Tuesday, Sep 18, 2007
Same data but different Interpretation to the BBC
Forbes: U.K. Housing Market To Crash?
If ever you wanted proof how bad the BBC's news coverage is then read the this story and compare it to the one posted below at 5:58PM.
Posted by enuii @ 09:56 PM (1127 views) Add Comment
13 Comments
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1. deepak said...
In light of the US rate cut, where investors will move there money from US$ deposits to UK£ deposits.
HPI will go up in UK because these people are going to come to UK and make money and pay not tax and increase HPI.
2. inbreda said...
that's really lateral thinking deepak.
Can you expand?
3. david20040_0 said...
So the crash in the US will continue but the UK will avert one?
4. deepak said...
inbreda, If you have a deposit account in US$ it will give you a return of around 4.75% (near the base rate)
Now if you take that money out of US$ and convert it into UK£ you can get around 6.00% without any risk as UK base rate is 5.75%.
(This is similar to japanese carry trade.)
What I also added, that more these high profile people will come to UK who will buy properties at higher price as they don't pay UK tax.
5. Spikey1 said...
Back to the original point of this blog I have emailed BBC the following
Shouldnt the following article http://news.bbc.co.uk/1/hi/business/7000598.stm have the headline 20% chance of a crash and not the misleading 10% chance of a crash which the reporter has seen fit to put as a headline?
Simon Rubinsohn is actually quoted in the article as saying there was a 20% chance of a 10% fall in London house prices over the next 12 months. No where in the article do I see the statement 10% chance within the UK?
Please explain!
6. whiteknight said...
Any chance they will invest in more productive economies?
7. alan said...
The people at the top are waiting to see what's going to happen next. I don't think they are in control.
I started looking at HPC in the expectation of seeing prices drop by 10-12% about 18months ago (yes, I got it wrong). What happened was Sub-Prime. Up to $400bn in loans is contaminated and nobody knows how contagious it is.
The house market is therefore not as predictable (with cyclical up and downs) because larger "movers" are "out there". In August 07, the defaults for US mortgages doubled, year on year. A recent indication of contagion levels. Previous posts have illustrated the way teaser loans work. These and future defaults have yet to feed through to loans made by the Chinese, Germans and Aussies to Wall St in the USA.
This type of contagion isn't simply a case of returning substandard toys to the factory for better paint.
We are (in my opinion) 25% of the way through the sub-prime crisis which has the capability to create the severest credit crunch we have ever seen. Credit in an economy is analogous to oil in an engine, if it runs low the engine overheats (inefficiency), if it runs out the engine siezes up (failure). Its been affecting big business deals for weeks, not just NR.
The crisis in the USA has (in my view) the potential to bring down the world economy. Until that issue is played out I cannot make predictions on house prices. I don't think anyone else can, either.
8. Notbuyingyet said...
Face it, the BBC is a government propopaganda channel funded by public subscription. Do you really expect it to have an objective unbiased opinion, free of the influence of people at the top of government?
9. Realist said...
Yes Dave, don't worry, everything will be OK for your buy to let flats.
10. confused76 said...
We need two or three months of (even small) negative price changes reported by RICS, Land Registry, Nationwide etc
At that point BtLers head for the exit en masse.
As a matter of fact, many BTLers of the early days have reduced their portfolios considerably, making a fortune on new fools (many foreigners) who have bought from them. But now the US housing market problems have been widely covered in the international press, and for the first time with Northern Rock, Britain has been associated to the US problems. I think foreign investors may be sitting on the fence for a while. Since you need a bigger fool to unload inflated properties, I wonder if that is enough to make price stagnate first and then drop.
I disagree with Deepak comments, you cannot compare so simply IRs across currencies and different assets (savings accounts versus property)
11. Realist said...
"So the crash in the US will continue but the UK will avert one?"
Yes, don't worry Dave. It is all going to be OK.
12. inbreda said...
Deepak - that would be an incredibly brave move given the historically high exchange rate gbp to usd, and the fact that there are wide ranging views that the UK is about to have more of a problem than the US.
It would be out of the frying pan into the fire. With a loss on the currency exchange to boot.
13. uncle tom said...
Deepak,
You are missing an important factor - if you live in the US, but put your money on deposit in the UK, you are gambling on the exchange rates.
Gambling equals risk, risk demands a return. Even if you thought the current exchange rate was sustainable, 1.25% is not much of a premium for the risk element.
The $/£ exchange rate is pretty extreme at the moment - for spending parity, it should be around $1.30/£
I don't think US investors will be seriously tempted.