Sunday, Mar 04, 2007
Proof the market has topped or proof the market is superstrong?
Telegraph Online: "We've got a house to sell... don't tell anyone" by Olga Craig
I thought hard about posting this article and I even double-checked its datre to make sure it was written in 2007. What convinced me was " ... So toxic has the market become that gazumping, the great evil of the late 1980s property boom, has returned, accompanied by two newer nightmares ... " This piece portrays a frenzied and hectic market and makes a reference to the late-1980s. People are paying grossly over the odds for a house and this is portrayed as a signed of strength within the market, along the lines of "Estate Agent says 'It hasn't been like this since the 1980s and therefore the market is super strong' or words to that effect." Poor George might get depressed at this one but I see it is a sign the market has topped. Your thoughts? Will Merryn Somer-Webb be right?
16 Comments
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1. sold 2 rent 1 said...
This is the winner's curse phase of the 18 year cycle.
This phase lasts up to 2 years. If we say it began Jan 06 then it could run until Jan 08.
Housing has to be "extremely overvalued" not just "overvalued" before a crash.
The housing market seems to be following Fred Harrison’s model to the letter.
George – don’t panic – everything is as expected.
The next big checkpoint for me is the quarterly report by Lombard Street Research on the “housing affordability index”. This is due at the beginning of April and published in The Telegraph.
2. Michael said...
Every market is characterized by fear or greed. At the moment it is pure greed. Does that mean we are at a market top? That is a more tricky question - after 10 year+ of rising property prices for most people property is viewed as a long term one way bet even if they pay above the asking price. But surely this must be a ridiculous situation where normal people can not buy property anymore and the market is driven by buy to let investors in the low end and city bonuses in the high end. That does not spell long term stability. But as long as these drivers are in place combined with short supply the market will trend higher. When will it break? Whenever that is be so sure that when fear grips the market then there will be a lot of fluff in the current property prices!
3. Paddington said...
Just like the US stock market last week, margin debt was at it's highest level ever and the volatility index (VIX) was indicating very calm seas......... and then the market plummeted.
People are like lemmings although I doubt this phase with UK property will last 2 years.
I reckon we are already in meltdown mode it's just joe public doesn't realise it yet. It's like to Road Runner cartoon when he runs off a cliff and hangs in the air for a while before plunging. If you read between the lines what Bernanke is saying he has already told us the Fed is going to hyperinflate money supply to absorb the economic shock of the meltdown.
I reckon April 2007 is when the Titanic starts to tilt upwards before going straight down.
This is not 1929 or 1987, this is 2007 the start of the financial armageddon.
The good news is that what follows is freedom, real freedom.
4. Surfgatinho said...
Ah, yes. But they are talking about London, not the rest of the country
5. sirgoogle said...
Unfortunately I can't see this being resolved in London for a while - esp while credit is still historically so cheap and while Bonuses are enabling people to pay these inflated prices without having to arrange a significant mortgage.
We will have to simply wait until all the money released by easy credit and the city bonus "free cash" have burn't themselves out and been transferred to the "value" of property. I can only see the Top of the market when house prices are at levels where significant mortgages are needed again by nearly all - including the rich (and from these reports it looks like we are way off from this). Once absorbed into the "value" of a property then when the crash occurs this "value" will be lost.
The knock-on effect is that (very lucky) old folk who want to retire to the West Country (e.g. Hampshire/Dorset) will get top dollar for their London homes and can then easily afford to completely out bid all the locals for housing, thereby spreading the boom to the rest of the South.
The social malaise from this will be awful - but hey this is a free market and we cannot allow anyone to interfere with that now can we (funny that Labour have never tried to undo this biggest Thatcherite legacy - perhaps because it generates so much revenue for HMG).
Listening to the economic pundits on World Service yesterday I think that I am changing my mind about whether a rate rise will occur on 8 March. In fact after the stock market crash drop last week I suspect that property looks (for the short term) even safer than before and the "economy" is in need of a drop in interest rates to keep building the house of cards even higher.
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7. Rachel said...
it's just crazy.
8. Davros said...
Have they not heard of renting? Duh.
9. Gavin said...
I work in the city and commute within an hour to work.
There are plenty of houses here that have been on the market for months.
Thats all I need to say about this piece.
10. enuii said...
As Micheal said, "the market is driven by buy to let investors in the low end and city bonuses in the high end", I have been talikg to a chap who works for a swiss bank. I am reliably informed that the large numbers of new build flats being built are mainly being bought by overseas investors and left empty as a means of legitamising money in what is percieved to be a safe haven for such assets (the UK). This explains why so many apartment blocks are always half empty with so few for sale signs visible, these investors (many are Irish) are not particularly concerned about the return on their investment as long as it is safe and viewed as legitimate.
11. Steve said...
As the stock market continues to decline, property looks an even safer bet for investors.
Therefore more people will put their money into property causing the rate of house price inflation to increase further. A rise of between 10-15% this year looks increasingly likely.
Property is not seen as somewhere to live anymore, it is also seen as a place in which to put money and invest.
12. Steve said...
This is quite an interesting article as it shows that the mentality of house prices must increase by £1,000 a month has utterly set into the minda of the British public.
Houses prices are still rising at a very high rate despite many predictions of a slowdown.
With the stock markets crashing property in the UK looks an increasing attractive proposition, with far greater returns than with stocks and shares.
It is very unlikely that the house price market will crash. With the stock market crashing it is likely that more and more people will invest in property further fuelling a large increase in the price of property.
Interest rates are also likely to dip below 5% as the Bank of England reacts trying to prevent a recessions occuring.
Due to interest rates being lower this will then further inflate the hosuing market and it will then take off again rising at probably 15% a year.
13. dohousescrashinthewoods said...
Someone I know says that money laundering is a definite component of the market.
GB & TB fighting terrorism by inviting organised crime to prop up the economy?
14. magnifico said...
Dohouses, I liked that one! Maybe you meant it as a tongue-in-cheek crack, but I can't help but thinking that you might just hit the nail right on the head.
15. dohousescrashinthewoods said...
Paddington, interesting comment, I see a couple of points in there:
- The market is already in meltdown
- Bernake is hinting to the canny that he will hyperinflate
- A post-market economy will emerge
I agree with the first, though can't quite put my finger on it. I'd be interested to hear what made you think the second. The third is quite possible and I'd be interested to hear more.
I believe a market economy is useful, but is not perfect and probably leads, as you suggest, to loss of personal freedom (freedom is a risk and risk doesn't help in predicing or making profits, so it is systematically eradicated).
I think the market economy will not disappear, because it is effective at sorting out the material basics of life (the "what"). However, it is completely ineffective (orthogonal) to "humanity" (the "why"). The fact is that people are unhappy and the suggestion is that the market has gone too far. The rub is this: that if you have your basics in life, you have to face up to answering "why" and that is a very uncomfortable question.
"The market" has taken us from material poverty to material surplus and now probably needs to take a subsidiary place within a "human" system where it becomes an engine that provides one of the foundations rather than the goal itself.
16. dohousescrashinthewoods said...
Hi magnifico, yes, it was a bit tongue in cheek, but surely the "Best of British" in Whitehall cannot be unaware of what is going on.
Extrapolating from the "character" of the government (lying for illegal wars, accepting bribes for honours, trying to lock people up without charge for 3 months, taxing pensioners, deliberately dumbing people down to make them easier to control, mass surveillance, erosion of privacy, curtailing of freedom..) then taking money from organised crime (linked with terrorism?) in order to keep their image afloat seems a congruous step.
We may not have 1000% inflation, but I really don't see that we are different in principle from Zimbabwe.