March 2007 Archive
Friday, March 30, 2007 
Was this the moment the birth of BTL
Telegraph: Revealed: Brown's pension grab secret
Gordon Brown was warned explicitly that he would cause the death of the final salary pension scheme and cost companies and individuals billions of pounds when he took the knife to the pension system in his first Budget.
More inflation [they tried to hide from news desks!]
Media Newswire: Don't ignore heavy thud of water bills on doormat
Water and sewerage bill increases take effect this weekend. Consumers face an average water bill rise of £20 ( or 7% ) from Sunday ( 1 April). A range of 5.7% increase at Severn Trent to a 10.1% rise for South West Water customers.
Inflation in US food prices........yet more evidence of the US's inflation problem
Breibart: Milk Prices Expected to Rise 9 Percent
Milk prices to go up by 9% in the US because of higher fuel costs and higher animal feed costs. But it's OK because the US doesn't have an inflation problem! (Yeah........right!)
We'll have it worse here in the UK. Much worse.
Boston Herald: ‘Going up and up’: Expert: No clear end to wave of foreclosures
Bay State mortgage foreclosures have hit a record high for the second straight month, and a top market watcher warns problems will “continue at astronomical levels well into 2007.”
Search actual house prices in your area
Useful link: www.houseprices.co.uk
Perhaps the second major driver for the current property bubble (after cheap credit) is the lack of transparency of this market. Professional sellers (the agents) have a very easy task convincing uninformed buyers. I wonder how many people actually check recent transactions in the same neighbourood or even the purchase prices of the same house by the previous owners (... could the "envy factor" help keeping prices down?). This site is also user friendly... have fun!
Clock ticking for landlords
Firstrung: One week left to prepare for tenancy deposit protection
Landlords who take deposits from their tenants under an assured shorthold tenancy agreement must belong to a tenancy deposit protection (TDP) scheme from 6th April 2007 or risk being taken to court and fined, says the National Association of Estate Agents (NAEA).
RICS predicts April rate rise
Firstrung: Another interest rate hike is likely despite uncertainty over inflation picture - RICS
Another rate hike is likely despite uncertainty over inflation picture.. Although inflation is likely to fall during the next six months, and wage rises have remained subdued, RICS still expect interest rates to rise to 5.5% in May. While there remains uncertainty over the prospects for price changes in the UK in 2008 and beyond, the fear of higher inflationary pressure from abroad and increased price setting power of firms at home, will convince policy makers that interest rates need to rise one more time.
Dorothy? Kansas? Bye Bye?
Rense.com: Operation Bite - April 6 Sneak Attack By US Forces On Iran Planned - Russian Military Sources Warn
This will drive up real "you can feel it now" inflation in days. For those of you pesky kids not old enough to remember the 1970s, this will go hard on all of us in the West.
Invasion imminent.....
IHT,com: Iran planning to stop using U.S. dollar to price oil, central bank governor says
KUALA LUMPUR, Malaysia: Iran is planning to stop using the U.S. dollar to price oil, with less than half of its oil income now paid in the U.S. currency, Iran's central bank governor said. "That's the plan for the future, we are working on that," Governor Ebrahim Sheibany said in an interview with Zawya Dow Jones News Service late Tuesday when asked if Iran was planning to stop pricing oil in dollars. He was speaking on the sidelines of an Islamic finance forum in Kuala Lumpur, Malaysia's largest city.
New book reviewed
Bull not bull: Social Cycles, Depression and Revolution (Part II)
A review of a new book predicting a new golden age lies ahead.
Unfortunately we have to go through a depression and revolution to get there.
Oil prices rise on back of kidnapped British sailors in Iran and French oil refinery strike
CNBC: Oil Above $66 on Iran Fears, French Strike
Help. I really am struggling to understand this. Let me see if I have got things straight:- 1) Oil/energy prices are rising 2) Food prices are rising 3) Chinese prices are rising (forcing their recent interest rate rise) 4) Housing costs are still rising 5) Salaries & mark-ups are rising 6) Consumers are spending like its going out of fashion 7) Money supply swelling at double digit level .............but we don't have a global inflation problem? - I'm really confused!
Think we're not in for the mother of all crashes? Buy this book now
Amazon.co.uk: Manias, Panics, and Crashes: A History of Financial Crises
Manias, Panics, and Crashes, Fifth Edition is a scholarly and entertaining account of the way that mismanagement of money and credit has led to financial explosions over the centuries. Covering such topics as the history and anatomy of crises, speculative manias, and the lender of last resort, this book has been hailed as "a true classic . . . both timely and timeless." In this new, updated Fifth Edition, Kindleberger and Aliber expand upon the ideas presented in the previous edition, and include two new chapters on the real estate price bubble that occurred in Norway, Sweden, and Finland at the end of the 1980s, and the three asset price bubbles that occurred between 1985 and 2000 in Japan and other Asian countries.
Evidence of US inflation keeps on coming in.......
Bloomberg: U.S. Personal Spending Rose 0.6%; Core Prices Up 0.3%
Key US inflation indicator comes at DOUBLE forecasted level. But it's OK, because the US doesn't have an inflation problem. (Yeah.... right!)
UK buy-to-let investors reaping a good return
999 Today: UK is second best for buy to let
According to the Assetz Property Investment Tracker, UK buy-to-let investors are enjoying a 63% return in cash investment. Poland leads the table at 165% with Bulgaria in third position at 54%. The managing director of Assetz predicts a growing demand for buy-to-let properties in the next few years.
Fiscal impact of falling housing market
Bloomberg: Housing Slump Erodes Budget Gains From Florida to California
States in the US are curtailing spending or increasing deficit spending as real estate-based tax revenues declines.
20% of UK landlords want more than one buy-to-let property
Houseladder.co.uk: One in five landowners seek multiple properties
20% of UK landlords want to own more than one buy-to-let property according to Landlord Mortgages. The majority, however, see one investment property as sufficient to provide a nest egg for retirement. The UK buy-to-let market is second only to Poland in terms of profitability.
Very interesting - Industry re-positioning itself...
Reuters: Gleeson downsizes with property sell-off
British construction company M.J. Gleeson Group Plc (GLE.L: Quote, Profile , Research), having trimmed 80 percent of its workforce, said on Friday it will exit the commercial property business in its efforts to remake itself. He said it was a good time to exit commercial property, as the company believed the market had peaked and it has about 30 million pounds in developments to sell to investors.
Will UK housing market go the same way as the US?
Assetz News: Can UK property avoid American humble pie?
Worries abound as to whether the UK market will experience the same crash as has hit America recently. Mervyn King is confident that the UK market is sufficiently robust to stay strong although other experts disagree.
There will be more of these "failures" as our banking system collapses
FT.com: Banking glitch delays salaries
We used to read about teachers, government workers, nurses and the like not being paid in former Soviet republics or in tinpot dictatorships. Now we are feeling it. Welcome to Bankrupt Britain 2007.
Why UK interest rates will rise by June
MoneyWeek article: Why UK interest rates will rise by June
News of strong UK retail sales and solid mortgage lending came despite reports earlier this week that consumers' disposable income was squeezed harder last year than for more than 20 years. On top of this, oil prices are heading back to uncomfortably high levels, defying continued forecasts for a decline... All of this adds up to another interest rate rise from the Bank of England's Monetary Policy Committee either next week, or in May.
Ben Bernanke in the poop?
Bloomberg: Fed Risks Moral Hazard as Housing Market Melts: Mark Gilbert
The hangover from that borrowing binge is beginning to hurt. Evidence is building that the U.S. economy is slowing sufficiently to warrant a soothing reduction in interest rates from the Federal Reserve. That poses an interesting dilemma for Fed Chairman Ben Bernanke. Cut too soon, and he will stand accused of ignoring inflation in an attempt to rescue the housing market. Leave it too late, and he risks tainting his second anniversary at the helm of the world's biggest economy by overseeing a recession.
Heading towards $70 again!!!
BBC: Iran concerns push oil above $66
Oil prices rose to new six month highs above $65 a barrel on fears of a clash between Western forces and Iran. Light sweet crude jumped by $1.95 to settle at $66.03 in the US. In the UK Brent crude rose $2.10 to $67.88.
Crude Price Rises
BBC: Crude Prices Rising Nicely
Crude prices rising nicely. Higher interest rates soon perhaps, to stave off inflation?
Thursday, March 29, 2007
It's all looking good for my savings!
Reuters: Mortgage, sales jump boost chance of rate rise
A surge in retail sales and an unexpectedly big rise in mortgage lending suggest three interest rate hikes since August have failed to curb consumer spending and make another rise look all the more imminent.
Recent FTBs not as 'at risk' as other borrowers
Firstrung: First time buyers not opting for interest only mortgages- CML
The length of mortgage terms has increased in some cases and, over a number of years, there has been an increased in take up of loans classified as interest-only. These remain more popular with movers, rather than first-time buyers. There has also been greater use of affordability models based on ability to meet payments, rather than a simple loan to earnings ratio. Despite being stretched, the vast majority of recent first-time buyers are not at risk of an imminent rise in loan payments. The CML's data reveals that the share of first-time buyers taking out fixed rate mortgages has been around 80% in the last eighteen months, and was at 85% at the start of this year.
Property prices cooling
Fool News Wire: House prices start to slow
Figures from the Nationwide show that property prices are slowing down due to the three rises in interest rates since last Aug and the expectation of further increases. Nationwide's chief economist predicts, however, that the market in the short term will remain "fairly firm".
Sutton house prices rocketing
Wimbledon Guardian: House prices rise sharply
Property prices in Sutton rose by 3.5% last month as buyers are forced further out of London for economic reasons. Sutton has excellent schools, good transport links to central London and a good variety of properties. The increase, however, is not welcome for first-time buyers who are finding it hard to get on to the properrty ladder.
Wait till you see what the "real" rate of inflation is
Ludwig Von Mises (LVM) Institute: Radioactive Money
Because of Iran's great oil wealth, it has been able, thus far, to stave off a hyperinflationary blow-off. Other countries have not been so lucky. Zimbabwe, today's poster child of hyperinflation, has collapsed into economic destitution, its population suffering from the outbreak of social diseases as well as from slow starvation. And, Zimbabwe's inflation has been modest when compared to other recent hyperinflations. In the chart below, I track the exchange rates (to the US dollar) of four currencies that recently went through hyperinflations, Argentina, Brazil, Yugoslavia and Zimbabwe. As you can see, the hyperinflation in Zimbabwe is just getting underway.
Property prices up in England and Wales
www.realestatetv.com: House prices rise across England and Wales
Property prices in England and Wales rose by 1% in Feb, bringing the average house price up to £177,099, an increase of 8.5% in the last year. London's prices have risen by 11.3% in the last 12 months with terraced houses having had the largest increase at 10%.
Why Soft Landings are Impossible in Property Booms
University College Dublin: Irish House Prices: Gliding into the Abyss?
Academic Economist reviews property booms in recent history and explains why the soft landings are the stuff of fantasy.
Great article on money supply growth
Market Oracle: Parabolic Money Supply Growth - The End of Money
Money supply growth has gone parabolic
It took us from 1620 until 1974 to create the first $1 trillion of US money stock. But it only took 10 months to create the most recent $1 trillion and I don't recall seeing an entire continent's worth of factories, schools or bridges built during that time.
Household debt has doubled in only 6 years.
Total credit market debt (that's everything) was about $5 trillion in 1975, has increased by $5 trillion in just 2 years, and now stands at over $51 trillion.
The wealth gap between the super-wealthy and everybody else is widening at a furious pace
Growth slowing Mervin? Really?
Reuters: Mortgage lending growth picks up unexpectedly
LONDON (Reuters) - Mortgage lending growth accelerated unexpectedly in February and home loan approvals also beat forecasts, suggesting the housing market is holding up despite three interest rate rises since last August.
If this is not sub-prime lending... !?
Firstrung: New FTB Cashback Mortgage launched by Co-Op
"As house prices have continued to rise it is important that the lifeblood of the market - First Time Buyers - are given extra help to gain that all important first footing on the ladder... As a responsible lender the Co-operative Bank does not impose costly Higher Lending Charges (HLCs) on borrowers who wish to borrow more than 95 per cent of the value of the property"
France joins Ireland with falling prices
The Telegraph: French housing bubble set to burst
The french property market is much less overheated than most other EU countries.
The ratio of household debt to disposable income in France is a modest 65pc, compared with 115pc in Spain, 146pc in Britain, 171pc in Holland, and 190pc in Ireland.
The markets are pricing in another euro IR rise in June
Another example of VI spin!
Reuters: UK Feb mortgage lending growth picks up unexpectedly
Mortgage numbers look good when compared to expected numbers rather than last year's! British mortgage lending growth accelerated unexpectedly in February and home loan approvals also beat forecasts, suggesting the housing market is holding up despite three interest rate rises since last August. The Bank of England said on Thursday that mortgage lending rose by 10.256 billion pounds in February, up from 9.520 billion the month before and stronger than forecasts for a 9.4 billion pound rise. Mortgage approvals -- a leading indicator of house prices -- were also higher than expected at 119,000 last month, against forecasts for an easing to 117,000 and the same as January.
Merv plays to the stalls!!
FT Online: Bank governor sees housing demand slowing at last
The housing market is at last slowing, Mervyn King, Bank of England governor, told MPs yesterday.
This ole house is a-gettin' shaky
TheTimesOnline: Slow growth sparks fears that housing market has peaked
To Glorious Sunshine: This ole house once knew his children This ole house once knew his wife This ole house was home and comfort As we saw the prices rise This old house once rang with laughter This old house heard many shouts Now he trembles in the darkness When the REPOSSESSION word comes out ALL TOGETHER NOW Ain't a-gonna need this house no longer Ain't a-gonna need this house no more Ain't got time to fix the shingles Ain't got time to fix the floor Ain't got time to oil the hinges Nor to mend the windowpane Ain't a-gonna need this house no longer He's a-gettin' ready to meet the saints
US Markets Fall because Bernanke is Pessimistic on US Economy
CNN: Stocks slump on economic woes
US Markets Fall because Bernanke is Pessimistic on US Economy
Irish property market & economy grind to a halt
Irish Times: Economy slows down as housing, exports decline
Further evidence that the Irish property market (and economy generally) is scr@$#d!
Wednesday, March 28, 2007
UK Wealth Gap Widens
Channel 4 News: More living in absolute poverty
The divide between rich and poor is widening, with the number of people living in absolute poverty up by 357,000 last year. The Institute for Fiscal Studies (IFS) showed that the UK's wealth gap increased last year - with the rich getting richer while the poorest fifth saw their incomes fall. It is also revealed that there are currently around 7.4 million individuals now living in absolute poverty in the UK after housing costs were factored in, up from 7.1 million in 2005/06.
UK Wealth Gap Widens
Channel 4 News: More living in absolute poverty
The divide between rich and poor is widening, with the number of people living in absolute poverty up by 357,000 last year. The Institute for Fiscal Studies (IFS) showed that the UK's wealth gap increased last year - with the rich getting richer while the poorest fifth saw their incomes fall. It is also revealed that there are currently around 7.4 million individuals now living in absolute poverty in the UK after housing costs were factored in, up from 7.1 million in 2005/06.
Senior guy at Citibank comments on current global imbalances
Financial Times: A market correction is coming, this time for real
Interconnected world, hedge funds etc. - global imbalances - necessitates greater prudence in lending and investing.
Poll shows that sentiment is wobbling
Guardian: Has the house price bubble finally burst?
Arguably the UK housing market is not sustained by fundamentals but by irrationality (and cheap credit). If the market sentiment starts changing...
Global Stocks Markets Drop on Bernanke's Testimony
CNBC: Stocks Drop Sharply On Fed Chairman Bernanke's Comments
I told you it was going to be a choppy week! These markets are a knife-edge. Smart money knows that asset prices are way too high. But these is a lot of dumb money looking for a home. Result: volatility. Bernanke sees downturn in property "could be more severe than we expect". That's as near as these guys get to "it's going to crash". He also said "core inflation is above the level conducive to sustained growth". Translation: "We have an inflation problem". He also talked about wage inflation and rising mark-ups. Their problem emanates from the same underlying cause as ours: too much credit. We seem to develop identical symptoms but only after a lag of a few months.
BTL credit dependency
Home.co.uk News: Landlords set store by mortgage advisers
This VI inspired article shows how completely dependent Buy-To-Let Landlords are on the supply of credit. When the deals dry up, as they eventually will, thousands of these investors will be in big trouble.
Distressed property company looking for buyers.
Gumtree.com: DISTRESS SELLER LOOKING FOR A QUICK SALE
Not strictly a news story but I could resist sharing this with you - look what I found on Gumtree.com: Distressed property company looking for buyers. (I have to admit, while I do sympathise with those employed in that firm, this did bring a smile to my face). I think the internet is going to make the coming HPC different from any in history.
UK: When the tide goes out
The Economist: The trouble with the housing market
Nice picture. Thinking of framing it, as a reminder of the turning point. Page 36: When the tide goes out: Rising house prices have hidden a multitude of sins Pages 87-89: Crack in the facade £3.60 well spent.
UK: When the tide goes out
The Economist: The trouble with the housing market
Nice picture. Thinking of framing it, as a reminder of the turning point. Page 36: When the tide goes out: Rising house prices have hidden a multitude of sins Pages 87-89: Crack in the facade £3.60 well spent.
Irish property market slowing down!
RTE News: Planning figure shows property slowdown
Evidence that Irish property market is slowing fast. It matter to us for 2 reasons. First, part of the global phenomenon of credit bloated house prices leading to inevitable bust. Second, the amount of Irish money that has flowed into UK residential property in the last few years. More than anyone else, the Irish have convinced themselves that rising prices are an intrinsic part of houses. If these guys have to pull out money from the UK to shore up failing investment at home, things could get interesting.
Think I will buy two!
Metro: London Flat sells for £100 Million
Struggling to find the first foot on the property ladder, why not buy a flat in London, great location!
The tide turns on the reporting of housing market
Daily Express: INTEREST RATES TO GO UP AGAIN
"MILLIONS of households were put on red alert yesterday for another round of crippling rises in home loans." As I've long predicted, once the gloom becomes a bigger seller than the boom, the tabloids will start to sing our song...
Economic growth slowing? Moi?
BBC "News": UK economic growth revised down
"The ONS added that service sector growth accelerated by 0.9% during the period, while business and finance sector output grew by 1%." Growth "accelerated" 0.9%? "Grew" by 1%? Wooah steady on! Thanks for the impartial and unbiased summary, BBC.
Lenders reporting shortfalls after repossession
Firstrung: Nearly half of lenders have reported an increase in shortfalls after sale of property
Up to half of lenders have reported an increase in shortfalls after sales of property, a survey by litigation specialists Moore & Blatch reveals. These shortfalls become apparent when Lenders sell property, usually at auction, having had to repossess due to client payment difficulties.
Still reckon it started Nov 2006 when rates reached 5%
Firstrung: House prices cool in March - Nationwide
Commenting on the figures Fionnuala Earley, Nationwide's Chief Economist, said: "The housing market showed further signs of cooling during March. The price of a typical house increased by 0.4% during the month, bringing the annual rate of house price inflation back into single digits at 9.3%. The price of a typical property in the UK is now £177,083, £15,000 higher than at this time last year. This is the equivalent of a monthly rise of £1,250 per month or £41 per day".
More rates rises to come
www.theherald.co.uk: King leaves base rate trapdoor open
Bank of England governor Mervyn King yesterday left the door wide open for another rise in UK interest rates when he and his Monetary Policy Committee colleagues testified before the Treasury Select Committee. King hammered home his view that the risks to inflation two years out remained to the "upside". He said the MPC was "concerned about" UK firms' surprisingly high confidence about pushing through price rises.
House price growth tailing off
guardian.co.uk: House price growth tailing off
Despite showing a degree of buoyancy over the last few months, Nationwide said the underlying trend indicated a softening property market in the face of recent interest rate rises. Mortgage approvals and buyer inquiries at estate agents have weakened since the start of the year, it noted.
Debate: Homes or Investments?
BBC News: Head to head: Property or pension?
So should people forget about saving in a personal pension fund and just put their faith in bricks and mortar instead?
There 'May' be trouble ahead
Daily Mail: Governor warns of house price slowdown and rate rise
Repeat mostly of earlier posting regarding Mervyn Kings comments about the economy and the signs that house price growth is starting to slow - indicating that another rate rise is expected in May, with a slim possibility it could be April, as inflation still seems to be running high.
region by region fluctuations
DQNews: California Home Sale Price Medians by City
Facinating to see just how regions, if not surburbs vary. But the general theme is down. Also shows how misleading averages can be and the huge effect London prices have on the national average house prices that the mainstream press so often love to quote.
Tuesday, March 27, 2007
Thou doth protest too much Mr 'Helicopter' Bernanke
Toronto Star: U.S. could withstand effects of debt sale: Bernanke
All house prices (and for that matter any asset prices) depend largely on the amount of money supply. Ben Bernanke can print all he wants, but unless he has more weaponry than the rest of the world combined (which many Americans would like to believe is still true - but isn't) - he cannot force anyone to accept his overvalued paper as payment any longer. In an nutshell, the USA is completely finished and with it, the UK also. There are a lot of nations we wronged (not even counting slavery) who are waiting to give us a good kicking. What better way to start than with a House Price Crash to end all House Price Crashes?
Who do you think you are kidding Mr Dollar.....?
Scotsman: China shifts to euros for Iran oil
Oh my, oh my. Looks like this is the final act after all. What do you think our inflation rate will be once the USD backed GBP collapses? 20%, 30% 80% p.a.?
Is that a sneer behind the Budget Box?
eBay: Gordon Browns 2p TAX 'CUT'
Gordon's 2p tax cut being auctioned on eBay!
The Canary in the Coal mine?
Bloomberg: Lennar's Profit Falls 73% as U.S. Home Demand Wanes
The US' largest homebuilder reported an earnings drop of 73% for Q1 '07 compared to Q1 '06: $68.6 million, or 43 cents a share, from $258.1 million or $1.58, a year earlier. They are now calling this the "biggest drop in U.S. home sales since 1990". And what did we have back in the '90s in the UK? But even more worrying is the inventory value of their unsold homes fell 51%! 3.45 billion from $7.1 billion. Others must now surely fall... is it pouring yet?!
Child Poverty Linked to Housing Costs
BBC News: More UK children live in poverty
Interesting article that subtly links child poverty to income after housing costs and charts it's recent rise with 3.6 million children living in relative poverty in the UK.
What will this do to oil prices?
MSNBC: U.S. launches show of force in Persian Gulf
The U.S. Navy on Tuesday began its largest demonstration of force in the Persian Gulf since the 2003 invasion of Iraq, led by a pair of aircraft carriers and backed by warplanes flying simulated attack maneuvers off the coast of Iran.
Dorothy? Kansas? Bye Bye?
Al Jazeera: Gulf economies to 'drop the dollar'
Gulf economies will move away from a dollar currency peg and shift foreign exchange reserves away from dollar to other currencies, including the Chinese yuan, the chief executive of Dubai International Financial Centre (DIFC) has said.
King damps rate rise speculation
Guardian: King damps rate rise speculation
Speculation of a further interest rate rise in the coming months was dampned today after the Bank of England governor Mervyn King said that the UK housing market was starting to slow down and that inflation would return to target in two years. What is he going on about the market isn't slowing down, he just wants to keep the boom going.
King also refused to say that house prices in the UK are over-valued and argued that much of the rise was perfectly understandable even though they appear high relative to earnings.
Forbes: BoE's King says impact of modest fall in UK house prices will be limited
We are all screwed King has said he will support house prices if they start to dip: The problem would be 'much more severe' if large falls materialise, though he stressed that the central bank would take offsetting action in the event that the decline came as a result of an external shock.
Oh dear, more bad news...
Bloomberg: S&P/Case-Shiller Home Prices Fell 0.2% in January, Index Shows
March 27 (Bloomberg) -- The price of homes in 20 U.S. metropolitan areas fell in January for the first time in seven years, a private survey showed today. Home values dropped 0.2 percent last month from January 2006, according to the S&P/Case-Shiller home-price index. The decrease was the first since the group started the index in January 2001.
Stop moaning, just save for ten years, then buy a studio 'apartment'..
Firstrung: First time buyers need on average a £38,000 deposit - Moneyextra
Moneyextra.com has revealed that, according to their mortgage approval data, first-time buyers (FTBs) are having to save an average of £37,632 for a deposit. First time buyers are putting down ever larger deposits. Robin Amlôt of Moneyextra: "Our analysis shows the average mortgage deposit being put down by first time buyers in February 2007 is almost 11 per cent higher than a year ago at an eye-watering £37,632.
Will supply and demand dynamic turn on buy-to-letters?
MoneyWeek: Could the UK property market could the way of the US?
There’s safety in numbers, so the saying goes. Maybe that’s why UK house builders are clamouring to hook up with each other like there’s no tomorrow. George Wimpey and Taylor Woodrow are headed for a £5.4bn merger - though many believe that FTSE 100 house builder Persimmon may gatecrash the party. Things aren't getting any better in the US property market and, back in the UK, the demand dynamic propping up the market isn't as strong as people think.
Raining stones in the mortgage market?
Firstrung: Mortgage approvals weaken in the face of rising costs and prices
Take a look at some of these figures; it has taken just 4 years for the average loan size to go from 100K to 140K, amount lent - 16.6bil in Jan down to 14.9 in Feb (bearing in mind Dec/Jan are the slowest months traditionally). When compared to February 2006, house purchase approvals were down 5% by number though up 8% by value; remortgaging approvals were up 6% by number and up 22% by value; and approvals for equity withdrawal were unchanged by number but 10% higher by value. nice to see the BBA blame it on lack of housing stock =;¬)
Monday, March 26, 2007
Gerald Ronson, one of the property industry’s most canny survivors, has warned that the industry is heading for a correction
FT: Ronson warns property investors
Mr Ronson, chief executive of private company Heron International, told guests at his annual lunch at London’s Savoy hotel that “there can only be one ending” to the current hot property market. “We will look back and talk about how obvious the signs were,” said the tycoon, whose business went bust in the early 1990s recession – but who has since rebuilt himself into a successful real estate player
£7 Billion Turnover Makes Wimpey No.1 in New Build
Times Online: Wimpey creates UK housing giant
Shares rise on £6 Billion Deal but how expensive will this deal be if the UK housing market has already peaked.
Smith's still not convinced about the US housing market
EconomicsUK: US housing - not dead yet
What will it take to convince this guy. The credit cycle is turning and it looks like the US will be the first economy that will be going down.
February's inventories of unsold US houses at a 16-year high
Market watch: US New-home sales fall to seven-year low
The words "shaped" and "pair" (but not necessarily in that order) spring to mind
Flashback: 1977 in the UK
Time Magazine: Time to Be Bullish on Britain?
The money is beginning to roll in at just the right time; after three nightmarish years, Britain is finally getting its economy in order. Much of the credit goes to the International Monetary Fund, which a year ago made available $3.9 billion in loan money to Britain in return for a severe austerity program. The IMF loan prevented a collapse of sterling. A long period of voluntary wage restraint, accepted by Britain's powerful trade unions at the Labor government's prompting, has reduced inflation from a Latin American annual rate of almost 27% in August 1975 to a still high 13% now.
Watch the Stock Markets Drop around the Globe!
CNBC: Drop in New [US] Home Sales Sparks Selloff in Stocks
Another US housing figure falls very far short of expectations. The stock markets, which have been bouyed up by a lot of stupid money which thinks it is buying in the dips, re-evaluate downwards. I reckon if we can breach the lows touched in previous weeks, we could get a stock market crash.
Here comes the first really bad news...
Bloomberg: New-Home Sales in U.S. Fell 3.9% to 848,000 Pace in February
Purchases declined 3.9 percent to an annual pace of 848,000 last month from a revised 882,000 rate in January that was lower than previously reported, the Commerce Department said today in Washington. The supply of unsold homes at the current sales pace rose to the highest in 16 years. Economists had forecast new home sales would rise to a 985,000 rate from a previously reported 937,000 for January, according to the median of 63 projections in a Bloomberg News survey. D'oh!
Ooops, Gordon your legacy is showing again ... !
Times Online: Home ownership slips into reverse for the first time in half a century
Under Gordon Brown's stewardship, the MPC deliberately started the house price boom, now it's consequences have come home to roost. “It is unprecedented to see home ownership decline in Britain and a sad commentary on Labour’s failure to spread prosperity across society,” Mr Gove said. “It is particularly unfortunate that Gordon Brown’s Budget made home ownership more difficult and did nothing to help first-time buyers.”
Labour 1st govt ever to cause decline in home ownership
BBC News: Owner occupation falls in England
The number of owner-occupied homes in England has fallen for the first time since official records began in 1939. There were 14.62 million owner occupied homes in England last year, according to the Department for Communities and Local Government (DCLG). That was 25,000 fewer than in 2005, because of a drop in the number of people buying a home with a mortgage.
BBC Economist admits property market is inflated
The Times: Property prices
Evan Davis corrects The Times for wrongly quoting his opinion, and doubts "investing" in property is a good bet anymore. Please see also the bullish caption to the article, which otherwise conveys some balanced opinions, http://property.timesonline.co.uk/tol/life_and_style/property/article1554085.ece One wonders if The Times journalist had in fact understood Davis' points
IR rise now guaranteed by May
The Telegraph: Sterling to smash $2, says ABN
The outlook for the next 12 month's:
Sterling to rise strongly as inflation and IR rise and economy overheats
Sterling to crash badly whern carry trade ends and economy slows
This all ties in with a crash and economic downturn in 2008.
House Prices Continue to Rise......No End in Sight Yet!
Daily Express: HOUSE PRICES HIT NEW HIGH
More VI frontpage, cheerleading, propaganda from the Express. Not worth commenting on any further.
READ THIS!!!
Guardian: We have nothing to fear but Wall Street
It is now becoming clear that there was fraud on a pretty massive scale. There will be more mortgage lenders filing for bankruptcy and, no doubt, some class-action lawsuits.
UK subprime like in the US
Guardian: Income £517, mortgage £430. It's the new housing scam
Council house tenants are losing their homes after being targeted by mortgage companies encouraging them to borrow ridiculous amounts of money to buy their properties
Sunday, March 25, 2007
Musings on landlord type 'stuff'....
Firstrung: Tales of an accidental landlord
Finally it's done, after eight weeks of trying it's finally let. Firstly let's get one thing 'arrow straight', the editor of Firstrung has not done a volte face and finally succumbed to the 'dark side' and become a buy to let landlord...
Under 35's Mugged by Baby Boomers
New Statesman: The great generational robbery
This is what it's all about, the older generation sub-consciuosly fleecing todays youngster to fund their retirement plans. Many of you reading this will be thieves. And a good proportion of you will be victims. There is no mugging involved, but a new form of wealth exchange, which economic observers are calling generational robbery.
Subprime lender points to differences between US and UK
Reuters: 15-Mar: Kensington sees strong demand
One-step-from-the-grave Kensington bullish outlook of just 2 weeks ago: "The UK market is fundamentally different to that in the U.S., with stringent regulation and high levels of checks."
Subprime market alive and kicking?
Sunday Telegraph: 25-year mortgage for a man aged 102
So the subprime market is alive and kicking but for how much longer? I don't know whether to laugh or cry. "A 102-year-old has been granted a 25-year, £200,000 mortgage. It will run until he is 127. The pensioner, from East Sussex, is believed to be the oldest person in the UK to be granted a mortgage. The revelation was greeted with alarm by debt advisors. He faces repayments of £958 a month on the interest-only loan and intends to pay them from rental income and make money from the property's increase in value over time."
The past week in focus
Firstrung: Firstrung, the week in focus 25/03/07
What caught the eye of the Firstrung team eye during the past week? Undoubtedly Lord George's interview regarding the actions the BoE believed they had to take after 9/11...In order to avoid the imminent recession (which was already on course) becoming a global collapse, the BoE, (under the former Governor's remit) increased the money supply and lowered interest rates to stimulate consumer demand. This led to the legacy of high house prices. It's important to remember this when faced with the usual anodyne argument that a "shortgage of supply has caused house price rises", it's nosense. Speculation caused by cheap credit is the reason, tell 'em "Lord George said so".
The human cost
Yahoo News: Subprime bust forces families from homes
Excellent article combining analysis of the subprime market with a story about the Snearys, a hardworking all-American family trapped by debt. To be repeated in the UK soon.
Saturday, March 24, 2007
The U.S. subprime mortgage meltdown
CBC: The U.S. subprime mortgage meltdown
Will it spread to Canada? Would you like a mortgage that lends you more than the value of your house? Would you like it structured so that your first payments are extra low? If the mortgage weren't structured that way, would you be unable to afford the payments? Are you convinced that real estate prices will continue to rise? Do you have a poor credit history? Congratulations if you answered "Yes" to most or all of those questions! You're an ideal target for a subprime mortgage lender.
Financial Planners say house prices 'bloated'
FT Money Makeover: Go liquid for a child-friendly plan
Young professionals invested in property looking for Makeover. Planners respond - 'sell up'.
The Budget missed opportunity
Guardian: House of Cards
Awareness is brewing... a well-written piece that hits all the right points. Sad to conclude that New Labour's biggest economic contribution has been to "rent-seeking". In 1997 Gordon Brown said, "I am determined that as a country we never return to the instability, speculation, and negative equity that characterised the housing market in the 1980s and 1990s." To address the property madness gripping the UK, Gordon Brown needed to do several things in his budget earlier this week. Restricting the money supply, forcing mortgage providers to adopt more stringent lending criteria, capital gains taxes on speculative property investments as a powerful incentive to invest in alternative forms of savings
Will this happen when we get our HPC?
BBC News: US house sales jump as prices dip
US existing home sales rose at their fastest rate since March 2004 last month, despite fears of a slowdown in the property market. Sales of existing homes rose 3.9% in February driven by a surge in activity in the North East, the National Association of Realtors (NAR) said.
The warnings of investing in property
BBC News: Buy-to-let pitfalls
Buy-to-let investments have become increasingly popular in recent years, but some observers warn that the market is on the wane. A mortgage expert outlines the possible drawbacks of buy-to-let and gives some handy investment hints.
property will continue to produce far greater returns than other forms of investments such as pension funds and the stock market
Landlord Expert: UK property: To buy or not to buy?
Please read the article, it is a true gem! There are statements like "maximising the power of gearing (but without overstretching yourself)" and "property will continue to produce far greater returns than other forms of investments such as pension funds and the stock market"
Friday, March 23, 2007
Higher oil prices will impact such things as lending rates
BBC News: Oil prices leap on Gulf incident
"This sort of incident, and subsequent mishandling, is just the sort of thing that fuels concerns about a global conflagration over oil," said Fimat analyst John Kilduff. We live in a highly connected world. There are those who think everything is nicely compartmentalised, but the world is more like a vast, highly complex differential equation with hundreds of partial derivatives which affect each other. Oil Prices going up, may cause the failure of a large firm, or force a large hedge fund to unwind positions in other areas. These "unexpected" events can shock entire systems and thus lending costs. "Spreads" will widen (meaning that lenders have to charge more for loans above the rate they borrow at), leading to consequences such as a fall in house prices.
UK sub-prime lender feeling the pinch
BBC News: Sub-prime lender's profit warning
It would appear that the sub-prime mortgage business here in the UK may be starting to have problems.
Here it Comes!!!! UK Sub-Prime-LIE TO BUY outfit -in deep trouble
Guardian Newspaper Online: Chief quits as mortgage lender issues profit warning
Shares plunged at Kensington Group, the mortgage lender that focuses on customers with below-average credit ratings, after it issued a profit warning. The company also announced that chief executive John Maltby had quit the company with immediate effect.
Hometrack see HPI falling to 4% by year end
Firstrung: House price rises affect first-time buyers - Hometrack
Higher house prices and rising interest rates means that more first-time buyers than ever are struggling to go-it-alone. Their dwindling numbers casts a shadow over the future of the property market and raises doubts over the sustainability of house price growth.
Buy to let to get squeezed
Firstrung: Could buy to let suffer due to new consumer credit legislation?
Lee Tillcock, editor of business Moneyfacts commented: "The last year has seen a raft of legislation impacting on the buy-to-let sector, with more new rules and regulations still to be implemented. So far the new regulation has covered areas to protect both the landlord's and tenant's rights. However lenders and borrowers should also be aware that The Consumer Credit Act 2006 (CCA 2006) presents potentially far more serious issues when its provisions begin to take full effect next April.
fall-out in the US subprime sector
FT: Kensington Group chief to step down
Kensington provides mortgage-broking services, mortgages, and personal loans to customers in the UK, Ireland and Sweden, who do not meet the criteria for other lenders often because of poor credit history.
Calling the top? Older generation downsizing and buying smaller properties for cash
Reuters: Property price boom creates cash buyers
Almost 400,000 people who plan to buy a new home in the first half of this year will be cash buyers, after raking in thousands of pounds in the property price boom. Three million people are planning to buy a property between February and July, but 13 percent -- some 395,000 people -- say they will not need a mortgage, according to research by mortgage comparison Web site mform.co.uk.
Very good... (Bit about retrospective tax handouts to people with holiday homes abroad)
Telegraph (Rory Bremner): Gordon's 'real' budget
Very funny (in a very dark way!). Good to see mainstream entertainers latching on to the activities of these crooks.
BTL lender Kensington's profits dwindle, boss quits.
Bloomberg: Kensington CEO Maltby Quits; Net May Miss Forecasts
CEO Maltby had catered to households that refinance debt to reduce payments. Still, profit has been hurt by rising bad debts and competition from HBOS. Kensington shares dropped 23 percent.
The BBC’s economics editor tells Judith Heywood why property is still a good bet
Times Online: The house master
"Davis... reminds us that property is historially cheap because of low mortgage rates"
BOE helped UK avoid a recession
Firstrung: BOE created consumer boom to boost house prices and personal debt so that "UK Plc" could avoid recession
This article was missed off the list this week - thought I might add it now. Confirms everything we already knew - but good to read.
It's official - US is due a recession and soon!!
Market Oracle: US Recession Imminent - 2007/08?
Technical analysts find data the strongly implies a recession is on the cards for the US for 2007/08.
Fed finally recognises the problems (it's caused)
BBC: Fed acknowledges sub-prime errors
The US Federal Reserve should have been more aware of the financial risks posed by the sub-prime mortgage market, a senior Fed official has admitted.
Is this Britain's future?
New York Times: Foreclosures Force Suburbs to Fight Blight
In a sign of the spreading economic fallout of mortgage foreclosures, several suburbs of Cleveland, one of the nation’s hardest-hit cities, are spending millions of dollars to maintain vacant houses as they try to contain blight and real-estate panic.
The only way is up...
MoneyExtra: House prices unstoppable
It would take a major economic decline for house prices to fall in the foreseeable future, which is highly improbable, experts have agreed at the second annual 'Great Housing Debate', organised by financial PR firm, The Wriglesworth Consultancy. David Miles, Chief Economist at Morgan Stanley said: "Public expectations regarding house price growth are key to the market's stability. Growth would need to fall successively for a number of months before peoples' expectations, and therefore prices, were seriously impacted." Nigel Terrington, Chief Executive of Paragon Mortgages, said "A serious correction in the housing market traditionally occurs as a result of a sharp economic downturn, which looks extremely unlikely."
UK Subprime Snapped Up
reuters investing: Paragon closes 1.5 bln stg buy-to-let mortgage bond
Please could somebody explain how I can 'short' some of these bonds?
Thursday, March 22, 2007
Rising house prices have hidden a multitude of sins
The Economist: Subprime mortgages - When the tide goes out
IT SHOULD have been a warning sign to Britain's mortgage lenders, but news of the meltdown in America's subprime market (see article) has prompted only self-congratulation. With straight faces, lenders, rating agencies and investors have counted the reasons why mortgage lending in Britain is as neat and orderly as the terraced Victorian houses it often finances.
More US housing detail
The Economist: Cracks in the façade
America's riskiest mortgages are crumbling. How far will the damage spread?
Lead article this week
The Economist: The trouble with the housing market
The true cause for concern is that just as America's housing boom was part of a synchronised global binge on cheap money, its bust may be part of a global story too
Inevitably, Americans will ask what policymakers can do. It is too late to unwind monetary policy of a few years ago; cutting rates now risks compounding the error. The Fed's main worry is inflation—and rightly so.
Mortgage Crisis Deepens in USA
CNN: Mortgage crisis overwhelming credit counselors
The mortgage crisis in America is overwhelming debt counsilors on the other side of the pond. A situation soon to come to the shores soon im sure of that. Mirracle economy my ar$e.
Now the fingerpointing and scapegoating starts
InvestmentNews Daily: 'Abusive' loans fueled subprime debacle
I really wonder about all this in the UK - What will be said about A&L, Barclays, HBOS, HSBC, Northern Rock? The surge in subprime mortgage defaults was caused by “abusive” lending and fraud, the deputy comptroller of the U.S. Office of the Comptroller of the Currency told the Senate Banking Committee today.
More conflicting reports
Guardian: Fresh fears over inflationary pressures
The prospect of higher interest rates loomed larger after a leading survey today showed that the number of manufacturers expecting to raise their prices hit the highest level in nearly 12 years, sparking fresh fears over inflationary pressures in the economy.
Paragon still happy
Sky News: Buy-To-Let Stays Strong
"The credit quality of the buy-to-let portfolio remains exemplary," it said. The housing market has stayed resilient despite three Bank of England interest rate rises since August to 5.25%. ...Paragon seem happy with the outlook for BTL.
BOJ will have to raise rates - end of the carry trade
BBC News: Japan's land prices start to rise
Here is some much needed cheer as today's posts are depressing.
The major metropolitan areas of Tokyo, Nagoya and Osaka each saw significant increases.
Commercial land prices in these big cities rose by 8.9% on average, led by a 9.4% average rise in Tokyo.
The last thing that Japan needs is another property bubble. The BOJ will raise rates faster than we think.
Get the poor paying 20% tax instead of 10% and help people with holiday homes!!! NICE!
FT: Sunnier outlook for holiday home taxpayers
Hundreds of thousands of people who have bought overseas holiday homes through companies will enjoy lower income tax charges following changes flagged in Wednesday’s Budget. The move was heralded as much-needed common sense as, although these many homeowners were in theory clocking up significant income tax bills, only a minority of owners of overseas property were actually paying the tax.
The Affluenza test
Fool.co.uk: Does Wealth Make Us Worse?
There is a massive downside to our embracing of dog-eat-dog consumerism, as revealed in my latest read, Affluenza: How to Be Successful and Stay Sane by clinical psychologist Oliver James. (By the way, if you apply for an Amazon credit card and make a purchase on it, then you get a £15 Amazon gift certificate which will pay for this book with £4.21 left over.)
More data to support a rate rise in April
SKY News: High street sales climb
High Street sales bounced back more than expected last month to rise at their fastest monthly rate in more than two years. Sales volumes climbed 1.4% in February - twice as much as predicted - and the strongest monthly rate since January 2005.
Budget and E-Petitions on housing
Firstrung: The budget, never mind the first-rung check out the smoke and mirrors
It would appear that 'pips can be squeezed' in relation to; mortgage interest rates, council tax, insurance costs, holiday taxes, airport taxes, etc. without a murmur. Houses rise in price by hundreds of thousands of pounds and middle England celebrate their equitable wealth, mess with petrol prices and fuel blockades ensue. Oh, and whilst on the subject of middle England, can you guess which E-Petition is also the most popular on the number 10 site? Yes, that's right, inheritance tax abolition, which received a massive boost in the budget to be implemented by 2010. Small comfort that the Government recognises who it actually needs to vote them back in.
Standard Life job cuts in Edinburgh
BBC News: Standard Life to cut 1,000 jobs
Standard Life is to cut another 1,000 jobs as part of plans to save £100m a year by 2009. The life and pensions group, reporting its first full-year results since its stock market listing, has already scrapped 4,500 posts since 2004.
NAEA bemoans yesterday's budget
Firstrung: Budget provides little consolation for home owners - NAEA
This year's budget report has provided little consolation for home buyers and sellers as important issues such as a stamp duty and inheritance tax were skirted around by the Chancellor. The National Association of Estate Agents (NAEA) has expressed its frustration that once again little appears to have been done to help first time buyers. It does, however, welcome moves to increase energy efficiency in UK homes
The irrationality of property buyers
NY Times: NY Times Property section
broadly, US market is almost as overblown as UK market. It is argued ( reasonably well in my opinion) that this is due to the irrationality of investors who are able to speculate using the leverage provided by mortgage companies. The reasons for doing this are: greed, mass psychology, funding and fear of stock market crashes. It does seem applicable to UK market. Buy2letters are happy to accept minimal yields often less than 4 % gross because they are simply convinced that property prices are a one way bet. we'll see.
No mention of inflation - as ever
BBC: Fed holds rate unchanged at 5.25%
The US Federal Reserve has left its main interest rate unchanged at 5.25%.
House prices unstoppable say experts
About Property: House prices unstoppable say experts
House prices look set to continue to rise at an unstoppable rate for the foreseeable future, experts have said. Focusing on income multiples alone is not helpful – they must be considered instead in the context of affordability," said Michael Coogan, director general of the Council of Mortgage Lenders. He added income multiples of six or seven could be a possibility in future.
This was hidden well.. and on the day of the Budget too.. hmmm
BBC: Mis-selling is 'rife' at Barclays
A nine-month investigation by BBC reporters working undercover in a leading British bank has revealed a culture of ruthlessness and lies which will shock their customers.
What would an escalation in military hostilities do to our currency and thus credit supply
Hartford Courant: Crude Prices Rise Slightly
Remember that House Prices are a symptom of the credit / money supply in the economy. Furthermore geopolitical effects shape currency at least as much as "simple" economics. What do you think business confidence will do if an o