What The Advisors To The Rich Really Think ......

[LuckyOne]

We seem to live in a two tiered world. The VIs try to impose their will on the masses while the rich seem to live in a world where the get a more honest opinion about what is happening.

HSBC Private Bank has a buyers' agency business called PropertyVision. Their December market comment makes for interesting reading.

http://www.propertyvision.com/market-comment.php?id=29

When cartoon characters run off a cliff, they keep running for some time before looking down. When they do, the game is over and … down they go. The mainstream residential property market looks a bit like this.

November produced some really quite shocking statistics on the mortgage front. Net mortgage lending for September was £112 million. The figure in September 2007 was £10 billion. Even allowing for ‘irrational exuberance’ and lamentable lending standards in 2007, that is a fall that brings to mind cars and cliffs. And it’s not the whole story. Gone are the days of 100% loan-to-value mortgages. Old-fashioned concepts such as deposits are now in vogue again and valuers, even in our market, are subtracting another 10% as an additional cushion, all of which brings to mind stable doors and horses. According to the Home Builders’ Federation, the average age of a Briton buying his or her own home without assistance is now thirty-seven.

If Quantitive Easing was supposed to be mending the transmission mechanism between depositors and lenders, it doesn’t seem to have worked. If it was supposed to mend the broken balance sheets of banks via the back door, then maybe it has – and hopefully this will, eventually, lead to more ‘normal’ lending. But this must be an optimistic view when the total commercial property loan book of UK banks is taken into account; nearly all of this is well under water, with the equity gone and the banks facing huge losses if they were to try and get their money back. Provisioning for this is likely to be the priority, rather than lending into a residential market that will continue to fall if it remains starved of credit.

The irony is that there is plenty of money out there looking for any sort of yield. For corporates or families with a good story to tell, the private placement market is booming, allowing them to raise long-term funds at once-in-a-generation prices. Recent bond issuers have sold fifty-year bonds for both companies and countries – very optimistic if buyers consider the number of companies that existed fifty years ago and are still around today. Mexico has hardly got a great record of paying its debts – but maybe it’s different this time…

The reason all of this is happening, and why the developed world is not mired in bankruptcy is, of course, the extremely low level of interest rates. Lord Young was only speaking the truth when he pointed out that anyone with a job and a tracker mortgage has never had it so good. This explains why,when we are supposed to be in a recession, the shopping centres of the south-east are booming and property developers, who are usually a mess on the floor at this point in the cycle, are living it up in Monaco. We are living in very unusual times.

So where does this leave our prime market at the end of a decade that has seen some dramatic financial events, during which residential property, of the expensive kind particularly, has been the star turn, behind gold and bonds? Slightly out of steam is the short answer – but that, as ever, depends on the market you are talking about. For instance, the new uber-developments in Central London exist in a parallel universe, even to their immediate neighbours. The Lancasters, the new development by Northacre/Minerva on Bayswater looking south over Kensington Gardens, has been selling at around £3000 per square foot, when houses in the streets and squares behind (suffering from the baleful influence of Paddington Station and the cheap hotels that feed off it) are at around £1000 per square foot. There is a similar gap in values between One Hyde Park (the upper floors looking over the park in particular) and its neighbours.

This is an eloquent comment on the internationalisation of Central London where ‘world prices’ are being paid for property that the international rich want to buy. This is in short supply and a London flat has become a ‘must have’ for any budding oligarch, or indeed any wealthy family with a few million to spare. How many of them there are around the world can be gauged by a glance at the sheer quantity of expensive marine hardware filling the harbours of anywhere warm with good restaurants. And the mainland Chinese haven’t arrived in any numbers … yet.

As we have commented before, supply over the whole of Central London is still low (half what it was six years ago), keeping prices up despite a fall in the number of buyers, which was noticeable over the last few months until November produced a clutch of new enquiries. It is always a mistake to draw too many conclusions at a time of year that has never been one for house-hunting. This is particularly so in the country where, except in the most bullish of markets, seasonality is very pronounced.

However, there is a sense throughout the whole ‘domestic’ market – London and the country – that the days of automatically selling your house for more than you bought it are over. January and February will reveal more.

Back in the mainstream market, the mortgage famine does not bode well. It is utterly dependent on credit and, with the supply of that at a trickle and unemployment starting to bite, it will take only a small uptick in interest rates to hammer it hard. It is becoming a world where the money has gone elsewhere and is not likely to return soon. Where has it gone? One last number tells it all. There are apparently sixty million (sic) unoccupied houses and flats in China. This must be one of the greatest misallocations of capital anywhere, anytime. But it is all part of the huge tectonic plate movements of a rather different world.

[SomethingHasToGive]

We seem to live in a two tiered world. The VIs try to impose their will on the masses while the rich seem to live in a world where the get a more honest opinion about what is happening.

HSBC Private Bank has a buyers' agency business called PropertyVision. Their December market comment makes for interesting reading.

http://www.propertyvision.com/market-comment.php?id=29

I love the first line of that article... so it is now my signature.

[Bloo Loo]

I just about wrote this in 2007 in my signature:

"Back in the mainstream market, the mortgage famine does not bode well. It is utterly dependent on credit and, with the supply of that at a trickle and unemployment starting to bite, it will take only a small uptick in interest rates to hammer it hard. "

I called it a feast of credit.

[The Masked Tulip]

I had a look at my local SA2/SA3 areas on globrix this morning - about 20 properties are being re-listed but most are down just 2% or 3% on asking price when 10% drops are needed now.

One has been reduced by 39% but it looks as if it needs major work as it is now 'offers over 100K' in an area where a house is usually about 225 to 250K so something costly needsto be done.

I did the rounds of some local EAs yesterday. In one branch I asked if they had anything new on the market and they said that there was nothing, January was slow, etc, but today I see they have a new listing.

This same branch had a house that I looked at last November but was told that it was about to complete - even had it listed on RM as STC. Well, surprise, surprise the house is back on the market for sale so I asked them yesterday why they told me it had about to complete before Christmas and they point blank denied telling me that. IMPO lazy feckers whom you cannot believe a single word that leaves their mouths but, hey, just my personal opinion.

[LuckyOne]

I had a look at my local SA2/SA3 areas on globrix this morning - about 20 properties are being re-listed but most are down just 2% or 3% on asking price when 10% drops are needed now.

One has been reduced by 39% but it looks as if it needs major work as it is now 'offers over 100K' in an area where a house is usually about 225 to 250K so something costly needsto be done.

I did the rounds of some local EAs yesterday. In one branch I asked if they had anything new on the market and they said that there was nothing, January was slow, etc, but today I see they have a new listing.

This same branch had a house that I looked at last November but was told that it was about to complete - even had it listed on RM as STC. Well, surprise, surprise the house is back on the market for sale so I asked them yesterday why they told me it had about to complete before Christmas and they point blank denied telling me that. IMPO lazy feckers whom you cannot believe a single word that leaves their mouths but, hey, just my personal opinion.

If you are a normal person, you have to deal with EAs and all of their spin. If you are rich, you have access to a buyer's agent who works for HSBC's Private Bank who has a fiduciary duty to you as the client.

I can't imagine that some shiny suit, scuffed shoe wearing EA with an overabundance of hair gel would ever tell a client to hold off buying for a while which is what PropertyVision seem to be saying.

[The Masked Tulip]

If you are a normal person, you have to deal with EAs and all of their spin. If you are rich, you have access to a buyer's agent who works for HSBC's Private Bank who has a fiduciary duty to you as the client.

I can't imagine that some shiny suit, scuffed shoe wearing EA with an overabundance of hair gel would ever tell a client to hold off buying for a while which is what PropertyVision seem to be saying.

I agree.

I am also aware that HSBC has been bearish on UK residential property prices for many years. I can recall 5 years back listening to one of their senior economists talking on the radio about a big crash in UK house prices about to occur

What I am saying above is that the EAs I spoke to yesterday appear to have returned from Christmas in the same lacklustre denial mentality that they appear to have been in, in my personal opinion, for the past 12 months. I might pop along later on to some of the EAs who have been, privately, very bearish on local prices and sound them out.

[HPC=dream]

I have just had my regular update on the Prime London property market from a property search agent that I sometimes work with.

He has been extremely bearish thoughout 2010 and says that in 80% all purchases in Kensington, Belgravia and Mayfair were overseas buyers taking advantage of the weaker £.

He is basically saying that you should think hard before buying in London. Unless you can afford to lose money dont do it!!

[R K]

If you are a normal person, you have to deal with EAs and all of their spin. If you are rich, you have access to a buyer's agent who works for HSBC's Private Bank who has a fiduciary duty to you as the client.

I can't imagine that some shiny suit, scuffed shoe wearing EA with an overabundance of hair gel would ever tell a client to hold off buying for a while which is what PropertyVision seem to be saying.

and will charge you £oodles for something you could perfectly simply figure out for yourself but feel more secure about if you've had it explained to you by an expensively suited, brogue footed snake oil salesman from HSBC's Private Bankster division.

The only thing that changes is the size of the fee.

[juvenal]

We seem to live in a two tiered world. The VIs try to impose their will on the masses while the rich seem to live in a world where the get a more honest opinion about what is happening.

HSBC Private Bank has a buyers' agency business called PropertyVision. Their December market comment makes for interesting reading.

http://www.propertyvision.com/market-comment.php?id=29

'The days of automatically selling your house for more than you bought it for are over'

Certainly are. A swish apartment in Dolphin Quays, Poole just sold at £535K. Bought in 2004 for £640K. 17% drop.

Edited January 6, 2011 by juvenal

[Snafu]

'The days of automatically selling your house for more than you bought it for are over'

Certainly are. A swish apartment in Dolphin Quays, Poole just sold at £535K. Bought in 2004 for £640K. 17% drop.

A colleague of mine's husband is an advisor "to the rich" for Lloyds I think it is. Anyway, I got talking to her in 2008/2009 about how house prices are fekked. She said "My husband would completely disagree with you, he only thinks house prices can go up!". Needless to say he was made redundant in May 2010. There must be a lot of weeding out going on in the advisor sector. Easy to ride a bubble.

[@contradevian]

I love the first line of that article... so it is now my signature.

I prefer this!

The reason all of this is happening, and why the developed world is not mired in bankruptcy is, of course, the extremely low level of interest rates. Lord Young was only speaking the truth when he pointed out that anyone with a job and a tracker mortgage has never had it so good. This explains why,when we are supposed to be in a recession, the shopping centres of the south-east are booming and property developers, who are usually a mess on the floor at this point in the cycle, are living it up in Monaco. We are living in very unusual times.

Makes you want to spit! lol

[frenchy]

What I am saying above is that the EAs I spoke to yesterday appear to have returned from Christmas in the same lacklustre denial mentality that they appear to have been in, in my personal opinion, for the past 12 months. I might pop along later on to some of the EAs who have been, privately, very bearish on local prices and sound them out.

If I may ask, how do you do this?

I would like to have a chat every now and then with EAs but do you just turn up and sit down with them? Do you present yourself as a potential buyer?

Thanks for letting me know...

[The Masked Tulip]

If I may ask, how do you do this?

I would like to have a chat every now and then with EAs but do you just turn up and sit down with them? Do you present yourself as a potential buyer?

Thanks for letting me know...

What do you mean - how do I get honest views from some of the EAs I talk with?

[frenchy]

What do you mean - how do I get honest views from some of the EAs I talk with?

yes basically!!!

and do you just go see them regularly as you would regularly chat on this forum or are you presently actively looking into buying and therefore have a good reason to visit them often?

Edit: sorry if it seems like a stupid question and if the answer is that I should simply go sit down with them during one of their very quiet and boring afternoons!

Edited January 6, 2011 by frenchy

[The Masked Tulip]

yes basically!!!

and do you just go see them regularly as you would regularly chat on this forum or are you presently actively looking into buying and therefore have a good reason to visit them often?

Edit: sorry if it seems like a stupid question and if the answer is that I should simply go sit down with them during one of their very quiet and boring afternoons!

Yes, I am looking to buy and hence this I why I visit them frequently. Friends of mine, former HPCers, bought a house in Swansea West, completely modernised, last year for less money than the developer purchased the unmodernised house for back in the 2007 boom. So you have to keep an eye out for those who are keen or depserate to sell.

What amazes me by my visits to the EAs is how few people I actually ever see in them. In all my visits to numerous EA offices in 2010 I doubt I saw more than a dozen people, in total, in the offices. Usually it is just myself and some very bored EAs.

I am a good communicator and will talk to anyone. I adopt different personas for chatting with diffrent people as different things work with different people.

There is one EA office in Swansea West where the EAs are, IMPO, just lazy feckers who think they know it all - so I let them think that I know nothing about the market and let them talk.

There is another EA office in Swansea West where the EA in charge likes to think of him/herself as some kind of wheeler dealer and is a 100%, IMPO, bull-sh*tter seemingly only interested in selling to developers so I adopt the persona of a would-be developer.

There are other EAs in the area who I personally consider to be greedy, stupid, lazy or a number of other things - suffice to say that I don't believe a word that comes out of their mouths - and I adopt different personas accordingly. Sometimes act dumb and naive, sometimes act shrewd and clued up.

But there are some EAs who I have got to know and they appear to be decent people simply doing a job - many of the long-term EAs hated the bubble because they knew what would come after it - and they are happy to chat about the local market, how dire it is, how little is selling, how prices are hugely over-valued, what they would give for the houses, etc. One or two of them, knowing I am a local looking to buy in an area where prices were driven nuts by Londoners buying second homes, are only happy to caution me on the asking prices in those areas.

At the end of the day it is about communication, about building up a relationship with others and about judging people - emotional intelligence basically - where you suss them out and they suss you out. It is no different doing this with an EA as it is with any other person you have dealings with.

Sadly, IMPO, whilst I have a good relationship with about half a dozen EAs in the area I would not give a moment of my time, if I did not have to, to the others. I have a very low opinion of most of them professionally and, being judgemental, as human beings.

I have been working from home for the past year so in my daily walks or cycle rides I would pop in depending on which area I go to. It looks like my working from home will stop in the coming months so my visits will be less and less to the EAs and, I have to say, I am now considering moves further afield as I have simply given up on the local housing market.

[frenchy]

Yes, I am looking to buy and hence this I why I visit them frequently. Friends of mine, former HPCers, bought a house in Swansea West, completely modernised, last year for less money than the developer purchased the unmodernised house for back in the 2007 boom. So you have to keep an eye out for those who are keen or depserate to sell.

What amazes me by my visits to the EAs is how few people I actually ever see in them. In all my visits to numerous EA offices in 2010 I doubt I saw more than a dozen people, in total, in the offices. Usually it is just myself and some very bored EAs.

I am a good communicator and will talk to anyone. I adopt different personas for chatting with diffrent people as different things work with different people.

There is one EA office in Swansea West where the EAs are, IMPO, just lazy feckers who think they know it all - so I let them think that I know nothing about the market and let them talk.

There is another EA office in Swansea West where the EA in charge likes to think of him/herself as some kind of wheeler dealer and is a 100%, IMPO, bull-sh*tter seemingly only interested in selling to developers so I adopt the persona of a would-be developer.

There are other EAs in the area who I personally consider to be greedy, stupid, lazy or a number of other things - suffice to say that I don't believe a word that comes out of their mouths - and I adopt different personas accordingly. Sometimes act dumb and naive, sometimes act shrewd and clued up.

But there are some EAs who I have got to know and they appear to be decent people simply doing a job - many of the long-term EAs hated the bubble because they knew what would come after it - and they are happy to chat about the local market, how dire it is, how little is selling, how prices are hugely over-valued, what they would give for the houses, etc. One or two of them, knowing I am a local looking to buy in an area where prices were driven nuts by Londoners buying second homes, are only happy to caution me on the asking prices in those areas.

At the end of the day it is about communication, about building up a relationship with others and about judging people - emotional intelligence basically - where you suss them out and they suss you out. It is no different doing this with an EA as it is with any other person you have dealings with.

Sadly, IMPO, whilst I have a good relationship with about half a dozen EAs in the area I would not give a moment of my time, if I did not have to, to the others. I have a very low opinion of most of them professionally and, being judgemental, as human beings.

I have been working from home for the past year so in my daily walks or cycle rides I would pop in depending on which area I go to. It looks like my working from home will stop in the coming months so my visits will be less and less to the EAs and, I have to say, I am now considering moves further afield as I have simply given up on the local housing market.

Thanks for taking the time to reply to me.

I have only recently started looking because of pressures from the mrs. There is however very little available where I am looking (near Bristol) and I have only come across a few EA. A couple of them were quite open during the viewing and seemed a bit depressed but others were just too young (a smug kid who had just passed his EA exam - whatever that is) or clueless (bimbos with tits hanging out for us to view but no idea about the market or even the house viewed).

The young/clueless only seem there for viewings and it would seem offers are dealt with by older dogs back at base and they have sometime been very very smug agressive and buly (but obviously it doesn't work very well with me).

In cases I have put offers over the phone and in others in writing (as an opportunity to put down basic arguments as to why I believed the prices were too high). But I have never been to any EA office, I should really.

Anyway at the moment, it is simply dead around here, I don't know if EAs are holding off or sellers themselves. Some stuff appears to have sold in recent weeks/months but is not filtering through house prices websites and so I cannot check whether there still are mugs out there buying at asking price or if everybody is now haggling.

I have my eye on 3 similar houses (4 bed detached +garage) available at first for 280-290k that I believe and hope have sold for 250k putting a new floor under the market and giving me a better rationale while trying to get those down to 235k, the price I would be prepared to pay for a 4 bed detached.

All the best with your search anyway!

[Bloo Loo]

snip

I have my eye on 3 similar houses (4 bed detached +garage) available at first for 280-290k that I believe and hope have sold for 250k putting a new floor under the market and giving me a better rationale while trying to get those down to 235k, the price I would be prepared to pay for a 4 bed detached.

All the best with your search anyway!

its more about what a banker is prepared to lend than what you are prepared to pay, these days.

[LuckyOne]

its more about what a banker is prepared to lend than what you are prepared to pay, these days.

Hasn't it been that way since at least the Roman times?

[Tired of Waiting]

We seem to live in a two tiered world. The VIs try to impose their will on the masses while the rich seem to live in a world where the get a more honest opinion about what is happening.

HSBC Private Bank has a buyers' agency business called PropertyVision. Their December market comment makes for interesting reading.

When cartoon characters run off a cliff, they keep running for some time before looking down. When they do, the game is over and … down they go. The mainstream residential property market looks a bit like this. (...)

http://www.propertyvision.com/market-comment.php?id=29

I knew it! Thanks Lucky!

I told you people! Look:

Any data to base your "conclusion"?

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Edited January 6, 2011 by Tired of Waiting

[Bloo Loo]

Hasn't it been that way since at least the Roman times?

it has, but you would think people have a real say in what they are paying...no credit, most people arent buying anything.

course, it was de rigour to buy for 150, 200 or 400.....forget the K, it was irrelevant.

[Tired of Waiting]

We seem to live in a two tiered world. The VIs try to impose their will on the masses while the rich seem to live in a world where the get a more honest opinion about what is happening.

HSBC Private Bank has a buyers' agency business called PropertyVision. Their December market comment makes for interesting reading.

http://www.propertyvision.com/market-comment.php?id=29

OK, more seriously now, the sentence I thought most useful was this: "(...) it will take only a small uptick in interest rates to hammer it hard."

+ 1

[LuckyOne]

I knew it! Thanks Lucky!

I told you people! Look:

You often say that it is "frothier at the top".

At least some of the smart money in the GBP 3 million to GBP 25 million net worth range (HSBC's Private Banking arm's target market) are being explicitly advised to stay away from the market.

This crash is a funny one. Most crashes start at lower priced houses and cascade upwards. SMI has helped prevent the crash at the bottom but the crash is still cascading upwards. It didn't appear to be happening because the first stage was muted due to SMI but it is underway.

[LuckyOne]

it has, but you would think people have a real say in what they are paying...no credit, most people arent buying anything.

course, it was de rigour to buy for 150, 200 or 400.....forget the K, it was irrelevant.

Sorry, I was being pedantic.

I have often thought that houses would cost about 20% to 25% of what they do if credit didn't exist.

[200p]

[Tired of Waiting]

You often say that it is "frothier at the top".

You remember! Cheers!

(...)

Markets are always frothier at the top.

' tis true.

At least some of the smart money in the GBP 3 million to GBP 25 million net worth range (HSBC's Private Banking arm's target market) are being explicitly advised to stay away from the market.

This crash is a funny one. Most crashes start at lower priced houses and cascade upwards. SMI has helped prevent the crash at the bottom but the crash is still cascading upwards. It didn't appear to be happening because the first stage was muted due to SMI but it is underway.

The gravity thing is related to the annual gov. budget deficit. As you know they are still running one of the biggest in the world. Still around 12%, I think, and not much below Brown's peak. It can't continue. Either they cut expenses and increase taxes = recession = crash. Or they print, and we have inflation = high IR - crash. No way out. They can only delay, but not avid the crash. Hence the Wile E Coyote image - perfect, unavoidable image, for an unavoidable situation.