Monday, Jun 11, 2007
ABN is a bank not a doom-monger
Mail: ABN fears world housing crash
"Soaring borrowing costs could spark a housing slump on a 'global scale', investment bank ABN Amro has warned. Families have taken on 'unsustainably large' mortgages, leaving them vulnerable to the sharp increases in bond yields and official interest rates seen in recent weeks, wrote economist Dominic White." ... how does this compare with house prices to grow to 10x salaries?!
Posted by confused76 @ 09:48 AM (352 views) Add Comment
15 Comments
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1. Mark Wadsworth said...
I had feared that the previous ABN internal memo was a spoof, it would appear that they are deadly serious about this.
My cynical chum explained that banks weren't actually too fussed about a price crash, as they have securitised a lot of home mortgages and sold them off to hedge funds (i.e. rich stupid people).
2. paul said...
"Britain is one of the most exposed markets thanks to rampant speculation over the past decade, though it is by no means alone. Claims that shortfalls in the supply of new homes will lead to an inexorable rise in UK property prices in coming decades have 'as much credibility as Britney Spears' latest comeback,' he wrote. "
Aye Carumba!
3. Orwell said...
As we lawyers like to say in Court, let us sum up.....
1. Families have taken on 'unsustainably large' mortgages...
2. Claims that shortfalls in the supply of new homes will lead to an inexorable rise in UK property prices in coming decades have 'as much credibility as Britney Spears' latest comeback...
3. 'The decline in global interest rates has now been largely reversed...
4. Rising real interest rates could result in greater economic volatility....
5. This leaves housing markets vulnerable to a correction on a global scale...
6. The degree of over-valuation is more 'severe' in Britain, Australia, Spain and Ireland...
7. A note by the bank in April found that UK residential property is 50% overvalued, whereas US houses are 25% too expensive.
Well Mr. David Smith and others...over to you to respond?
(mind you it is true that Britney could make a come back, she is C***P enough! )
4. confused76 said...
AhAhAhhhAAHHAHHHA AHHHAH!
Thanks Paul, I missed the BSpears bit! AAAAHAHAHHA! Would you prefer spending an evening with B.S. or with Professor Nickell? that may depend on the topic of the conversation I guess, but I feel I am biased toward B.S.
5. japanese uncle said...
ABN AMRO has been most consistnt in their reasonable observation about the UK housing bubble for the past 3 years, unlike their wavering colleague, Capital One (they might now wish to shave their heads like Britney, to show repentance ).
6. This comment has been removed as it was found to be in breach of our Blog Policies.
7. harold said...
It amazes me that people are still unaware as to the true scale of the housing bubble in this country. In short, it is absolutely huge. Talk of x10 salary mortgages is met by simpering Nu-Labour ministers saying we need to build a million new ("eco-friendly", ho ho) houses to meet the demand! This country's government is run either by educationally sub-normal idiots or a cynical corporatocracy. Take your pick.
8. This comment has been removed as it was found to be in breach of our Blog Policies.
9. Scott said...
Harold, by how much do you think property is overvalued? How much should an average house cost in London and Manchester and Edinburgh?
10. mrmickey said...
I agree Harold the bubble is vast, all that has happened is that it's been normalised in most peoples minds, you need to keep on pinching yourself to make sure your not dreaming.
11. Me Me Me said...
When the head of CPRE says that simply building more houses wont reduce house prices I think to myself, she needs to be taken out! [And not just to dinner]
12. Ticktock said...
"There is no future in Englands dreaming"
God Save The Queen
Sex Pistols
13. speculatorone said...
I agree mrmickey and harold. Looking at house prices you tend to think current levels are normal until you sit down and work out repayments on anything you like.
I don't know how someone who jumps on the ladder with a mortgage of 4 plus times their salary sleeps at night, I couldn't....
14. dugmug said...
I love the Britney Spears comparison!! :-)
David_2004 - you posted about the 10 times salary prediction that was put on the site earlier, saying how it "proved you right". Clearly there's a mathematical argument that says people couldn't borrow 10 times salary and afford the repayments, unless interest rates were to go considerably lower than they are presently, and stay there for 25 years or more, so the predicitions of that particular expert seems dubious at best, without any knowledge of anything other than mathematics and a mortgage calculator. Yet you gave the "predicition" so much credence you considered it absolute proof. I don't see why the expert quoted here is any less qualified or knowledgeable (and arguably has much less of a vested interest in whether housing goes up or down - the sensible person should give the most weight to the least biased commentators), so really you should comment on this article too?
15. David20040_0 said...
Dugmug I want a housing price crash, I really do, I just can't see it happening.
About a year ago there were predictions that house prices and mortgage multiples would go to 7* salary. That idea was dismissed on this site.
I predicted about a year ago that the banks and other commentators would respsond that 10* salary would be the norm.
It now seems that this happened.
The BoE has no balls at all, if it was down to some of the members rates would probably still be at 4% or less.
If there is any sign of a house price crash it is likely that the BoE will manipulate the CPI to show inlfation below 2% allowing them to drop rates dramatically and allow the housing boom to continue.
If interest rates were to drop again, which they look likely to do so next year 10* salary will become "affordable".
I would like to state that I want house prices to crash like crazy, I just don't believe they will.