Am new member to HPC and background is that I am a Fund Manager in the City who owns no housebuilder shares but constantly receives a stream of bullish research on the housing market. Am also fed up with price silliness as my neighbour sold the land in their garden for £320k to a developer who built a 350sq m house on it so I have swapped view over South Downs for view of roof of the new monstrosity. Needless to say, said developer drives a Ferrari and has enough money to run his own polo team!! Am hoping he gets come uppance when prices melt down and his quick turns become long term investments at much lower prices.
Having lagged early last year, the share prices of the housebuilders took off last year as the City perception is definately that a HPC has been avoided and we are off to the races again. To give an example, the price of the largest housebuilder, Persimmon, has risen by a staggering 66% since the start of November to an all time high. Almost all of the housebuilders to report figures recently have met expectations and have commented that they see signs of confidence returning to the market.
I have long been a believer that we are headed for a crash. In fact, one well known US fund management house has researched ALL previous bubbles in history and they define a bubble as any asset class that moved more than two standard deviations away from its long term average. In the history of time, there have been 28 of them (tulips, south sea bubble, nasdaq etc) and in ALL cases, they have corrected back to their long term average fairly violently. According to their studies, UK house prices are the 29th such incidence of this occuring....
However, just when 2005 looked like it would be the top, suddenly the data has started turning positive again.
Can anyone out there rationalise the following figures for me? Housing transactions and mortgage approvals have suddenly shot back up to 2003 levels. What is really weird about this is that consumer confidence has crashed post the Christmas splurge, unemployment is picking up, voluntary redundancies and loan defaults are going through the roof. This would not normally be a great background to increase ones confidence in going out and buying a house and yet transactions have suddenly spiked.
Anyone able to solve this apparent conundrum? City as a whole is usually pretty efficient at pricing shares which makes me worry that I am missing something.