Search the Community

Going to keep a copy of this to see if this pans out as predicted. Some interesting comments too, especially about the confidence of predicting the future: http://www.telegraph.co.uk/finance/property/11977163/Which-London-boroughs-will-see-the-biggest-house-price-rises-by-2020.html

I don't see any references to this fascinating research piece from Deutsche Bank so decided to post it. http://uk.businessinsider.com/deutsche-bank-calls-the-top-on-londons-insane-property-bubble-2015-10?r=US&IR=T It's in a PDF here on page 29 http://www.dbresearch.com/PROD/DBR_INTERNET_EN-PROD/PROD0000000000368569/Konzept_Issue_06.pdf Deutsche Bank has called the top of London's runaway housing market in a blisteringly pessimistic note sent to clients on Thursday. In the bank's sixth "Konzepts" paper, Sahil Mahtani argues that a combination of rising interest rates, the Bank of England's tinkering with the market, and the increasing "politicisation of the housing issue" means London's insane price rises can't continue — and price falls could be likely. What's more, Mahtani argues there are "multiple catalysts to suggest that 2015 is the turning point" and concludes ominously: "London’s property is unlikely to enjoy the next thirty years as it did the last." The riseMahtani begins by illustrating just how spectacular the rally in London property prices has been over the last few years, with some stunning facts: Every £1 invested in London property in 1990 is now worth £5, double the performance of the FTSE 100. In the last sixty years, London house prices have only fallen 3 times: during the Volcker recession of the early-1980s; the sterling crisis of 1992; and the 2009 financial crash. Conservative estimates put average London house prices at 13 times average gross incomes. London residential mortgage debt amounts to a quarter of the country’s total. London's housing market is huge, expensive, and hot. It's not hard to find stories of property insanity in the capital and popular opinion holds that its a flood of foreign investors buying up homes and leaving them empty to accumulate value that has sparked the boom. Mahtani says it's simple supply and demand — the supply of homes has failed to keep pace with demand from buyers, be they foreign or otherwise. But crucially Mahtani sees a second, overlooked factor for spiraling prices — buyers believe house prices will keep going up. People are willing to pay silly prices on the expectation prices will keep rising and they can cash in themselves later. That in turn bids up prices. The fallBut the second cause is a worryingly self-fulfilling practice that isn't sustainable. What's more, Mahtani thinks economists are underestimating just how much perception effects prices. He points to the Hong Kong property crash of 1997, when prices dropped 40% in just over a year, as evidence for what happens when the wind changes direction on public opinion. Here's Mahtani: A shift in expectations about future supply was much more instrumental in bringing about the downturn. The post-handover government had made it known that it would welcome a decline in property prices and would increase supply by 85,000 units a year. In retrospect, at no point during the next five years did housing completions reach 35,000 annually. Yet because the decision had credibility, it changed expectations and the 85,000 figure is still cited today as a reason for the market decline. The government announcement precipitated a change in psychology that diminished the speculative increment in the market. It didn't matter that supply increased nowhere near as much as promised — the "psychology" had changed and that was enough to send buyers running. Interest rates are bound to rise soon in the UK which will take out a lot of the momentum in the property sector. But Mahtani believes something similar to Hong Kong could also happen in the UK, caused by state and Bank of England intervention. Mahtani says the Bank of England is beginning to see housing "more like a utility and less like a financial asset," because Governor Mark Carney sees mortgage lending as a key component of bank stability and the wider financial system. That makes it more likely the Bank will put in place more measures to rein in certain lending and buying practices. This will likely have an outsized impact on London because of its huge weighting in UK property debt. Here's Mahtani: The most advanced practitioners of macroprudential policy are Hong Kong and Singapore where loan-to-values for buy-to-let properties are capped at 50 per cent, foreign purchases of property are hit with 15 per cent stamp duty and second and third home buyers face differentiated, punitive treatment. In this approach, housing becomes more like a utility and less like a financial asset. The Bank of England appears to be moving in this direction. Secondly, and perhaps most importantly, housing is growing issue for both the left and the right. Only 40% of today’s 25- to 34-year-olds own homes, compared with two-thirds in 1991, and Mahtani says both parties are trying to address this in a bid to win over the next generation of voters. flickr: muddyclayThe redevelopment of Battersea Power Station is one of the most high-profile residential developments in London. The Conservatives have already moved to increase stamp duty at the top of the market and cut tax benefits for buy-to-let landlords, which has taken some of the air out of the top of the market. This could be just the start. Mahtani argues that the more house prices rise out of step with earnings, the more it will "sow the seeds of its own correction" by increasing resentment and discontent amongst would-be home owners. He says: "The fate of house prices may well be decided in the political face-off between younger voters and the elderly harnessing their political power to prevent price declines to their house-cum-pensions." Ultimately, Mahtani says, we may have reached a point where "policy intervention will favour stabilising or reducing prices." The aftermathIf you're a would-be buyer, all this is great news. But for people who have recently bought it's another story. As in Hong Kong, Mahtani thinks that even if policy intervention is only meant to put a lid on things, it could end up sending prices into reverse. He says: "Again, all that needs to happen is for investors to think price outcomes are asymmetric, with low upside and large downside." In this way a self-fulfilling cycle in the opposite price direction could emerge. Homeowners would then find themselves in negative equity, freezing much of the market as people sit on their property until the price gets above water again. Another issue is interest-only mortgages. Mahtani writes: "Over a third of those with mortgages have interest-only loans, with the first sizeable wave of principal repayments due in 2017-2018." That could lead to a wave of repossessed homes, again driving prices down. Mahtani says that ultimately it's "a losing battle to call an end to the froth in this market. But perhaps we are close to the turning point." In short, either prepare for more afforadability or brace for impact because London's property market is heading for a big shake-up, according to Deutsche Bank.

Joe Sarling (@joesarling) has put forward a proposal for a London Land Levy and I thought it might be of interest to HPC forum members http://commenttoday.org/2015/06/18/the-london-land-levy-a-regional-land-value-tax/ You can also contact Joe on Twitter if you have any comments and suggestions for help move the debate forward

http://www.westdraytonwaterside.co.uk/ The homes are going under the hammer, and the EA is looking for buyers in the Middle East and Asia (but FTB in the UK are welcome to bid against foreign Sovereign Wealth Funds and Pension Funds). It should be interesting, although how the EA is going to know if a bidder has the cash is beyond me.

Travelled in 4 carriages altogether, and I think I saw an ad of theirs on 3 of them. They're pretty much what they sound like - offer "cash within 48 hours" to distressed sellers, presumably at a honking great discount. Maybe it's just coincidence, or maybe they've been advertising for ages and I just never noticed them before, but if they're really launching a big blitz then that says a lot about sentiment. Does anyone remember whether there were similar outfits during the early-90s crash? Sounds like something that could add some useful liquidity to the market on the way down.

There's been an increase in wealthy households - thank God for trickle down wealth and Help to Buy !

"Fully private block with no social housing", goes the sales patter. The property advert that's sparking anger in London: more here...

There's a whole thread on here about Foxtons, but does anyone have any ideas on other shares that track high-end London property? I think the crash in the oil price is going to lead to a step-change in prime London property prices. It's pretty clear that they've plateaued over the past half year, but I think they're about to really crash and I'm wondering what would be a good target to short to track that fall. Foxtons seems to track London overall rather than just prime, and trying to short property prices directly using the property price indexes in spread betting is pretty useless given the size of the spreads. Any ideas on other shares?

The independent It certainly isnt the stuff of dreams: this single box room in Lewisham, London, advertised on Spareroom.co.uk purports to be perfect for young professionals, but in reality it doesnt look fit for a hamster. http://www.independent.co.uk/news/uk/home-news/what-does-74perweek-rent-in-london-get-you-a-desk-as-a-bed-in-a-box-room-filled-with-overhanging-unconnected-wires-9762633.html

Now nicely decanted of all its social tenants, the legendary Balfron Tower is now undergoing death by Wayne Hemingway 'pop up' exhibition before it is marketed to Canary Wharf bankers and overseas investors. http://www.theguardian.com/artanddesign/architecture-design-blog/2014/sep/26/wayne-hemingways-pop-up-plan-sounds-the-death-knell-for-the-legendary-balfron-tower

I don't know how it is in your areas, but every few weeks I click on Rightmove sold house prices for my area (E8, E9 and E5), and bar a few sales am not really seeing much actually appearing near the crazy asking prices published? Of course there is a delay of a few months, but still.... For example, note this house with north facing garden for £1.5million: http://www.rightmove.co.uk/property-for-sale/property-32141598.html Yet the highest sale I can find for the street is £1,015,000. http://www.rightmove.co.uk/house-prices/detail.html?country=england&locationIdentifier=OUTCODE%5E762&searchLocation=E8&referrer=listChangeCriteria&index=25 I was told by an agent that something in the street went for over 1.2million, but wonder if these sales will be stopped by surveyor valuations as had heard from one agent that surveyors have been told to "calm it down"?! Curious to know if this is the picture across London, and generally how many months out is the land registry sold prices index? Also, I can imagine in EA offices they must be panicking now to close the sales at the bubble prices. There have certainly been a few properties return to market. I just hope more of these sales at the silly prices fall through and sellers get a bit more real about what they can ask. Even if you add on 20% to 2013 sold prices, you don't quite get to the current asking prices for most property (specifically houses, not flats).

How strangely bearish. Could that be because prices are going to go down? Of course not, it's because they're going up so the only 'crazy' would be to pay stamp duty now and even more stamp duty when you trade up in a few years. http://www.telegraph.co.uk/finance/newsbysector/constructionandproperty/10974069/Youd-be-crazy-to-buy-a-home-right-now.html

Full report as pdf from Land Registry website. As trailed before hand, London is flat month on month. Quite a dip in transaction volumes too.

Oink, oink forget tenancy and land reform with MP's like this. Their massive land grab is going well. http://www.mirror.co.uk/news/uk-news/devastated-families-face-eviction-after-3786578 Mind you if he bought where I lived and he moved to 'market rents' I would probably get a rent reduction!

London landlords accused of hijacking AirBNB website with thousands of short term listings. http://www.lettingagenttoday.co.uk/672-london-landlords-accused-of-hijacking-website Can see a six month AST being considered a 'long term secure tenancy' in the future as everywhere is let out as short term 'holiday' lets. http://www.theguardian.com/technology/2014/jun/20/buy-to-let-landlords-leasing-properties-airbnb-uk

PRICES ARE GOING THROUGH THE ROOF! WE'LL NEVER GET ON THE PROPERTY LADDER! Now you can!.....As opposed to PricedOut, we have the originally named PricedIn.

http://blogs.economictimes.indiatimes.com/LettersfromLondon/entry/clear-and-present-danger-to-uk-property

Yeh I find it hard to believe too, but the equivalent of 7.6 shards are planned to be demolished. Sure there is no 'false scarcity' being 'centrally planned' into the system so that rents and values always magically go up. http://www.newstatesman.com/jonn-elledge/2014/05/believe-it-or-not-london-doesnt-have-enough-offices

hi all, i've been looking for a house in tottenham and forest gate for the last 8 months or so and have offered the asking price or above on around 10 properties only to be outbid each time. in the last 2 weeks or so there seems to have been a change in sentiment. houses are coming on the market at around the same prices they were a few months ago (apart from foxtons) and some are actually coming on for less. the last viewing i attended didn't seem to have that same air of desperation. just wondered if anyone else have found this or is it just wishful thinking on my part?

Gherkin goes into receivership ahead of sale. Battling with debt. Still its prime London commercial property so the only way must be up! Bit of a pickle!