Damik

Is Prime London Crashing? - Merged Threads

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House prices slightly lower than a year earlier and the trend seems to be down.

Prices are still to high to attract many buyers and the London BTL market is dead. Further falls are inevitable. 

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Yesterday's London Evening Standard. Editorial inside (can't think who would be behind that) said house price falls were a bad thing and this news was a result of loss of confidence following the Brexit vote.

London_Evening_Standard_30_9_2017_400.jp

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Just the latest in numerous reports on the buckets of corrupt money that pump up the housing bubble...

https://www.voanews.com/a/london-tour-nigeria-corrupt-money-london/4056107.html?utm_source=dlvr.it&utm_medium=twitter

'Kleptocracy Tour' Spotlights Nigerian Corrupt Money Funneled Through Britain

Anti-corruption activists hoping to shine a light on the hundreds of millions of dollars funneled through London every year are organizing tours of properties allegedly bought with dishonest money.

The "Kleptocracy Tour" is billed as a journey to the dark side of globalization. This is the first such tour which focuses on Nigeria.

"The international community, specifically the United Kingdom, the United States, other financial centers, are playing a huge role in facilitating elite corruption in Nigeria, through offshore corporate tax havens, lax banking and property laws," said tour guide Matthew Page, a former U.S. State Department Nigeria analyst, now with Transparency International.

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On 9/30/2017 at 4:00 PM, rantnrave said:

Yesterday's London Evening Standard. Editorial inside (can't think who would be behind that) said house price falls were a bad thing and this news was a result of loss of confidence following the Brexit vote.

London_Evening_Standard_30_9_2017_400.jp

Blackrock paying Osborne has done wonders for their ETF shorting surely?

As dirty as that rag is, people read it and absorb it glancingly. You'll see more trepid sellers starting to prepare to sell now. 

It's begun.

Edited by Tapori

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3 hours ago, Tempus said:

Just the latest in numerous reports on the buckets of corrupt money that pump up the housing bubble...

https://www.voanews.com/a/london-tour-nigeria-corrupt-money-london/4056107.html?utm_source=dlvr.it&utm_medium=twitter

'Kleptocracy Tour' Spotlights Nigerian Corrupt Money Funneled Through Britain

Anti-corruption activists hoping to shine a light on the hundreds of millions of dollars funneled through London every year are organizing tours of properties allegedly bought with dishonest money.

The "Kleptocracy Tour" is billed as a journey to the dark side of globalization. This is the first such tour which focuses on Nigeria.

"The international community, specifically the United Kingdom, the United States, other financial centers, are playing a huge role in facilitating elite corruption in Nigeria, through offshore corporate tax havens, lax banking and property laws," said tour guide Matthew Page, a former U.S. State Department Nigeria analyst, now with Transparency International.

I'd follow the Nawaz Sharif trial in Pakistan. Ex-PM disqualified recently by a emboldened judiciary after a corruption investigation based on the Panama Papers linking his children to ownership of ill-gotten Mayfair flats for which he could not show proof of income. The resulting report investigation requested info on Sharif and the UK gov responded. This response has not been revealed. The report cited numerous companies and dealings here in the UK. It's commonly known in the Pakistani diaspora the Pakistani elites have robbed the country blind and invested heavily here in property, buildings and much more. Documentary from Ilford to Islamabad is on youtube by the BBC highlighting the seeds of this corruption.

In India, Vihay Malhiya is being investigated too and I bet he has money here. 

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4 minutes ago, SOLZHENITSYN said:

I'm trying to find the name of a website I used to use, but have now lost the bookmark. The site took land-reg data and displayed changes in house prices on a map by area. You could search by various postcodes etc and it would show a heat map for %change in prices, sales volumes etc etc.  Was a pretty cool tool. But I cannot for the life of me find it.

 

Any ideas?

 

Cheers,

Matt

rightmove shows per the postcode

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2 hours ago, SOLZHENITSYN said:

if you look at the price changes in new builds only across London the story gets even worse...

new builds london 1yr price trend.jpg

Yeah, all those green +20%'s are terrible !!!

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2 hours ago, SOLZHENITSYN said:

Here's the stats from 2015 - a few spikes along the way but aclear down trend toward zero! :) 

2yr trend sw8 sales.jpg

Cheers, definitely looks to be in trouble

 

2015-09: 100

2016-08: 30 

2017-08: 12

 

Approx !!!

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Check out the big loss on this luxury newbuild (data taken from houseprices.io, which was built by @evictee)

59d75d06a0977_ScreenShot2017-10-06at11_33_54.png.d65b28aefd3afb4bcbc1afb484c52b09.png

It doesn't look like a big loss but you have to take into account the stamp duty due in 2015 of £107,550.

We don't know who paid that and we don't know who paid the stamp duty due on the 2017 transaction, but here's a stab at calculating the loss in some of the possible scenarios of who paid what:

1) 2015 buyer paid the stamp duty in 2015 but did not have to make any contribution to their buyer's stamp duty in 2017. Loss of £100,000. 

2) 2015 buyer paid the stamp duty in 2015 and when they sold in 2017 they paid a quarter of the buyer's stamp duty. Loss of £126,877. 

3) 2015 buyer paid no stamp duty in 2015 because they got a good deal from the developer and did not have to make any contribution to their buyer's stamp duty in 2017. Gain of £8,000. 

If you want to add in the possibly of more losses if the seller is an overseas investor, consider that the pound fell roughly 15% against the dollar in between the two transaction dates. 

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Good point made in this article that the sales figures reported recently are from mortgage applications and a sales process instigated before recent sentiment had changed.

http://citywire.co.uk/wealth-manager/news/are-the-foundations-of-london-property-finally-crumbling/a1055849

For much of the last decade, London house prices have been as close to bulletproof as an asset class gets, rising with the inevitability of the tides, or an apparently deceased villain in a bad horror movie.

So even a relatively tentative indicator of weakness, such as the 0.6% fall in the capital’s house prices over the 12 months to September revealed by Nationwide last week, feels portentous. The question now is whether this is a prelude to weaker price growth, or all-out correction.

That was ‘the first [annual] decline in eight years’ noted Samuel Tombs, chief UK economist at Pantheon Macroeconomics, even as national pricing rose by 2%.

 

‘Nationwide’s index is based on its mortgage offers for people who likely began looking to buy a home well before the [Bank of England] warned earlier this month that interest rates will probably rise soon.

‘With the real wage squeeze set to remain intense over the next six months and mortgage rates about to rise, we continue to think the housing market will weaken further over the winter.’

A year of warnings about the near evaporation of liquidity at the top end of the market following Brexit and hiked stamp duty, and a significant overhang of speculative development south of the river, have primed people to look for evidence on the downside.

Some 17,000 ‘prime’ properties are due to be completed in the capital in the next 15 months in historically non-prime locations, according to property consultancy Arcadis. The daily press this summer has been filled with stories of the lengths developers are going to in order to avoid marking down prices.    

Inducements or bribes?

At the very top end, inducements include £18,000 cars and luxury electronics, according to estate-agent-to-the-rich Garrington Properties, while lower down the market developers such as Barratt and Taylor Wimpey have dangled free travel cards and furniture to try to lure in potential buyers.

Actual evidence of price falls has nonetheless been rare. At the most volatile end of the spectrum of indicators, initial asking prices fell 3.2% in London over the year to September, led by a 5.3% fall in central London boroughs, reported online portal Rightmove

At the other end of the scale, data from the Land Registry – the only major index compiled from actual achieved sales prices – reported a 2.8% rise in London prices in the 12 months to July.  

Inflation-adjusted, pricing has already peaked and rolled over, noted UBS. ‘Real prices are 2% lower’ than the 2016 top, the bank noted in its annual bubblewatch property report.   

‘Favourable credit conditions and the help-to-buy scheme have kept demand in the lower-price segment high. But the prime market now faces oversupply as increased stamp duties on luxury and buy-to-let properties hamper demand.’

Volume data showed weaker prime pricing has begun to lure buyers, data from Knight Frank suggested, with the number of completed sales rising 6% in the first half. Over the longer term liquidity remains much reduced, 10% below the same period of 2015 and 28% below 2014.

Buyers also remained highly price sensitive said Tom Bill, the estate agent’s head of London residential, saying there remained only patchy evidence that prime prices were bottoming out. 

‘Higher-value properties outperformed lower value properties for the sixth consecutive month in August, demonstrating how the market is adapting to the changed fiscal landscape,’ said Bill.

‘Prices between £5 million and £10 million were down 3.7% in the year to August 2017 compared to a decline of 5.4% across the whole [prime central London] market, and a drop of 6.7% between £1 million and £2 million.

‘The last time there was a similar outperformance was in the second half of 2009, during the initial stages of the global financial crisis when the safe-haven appeal of the prime London residential market rose strongly.’

Buying on price weakness

Many have taken as read that middle-class Londoners would buy any price weakness outside central London – an impression boosted by the government’s commitment of a further £10 billion in Help to Buy funding last week, of which they have been a primary beneficiary.

But the fact that August mortgage approvals are 3.3% lower, led by a 2.7% fall in house purchase deals and an 8% decline in ‘other’ transactions – primarily equity release and buy to let – have suggested that Bank of England warnings on credit conditions are starting to hit home.

So long as employment remained buoyant, that stress was unlikely to turn into outright cracks, said Capital Economics’ chief property economist Ed Stansfield.  

‘With no signs of a downturn in London’s labour market, we suspect it reflects sellers finally taking a more realistic view of what their homes are worth. If so, it is unlikely to be the start of a sustained correction. That said, data on buyer enquires and newly agreed sales offer little hope of any end to the current slowdown any time soon, either in London or elsewhere.’  

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http://www.icis.com/blogs/chemicals-and-the-economy/2017/10/interest-rates-and-london-house-prices/

'image.png.f16197bdaa4bf04fb77316f4d9351f09.png

House prices are also in the line of fire, as the second chart shows for London.  They have typically traded on the basis of their ratio to earnings

  The average ratio was 4.8x between 1971 – 1999
  But this ratio has more than doubled to 12x since 2000 as prices rose exponentially during subprime and then QE

The reason was that after the dotcom crash in 2000, the Bank of England deliberately allowed prices to move out of line with earnings. As its Governor, Eddie George, later told the UK Parliament in March 2007:

“When we were in an environment of global economic weakness at the beginning of the decade, it meant that external demand was declining… One had only two alternatives in sustaining demand and keeping the economy moving forward: one was public spending and the other was consumption….

“We knew that we had pushed consumption up to levels that could not possibly be sustained in the medium and longer term. But for the time being if we had not done that the UK economy would have gone into recession, just like the economies of the United States, Germany and other major industrial countries. That pushed up house prices and increased household debt. That problem has been a legacy to my successors; they have to sort it out.”

Of course, as the chart shows, George’s successors did the very opposite. Ignoring the fact that a bubble was already underway, they instead reduced interest rates to near-zero after the subprime crisis of 2008, and flooded the market with liquidity. Naturally enough, prices then took off into the stratosphere.

Today, however, the Bank is finally recognising – too late – that it has created a bubble of historical proportions, and is desperately trying to shift the blame to someone else.  Thus Governor Mark Carney warned last week:

“What we’re worried about is a pocket of risk – a risk in consumer debt, credit card debt, debt for cars, personal loans.

Of course, the biggest “pocket of risk” is in the housing market:

  Lower interest rates meant lower monthly mortgage payments, creating the illusion that high prices were affordable
  But higher prices still have to be paid back at the end of the mortgage – very difficult, when wages aren’t also rising

The Bank has therefore now imposed major new restrictions on lenders.  They have ordered them to keep new loans at no more than 4.5x incomes for the vast majority of their borrowers.  And lenders themselves are also starting to get worried as the average deposit is now close to £100k ($135k).

Of course, London prices might stay high despite these new restrictions.  Anything is possible.

But fears over a hard Brexit have already led many banks, insurance companies and lawyers to start moving highly-paid people out of London, as the City risks losing its “passport” to service EU27 clients.  Over 50% of surveyors report that London house prices are now falling, just as a glut of new homes comes to market.  In the past month, asking prices have fallen by £300k in Kensington/Chelsea, and by £75k in Camden, as buyers disappear.

The next question is how low could prices go if they return to the mean?  If London price/earning ratios fell back from today’s 12x ratio to the post-2000 average of 8.2x level, average prices would fall by nearly a third to £332k.  If ratios returned to the pre-2000 level of 4.8x earnings, then prices would fall by 60% to £195k.

Most Britons now expect a price crash within 5 years, and a quarter expect it by 2019.  Brexit uncertainty, record high prices and vast over-supply of new properties could be a toxic combination, perhaps even taking ratios below their average for a while – as happened in the early 1990s slump.  As then, a crash might also take years to unwind, making life very difficult even for those who did not purchase when prices were at their peak.'

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Posted about this one at the start of the year.  Coming up to one year on the market. Was actually listed at 999,995 last November. Dropped it 100k after 3 months. Seems they aren't going to budge on the price. I guess they are waiting for the right buyer :lol:

http://www.rightmove.co.uk/property-for-sale/find.html?locationIdentifier=POSTCODE^1245928&insId=1&googleAnalyticsChannel=buying

bought for 440k in 2011. Added extension and some twigs and bobs your uncle - million quid house. 

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Got a funny email this morning:

Sir/Madam,

 

I am conducting an investigation into tenders awarded by staff employed by Barratt development PLC and in particular members of staff from the three London offices.

 

As a result of reviewing a large amount of tenders I have found that your company has submitted tenders that I need to verify as genuine and that the figures in the documents have not been changed.

 

Would it be possible to visit your office and talk to someone about these tenders?

 

From Met :)

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Not too surprising to anyone in London given how London agents and sales have been over the last year, but still a bit eye opening just how much London has slowed.

Throw rising interest rates in and is hard to see Sales picking up any time soon..

http://www.propertyindustryeye.com/we-are-just-not-seeing-sales-un-named-london-agent-tells-reuters/

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20 minutes ago, london_thirtythree said:

Not too surprising to anyone in London given how London agents and sales have been over the last year, but still a bit eye opening just how much London has slowed.

Throw rising interest rates in and is hard to see Sales picking up any time soon..

http://www.propertyindustryeye.com/we-are-just-not-seeing-sales-un-named-london-agent-tells-reuters/

Very positive.....pay back time.;)

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On 06/10/2017 at 7:48 PM, hp72 said:

Good point made in this article that the sales figures reported recently are from mortgage applications and a sales process instigated before recent sentiment had changed.

http://citywire.co.uk/wealth-manager/news/are-the-foundations-of-london-property-finally-crumbling/a1055849

~SNIP~

‘Prices between £5 million and £10 million were down 3.7% in the year to August 2017 compared to a decline of 5.4% across the whole [prime central London] market, and a drop of 6.7% between £1 million and £2 million.

The last time there was a similar outperformance was in the second half of 2009, during the initial stages of the global financial crisis when the safe-haven appeal of the prime London residential market rose strongly.’

~SNIP~

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Quote

 

More signs of wavering London house prices as UK sales demand falls

The number of new buyers and sales in the housing market fell again in September, with signs of sharp falls in demand in London. A net balance of 20 per cent of surveyors said they had noticed a fall in demand during the month. In pricier regions such as London affordability is one of the main concerns, according to Simon Rubinsohn, Rics chief economist. The “stark divergence” across the country amid wavering demand for houses in London is partly “a reflection of affordability constraints hitting the higher-priced segments of the market”, said Rubinsohn.

London and the South East saw the sharpest decline in sales. The balance of surveyors reporting increasing prices in London is the lowest of any region, remaining in “firmly negative” territory. City AM

 

You know the Brexit effect.

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Property pundit forecasts redundancies and closures as pain in London market goes on

http://www.propertyindustryeye.com/buying-agent-forecasts-redundancies-and-closures-as-pain-in-london-market-goes-on/

Oct 12th

Buying agent and property pundit Henry Pryor has predicted “significant” redundancies and branch closures in the London market. He said many agents are “on their knees”.

Separately, in a gloomy report, a central London agent has said that the Government will have to address the woes of the housing market in the capital.

Peter Wetherell, of Mayfair agent Wetherell, said that the luxury market is currently dogged by “hesitation and anxiety”.

He said asking prices in London are already down by over 3% this year, and are 15% lower than three years ago.

Asking prices are being cut as Stamp Duty increases take their toll. He cited the case of a property previously on at over £1m which has had its asking price slashed by 50%.

This is a property in South Kensington first advertised in May at over £1.2m and now on the market at £685,000 with Foxtons.

Wetherell said that transactions are down and the number of homes taken off the market because they have failed to sell has grown.

However, he said the economic uncertainty is currently creating “rare opportunities” for buyers, but added that they needed encouragement.

Wetherell said: “Uncertainty and loss of market share due to Brexit will place the Government under huge pressure to cut corporation tax, cut income tax and slash Stamp Duty.

“All these measures will be needed to keep London competitive so bold investors could now reap future rewards.”

Yesterday, Pryor tweeted: “We’re going to see some significant redundancies and some well known brands closing down in London at this rate.”

Pryor told EYE: “Many agents I speak to are on their knees.

“There is a market but it’s not big enough to support the number of mouths that need to be fed. It’s pretty bleak for many.”

 

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