158,017 116.87% 85 - 89 44,491 67,071 111,562 126.36% 90 + 38,433 75,368 113,801 203.47% Total 4,227,123 4,518,473 8,745,596 110.70%

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If / when Britain leaves the EU, London property will crash

 

That seems LIKELY to me. But How imminent is a departure?

Is 2017 the earliest possible EXIT date ?

 

Au Revoir, Europe: What if Britain Left the EU? by David Charter: review

 

We still have by far the biggest financial centre in Europe – and why would banks flee from London to an over-regulated zone subject to central diktat?

===

/more: http://www.telegraph...ter-review.html

 

This is what it's all about. The UK is only threatening to leave the EU as a bargaining tool to prevent more financial regulation. It's got nothing to do with anything else.

 

If the UK did leave it's complete freedom for our banks to do whatever they like. I don't see why this result in a London crash - initially - it would take longer for the ponzi effect to strike.

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A european exit is an interesting scenario, but it will very much depend on how much of an exit it is. Just because there's a passport check, doesn't mean it's the end of the world. Existing EU could have indefinate leave to remain by default, there could be all sorts of grandfather rules. If it's harsh policy, then yes, I can see it getting bad. Unlikely, because London would be shooting itself in the foot quite severely. A lot of businesses would suffer badly if their EU employees were forced to leave, decimating headcounts. Expect serious resistance from business interests.

 

Baby boomer exit? Doubt it. In the borough of Haringey, that would free up about 75 houses over a 5 year period, going by projections on the 60-64 year old people, assuming 2 people per house. between 2011 and 2016. No such drop by 2026.

Same thing for all of London: 5000 houses for sale, over a 5 year period.

 

 

Forum software screwed my tables.... :(

Attached it a reduced dataset, the original is 5MB, too big for the forum limit. The data set is known as "2010 Round of Demographic Projections - SHLAA"

populationprojection_brief.zip

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I really cannot see areas like Knightsbridge crashing, having been there today I dont think I saw one native person in sight (slight exaggeration - but only slight!) - most of the properties seem to be owned by overseas nationals, who probably have no mortgage and will never need to sell.

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...probably have no mortgage and will never need to sell.

 

They might want to cash their profits (or escape a decline) someday,

and that would drive them to sell.

Since they are foreigners, their departure may not help demand somewhere else in the UK

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I really cannot see areas like Knightsbridge crashing, having been there today I dont think I saw one native person in sight (slight exaggeration - but only slight!) - most of the properties seem to be owned by overseas nationals, who probably have no mortgage and will never need to sell.

 

And if prime central holds up then many displaced purchasers move to Zone 2 etc and support prices further out.

 

I wish it were otherwise but that's what I'm seeing and that's why I'm buying.

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I can't see thousands of workers leaving - there would be amnesty / long lead-time / special rules etc.

 

And less banking regulation would likely mean more lending - inflating the housing bubble further or at least delaying its popping.

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where are you buying?

 

Places like East Dulwich and Peckham Rye have virtually doubled in 3 or 4 years thanks to the displaced purchaser effect and improved transport ...

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I know it seems like :

+ whatever happens it will HELP the housing market (based on past experience)

 

But it will not always be like that...

 

The property market is STRESSED BEYOND BELIEF in relation to stagnant incomes.

(And incomes are going nowhere)

 

Can you not see the danger ?

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where are you buying?

 

Places like East Dulwich and Peckham Rye have virtually doubled in 3 or 4 years thanks to the displaced purchaser effect and improved transport ...

 

I think you exaggerate slightly. ;)

Prices have bounced well since the 2009 bottom. They had a soft patch around H2-2010 to H1-2011, and then continued to rise as mortgage rates plummeted, and now they're probably up about 20-35% depending on area.

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