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What would bring on a crash in London property?

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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 ...

 

Finchley area, North London.

 

Got about 20% off initial asking price. Big detached house which will last us forever if we wanted it to.

 

And managed to keep the bulk of my metals for a rainy day.

 

Prices softened a little at the back end of last year so we dived in. Now seem to be increasing again. Madness.

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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 ?

 

I disagree with your assessment. You may be right. Time will tell.

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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.

 

 

All the places, I think the high end is very vulnerable to a drop, capital is more mobile in that market segment. It's not like the valuations are supported by the yield from the properties anywhere in London.

It gets better as you hit the mortgaged-off-a-salary part of the market, ie under 500K.

 

I agree with the displaced buyer effect, I'm seeing the bottom of the barrel areas in Zone 3 shooting up in price over the last 2 years.

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High ? ... or Low?

Take your pick in the reading sentiment game:

 

 

No posts here since the 6th of January, that must be a record.

So, are we near a low then, at least in sentiment? :D

A low?

More like a High, I reckon...

The MOVE UP in Barratt is beginning to look parabolic ... BDEV-chart

 

55965842.gif

 

It is threatening to push above the channel that I indicated above.

 

The implication of a parabolic move is that such moves often end in important Tops.

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Now halfway through Tim Morgan's report "perfect storm"

 

"Logically, the next sequential stage – one which probably lies in the very

near future – is a market realisation that the claimed reversibility of QE is

nonsense. The idea that, say, the Bank of England can ever reverse £375bn

of money creation seems extremely far-fetched"

 

So how the hell can this nonsense go on for? A one bed flat in Primrose Hill for £600K? Tulips, tulips.

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Now halfway through Tim Morgan's report "perfect storm"

 

"Logically, the next sequential stage – one which probably lies in the very

near future – is a market realisation that the claimed reversibility of QE is

nonsense. The idea that, say, the Bank of England can ever reverse £375bn

of money creation seems extremely far-fetched"

 

So how the hell can this nonsense go on for? A one bed flat in Primrose Hill for £600K? Tulips, tulips.

 

The continuing QE has certainly done wonders for BDEV's share price.

That and the eager buying of London properties by foreigners.

 

Personally, I can see it getting de-railed far before a time when 1BR flats in Primrose Hill it that sort of number.

Unless I am wrong, and they are at those prices already

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

(And incomes are going nowhere)

 

Can you not see the danger ?

 

I strongly agree with the income-to-value ratio being insane. But it assumes everyone should be a buyer. I suspect we've simply moved to an era where inequality (socially, regionally) is getting worse and property owners will milk tentants for all they're worth, all aided by super low intrest rates. The choice could be "rent/buy for 60% of your income in London/SE to live in a shoebox" vs "rent/own cheaply in an economic dead-zone". Only rampant basic-needs (cost-push) inflation (food/fuel) would put a stop to people's ability to pay that rent. Then what? Rents drop, or wages rise until they hit their "whatever the market can bear" level. If we're in a cost-push environment, I don't see rates going up, it would just choke the economy further, so borrowing costs aren't affected. Rental yields would go down, which would take prices down somewhat until we're back at maximum exploitation level.

Never underestimate people's capacity to exploit each other.

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... property owners will milk tentants for all they're worth, all aided by super low intrest rates.

The choice could be:

 

+ "Rent/buy for 60% of your income in London/SE to live in a shoebox"

- vs:

+ "Rent/own cheaply in an economic dead-zone".

 

Only rampant basic-needs (cost-push) inflation (food/fuel) would put a stop to people's ability to pay that rent.

Then what? Rents drop, or wages rise until they hit their "whatever the market can bear" level.

 

I think that's a good insight.

TPTB now favor the landlords* and don't seem to care that rents are stressing people's ability to live decently.

But there's a cycle underneath it all, and at some stage there will be a big adjustment.

 

We saw that in HK from 1997 to 2003, when prices fell 69%, and that represented a big adjustment.

I cannot tell you how big it will be, when it will start, or how long it will last. But an adjustment will surely come.

And I think it will not be a small one.

== ==

 

*The same was true in HK for some years, but people are now so stressed, that the level of property prices and rents has become a political issue.

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I think that's a good insight.

TPTB now favor the landlords* and don't seem to care that rents are stressing people's ability to live decently.

But there's a cycle underneath it all, and at some stage there will be a big adjustment.

 

We saw that in HK from 1997 to 2003, when prices fell 69%, and that represented a big adjustment.

I cannot tell you how big it will be, when it will start, or how long it will last. But an adjustment will surely come.

And I think it will not be a small one.

== ==

 

*The same was true in HK for some years, but people are now so stressed, that the level of property prices and rents has become a political issue.

 

I've pondered a little on the political side of this. I suspect there's no political gain in making house prices go down but instead will make renting less problematic. Why? It pisses no one off, and may win votes with renters. Spineless, short-termist and irrelevant thinking, but that's the breed of politicians we have.

 

Some Labour noises:

- are all about reducing predatory behaviour in the rental sector. Nice for tenants, but lacks substance. http://www.guardian.co.uk/housing-network/editors-blog/2013/jan/18/editors-blog-labour-one-nation-housing

- Ed balls wants to build 100.000 affordable homes but doesn't say where and funding for is uncertain. http://blogs.telegraph.co.uk/finance/thomaspascoe/100020447/ed-ballss-housing-plan-could-win-labour-the-election/

 

Tories: Not much happening with them in power on this front other than some ineffective policies that prop up the market a little and trim a little of the worst excesses of housing benefits.

 

 

What was behind the slide in HK? Was it the handover to Chinese rule?

 

Cycles: I've given up on the concept of cycles. Yes, things may go up and down over time, but wavelength and amplitude are impossible to forecast and rarely the same. There's always room for "a black swan" and for long-term cycles, the sample size (ie. #cycles) is so limited that it's statiscally irrelevant. Fred Harrison goes on about 18 year property cycles. Cute. That's 5 cycles per century. He goes back "300 years". Sounds impressive. That about 15 cycles - that's a joke as a dataset.

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Ed balls wants to build 100.000 affordable homes but doesn't say where and funding for is uncertain. http://blogs.telegra...r-the-election/

 

"Affordable Housing" is a sad misnomer.

By making some housing cheaper for "favored" groups - it raises the prices on newly-built housing,

and thereby increases the cost for everyone else.

 

This is a transfer of wealth, from the many to the favored few - and it is partly covered up,

for those who want to be less that honest about how it works

 

Affordable housing also encourages political patronage (vote buying) on the part of those who dole it out.

 

Remove it, build more homes without it, and prices would come down for everyone.

 

Why do Brits find it so difficult to be honest about gimmicks like "affordable housing" ?

They should call it "subsidised housing", for starters

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Remove it, build more homes without it, and prices would come down for everyone.

 

It distorts the market, that's for sure, but in this case I'm not sure prices would come down, those with more a little bit more money would outbid the segment that it's aimed at.

 

That said, a lot of the affordable stuff is pretty grim, who'd want to buy a new build 1 bed flat above a tyre shop on a busy A road? (just thinking of one of these developments I know in London)

It seems that developers pick the worst part of their site for the affordable stuff. It's a rational choice, but if the market were functioning normally and this kind of construction wasn't subsidised they might not build something as crap, because they'd struggle to offload it.

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'It seems that developers pick the worst part of their site for the affordable stuff. It's a rational choice, but if the market were functioning normally and this kind of construction wasn't subsidised they might not build something as crap, because they'd struggle to offload it.'

 

yes, I agree, a guaranteed buyer for the crap means they don't have to use commercial-appeal considerations. And we all know the gov't pays over the odds for everything they buy. E.g. a £300 laptop bought by the NHS costs £800.

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All the places, I think the high end is very vulnerable to a drop, capital is more mobile in that market segment. It's not like the valuations are supported by the yield from the properties anywhere in London.

It gets better as you hit the mortgaged-off-a-salary part of the market, ie under 500K.

 

I agree with the displaced buyer effect, I'm seeing the bottom of the barrel areas in Zone 3 shooting up in price over the last 2 years.

 

In the very centre of London, I think a lot of the properties are owned by overseas nationals as a holiday home rather than an investment or because they work here. Many flats seem to be only occupied for one month of the year.

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Just an observation: while there is currently zilch for sale in Clapham Old Town (SW4) and very little in new hotspots such as east Dulwich and Peckam Rye.

 

There suddenly seems to be rather a lot in SW11 (Battersea and Clapham West).

 

May it spread.

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Number of properties for sale seems to be at a recent all time low

 

http://www.home.co.uk/guides/time_on_market_report.htm?location=london&all=1

 

looking at prices

http://www.home.co.uk/guides/asking_prices_report.htm?location=london&all=1

 

It's the top end that has soared (pushing up averages considerably).

 

Look at the median (more representative). No of beds is also indicative.

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YUP

 

But those are just "Asking" prices, I believe

 

Average Asking Prices By Type in London (£000's)

 

rollingbytype-london-200609-201301.gif

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Well,

I suppose a collapsing Pound might help to save the London property bubble for awhile

 

... at least until the BofE is forced to raise rates

 

British Pound to $0.90 !?

 

FXB / British Pound ... Alldata : 5yrsWk : 2yrsD : 6mos : 10d

 

fxb.gif

 

This comment is pretty bearish, if it proves accurate:

 

British Pound Breakdown Imminent, Downside Target 90!

(01/28/13)

 

After 4-5 years of sideways consolidation, the British Pound appears SET TO BREAKDOWN and complete a long term coiling pattern.

This process is set to end at precisely the same time that a new intermediate term bearish trend signal is poised to trigger.

The long term (several years) measured target from a successful breakdown here is 90 (currently around 160).

 

It is important to note that at this time we have neither broken down, nor have we triggered a new intermediate bearish trend signal....yet.

That technical confirmation could come as soon as tomorrow however given that other indicators that we follow that have already given way to a bearish break.

 

Paul Thomason, Elliott Wave Market Service

 

(I reckon that a meaningful break of $1.55 may do it !)

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From the article:

 

The further up the price scale you go, the fewer domestic buyers you see:

  • Up to £2m is a predominantly British market place.
  • £2-5m is a mix of international and domestic, and this price bracket has been hardest hit by the hike in stamp duty; between £2-3m is a sluggish market as this is just into the 7% stamp duty area, and hurts most the people who can afford it the least.
  • £5-10m is still a strong market with a strangled supply. This is probably a 70:30 split, international verses domestic. Getting to the front of the queue for the best properties is very hard – which is, of course, where we come in.
  • (Continues)

Haha!

A collapsing Pound (on its way to becoming a 90-cent "ounce"),

might scare away a few of those foreign plutocrats !

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A UK TURN may be at hand...

 

Key bellwether Barratt is beginning to falter : BDEV-chart

 

BDEV is now trading below the 8d-MA, despite recent strength in FTSE : UKX-chart

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Yet London prices went up 3.1% last month alone (according to Land Registry - unclear which areas).

 

As you know,

LR is a lagging indicator.

BDEV was rising fast some weeks ago

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YUP

 

But those are just "Asking" prices, I believe

 

Average Asking Prices By Type in London (£000's)

 

rollingbytype-london-200609-201301.gif

 

What do the different colours represent? House types? What area is this for, prime, central? Greater?

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A better idea, than exposing yourself to a market that may "head south,"

might be to head south yourself, and buy something at half price in Chichester.

I reckon you can rent it at a higher yield, and then use the money to rent in London,

until you can escape, and move south yourself.

 

Why expose your capital to so much downside ?.

 

Unfortunately one would have to pay tax on the rental income on the home you own while having to pay full rental costs on the property you rent. Only way round would be to mortgage the one you let out to the hilt to claim tax relief on the interest .ZIRP works against you on this.

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