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Oh come on people, I have explained this to you time and again - ASIAN INVESTMENT IN LONDON PROPERTY. I opened up my postbox today. of the three bits of junkmail, one was a gvt info brochure and 2 were London property fliers. That is about right every day.

Until there is some political will to prevent foreign buyers, I cannot see a crash in London.

But are these in terms of capital protection or in terms of yield? Dr. Mibbles view, as I understand it, is that yield has gone,

Peter.

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I find it hard to believe that the figures for bunuses are so low, even in 2007, but in any event, the route the money takes to work itself into asset prices is irrelevant. If The government supported the car industry to the tune of 500 bn GBP, then house prices in Coventry would go up. If they supported the mining industry, house prices in Sheffield would go up. When they support banks, house prices in London go up.

(Very) back of envelope calculation: 500bn over 5mn households in London = 100,000 per house. OK, I accept that's the absolute upper limit (of the direct aid), as it will also be being used to inflate other asset bubbles, and if you agree that it's inflating the Stock Market, then you should agree that it must also have some effect on house prices.

Sadly your analysis is based on a flawed understanding of QE. 99% of it goes into buying government bonds, which is then used for general government spending. It doesn't go to bankers directly.

QE helps the banks by freeing up capital which was tied up in government bonds, and pushes down the governments cost of borrowing, but it's essentially an asset purchase, it doesn't increase the Banking industry balance sheet. However, although the banks are not any better off for it per se, they are more liquid. They need that liquidity to shore up their balance sheets, but this is just something they have to do - regulatory pressure.

QE is not, in any way, fuelling bonuses in the City. It doesn't increase profitablity and neither does it feed through to City job, which have been lost in very large numbers.

You can believe what you like, but the facts in this case are unassailable - bonuses and employment in the City is at the lowest level since the mid-90's. QE is not being used to shore up house prices via City bonuses - it just isn't happening. QE is shoring up balance sheets, and if anything fuelling an equities bubble.

Edited by Dr_Mibbles

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QE is not, in any way, fuelling bonuses in the City. It doesn't increase profitablity and neither does it feed through to City job, which have been lost in very large numbers.

You can believe what you like, but the facts in this case are unassailable - bonuses and employment in the City is at the lowest level since the mid-90's.

Yes and that reality means that the recent London gains really are signs of a bubble rather than anything driven by fundamentals.

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So, who are all these people paying £450k + for a 55 sq meter leashold flat in suburban London? There seem to be a hell of a lot of them. Where is the money coming from???

Not sure I'd use the phrase 'all these people' when we have a record low number of transactions.

Some properties are changing hands, but not many. Huge gifts from parents, inheritance, people swapping houses due to relocation etc. That's fine when property transactions are at an all time low, but hopelessly unsustainable.

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Oh come on people, I have explained this to you time and again - ASIAN INVESTMENT IN LONDON PROPERTY. I opened up my postbox today. of the three bits of junkmail, one was a gvt info brochure and 2 were London property fliers. That is about right every day.

Until there is some political will to prevent foreign buyers, I cannot see a crash in London.

Mr B and I just went for a walk along the river just outside the centre of Kingston. There is a vast new development of flats there (Kingston Riverside) - many will have fantastic river views and it looks as if they'll all have balconies, so they're obviously going to be very expensive. The immediate riverside area (away from the centre) is very green and almost countrified, so quite a bit nicer than many developments.

I googled it when we got home - don't know why I haven't before - and it looked as if the marketing guff is aimed at least partly at overseas investors. Lots of e.g. 'walking in the footsteps of kings' (Richmond Park etc. ) and all sorts of generalised stuff about 'world class city'.

I was really looking for a good old nose about prices/sq. meterage + floor plans, but nothing on the website yet.

Edit for linky: http://www.redrow.co.uk/developments/kingston-riverside

Edit 2: found details after all, prices so far from £405K to well over £1M - , cheapest with river views is £550K for a 2 bed.

Don't all rush at once.

Edited by Mrs Bear

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Sadly your analysis is based on a flawed understanding of QE. 99% of it goes into buying government bonds, which is then used for general government spending. It doesn't go to bankers directly.

As far as I am aware, the central bankers themselves openly admit that they are pretty shaky on what the consequences of QE are, so I am probably in "good" company, or "among thieves" or whatever the appropriate phrase is.

So the situation before was, the banks had 500bn worth of gilts earning 2 or 3% but no cash, and now they have 500bn in cash that they can do what they like with. It doesn't matter that the sector is shrinking, the benefits just get shared among fewer people.

Again, I come back to my analogy. If the government invested 500bn in the car industry - not by directly buying cars and trucks, but by buying up stocks, loans whatever, thus enabling the industry to have use of that money, that 500 bn would effectively be added to whatever earnings the industry was itself generating, even if the industry was shrinking and would flow out into whatever region that industry was based in.

Edited by BigPig

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Sadly your analysis is based on a flawed understanding of QE. 99% of it goes into buying government bonds, which is then used for general government spending. It doesn't go to bankers directly.

QE helps the banks by freeing up capital which was tied up in government bonds, and pushes down the governments cost of borrowing, but it's essentially an asset purchase, it doesn't increase the Banking industry balance sheet. However, although the banks are not any better off for it per se, they are more liquid. They need that liquidity to shore up their balance sheets, but this is just something they have to do - regulatory pressure.

QE is not, in any way, fuelling bonuses in the City. It doesn't increase profitablity and neither does it feed through to City job, which have been lost in very large numbers.

You can believe what you like, but the facts in this case are unassailable - bonuses and employment in the City is at the lowest level since the mid-90's. QE is not being used to shore up house prices via City bonuses - it just isn't happening. QE is shoring up balance sheets, and if anything fuelling an equities bubble.

That is the best explanation of QE (of many) that I have ever seen on this site. Thank you!

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I seem to remember (from the cartoon video about 'the Ben Bernanke') that in the US, when the Fed does QE it doesn't buy government bonds directly from the Treasury but via investment banks. I presume that isn't the case in the UK?

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As far as I am aware, the central bankers themselves openly admit that they are pretty shaky on what the consequences of QE are, so I am probably in "good" company, or "among thieves" or whatever the appropriate phrase is.

So the situation before was, the banks had 500bn worth of gilts earning 2 or 3% but no cash, and now they have 500bn in cash that they can do what they like with.

The banks can't do what they like with that liquidity - they've been forced to use it to shore up their financial positions as per regulatory pressure. They can't just hand it out in large bonuses (bonuses for what and to whom?) and neither would it be desirable for them to do so, since they'd need to find the money from somewhere to de-leverage as they have been ordered to.

I'm not saying there won't be consequences to QE, although at the moment there are very few due to our being in a liquidity trap - but one of those consequences is definitely not large City bonuses. That's really the point I was seeking to make. There is no link between the two, and the argument that there is a link is very weak - witness the collapse in City bonuses since QE began. It would be more convincing to state "QE causes bonuses to collapse" - that would at least be based on actual data, although it would also be a completely false correlation.

Edited by Dr_Mibbles

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It's confusing trying to analyse how the banks work, because their product is money, which is also what we measure economic output with. Perhaps for my analogy, I should have said that the government takes a load of scrap metal of British Leyland's hands (and vapourises it), and gives them 500 bn worth of shiny new rolled steel.

I like analogies. :)

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Hello, newbie here. I thought this might be of some interest on a London thread and particularly those in the North London area.

I sent a Freedom of Information Request to my council (Haringey) a few years ago to ask them how many households in my area (Muswell Hill) are receiving housing benefit (LHA) for private rentals. The answer I got back was very interesting. I asked them to break it down by postcode, so how many households in the N10 area are receiving housing benefit for private rentals. The answer I received back was: 429.

According to this map http://www.haringey.gov.uk/frbak/2011_muswell_hill_ward_profile-2.pdf the Muswell Hill ward has 4321 individual households. Now, be aware that the Muswell Hill ward doesn't cover the N10 postcode exactly, (the ward actually covers some of N10 and some of N8) but if we assume that the N10 postcode area has a maximum household figure of 4500 (based on the household figures of Muswell Hill ward and surrounding wards) and according to that document 22.9% of households in the ward were renting privately, that would amount to approx 1030 households in the N10 area privately renting.

If 429 of the 1030 privately renting are receiving Local Housing Allowance, that means that 41% of private renters in this middle class area of North London are receiving some housing benefit for private rent. I think this is a staggering amount, even with the possibility of error of +10 or - 10%.

It will be interesting to see what effect, if any, the overall benefit cap has on rentals in this area.

Welcome Snowball!

I'm down the road from you in the poorer N19 area. You''ve inspired me to to a FOI request for area and I will do.

I'll report back if I get some answers!

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I seem to remember (from the cartoon video about 'the Ben Bernanke') that in the US, when the Fed does QE it doesn't buy government bonds directly from the Treasury but via investment banks. I presume that isn't the case in the UK?

It's exactly the same for the UK. The same mechanism and largely the same banks. In the US they're called Primary Dealers, in the UK they're called Gilt Edged Market Makers. A difference exists only in terms of the instruments the BoE is prepared to accept as collateral. The Fed is buying treasuries and mortgage backed securities (MBS); so far the BoE has been buying only gilts. That will change when Carney gets here.

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Sadly your analysis is based on a flawed understanding of QE. 99% of it goes into buying government bonds, which is then used for general government spending. It doesn't go to bankers directly.

QE helps the banks by freeing up capital which was tied up in government bonds, and pushes down the governments cost of borrowing, but it's essentially an asset purchase, it doesn't increase the Banking industry balance sheet. However, although the banks are not any better off for it per se, they are more liquid. They need that liquidity to shore up their balance sheets, but this is just something they have to do - regulatory pressure.

QE is not, in any way, fuelling bonuses in the City. It doesn't increase profitablity and neither does it feed through to City job, which have been lost in very large numbers.

You can believe what you like, but the facts in this case are unassailable - bonuses and employment in the City is at the lowest level since the mid-90's. QE is not being used to shore up house prices via City bonuses - it just isn't happening. QE is shoring up balance sheets, and if anything fuelling an equities bubble.

Of course QE is profitable for the banks! Why else would they do it? If I can make 15-20% a year out of passive index trackers, how much more are these guys making by actively ramping every market and commodity with free QE cash? The problem the banks have is that this is still insufficient to offset their losses elsewhere, notably in mortgage origination and securitisation which formerly accounted for the greater part of their profitability. It also helps to explain why King and Osborne have been working overtime to re-inflate the UK housing bubble - there's no other way of generating bank profits on the same scale.

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Of course QE is profitable for the banks! Why else would they do it? If I can make 15-20% a year out of passive index trackers, how much more are these guys making by actively ramping every market and commodity with free QE cash?

Well, firstly, QE money isn't "free", it's exchanged for an asset. So the banks are able to transfer high quality assets (usually UK government bonds) into cash, and the government has no problems finding buyers for it's debt.

QE is not designed to raise the profits of banks, and cannot directly do so, it is designed to improve liquidity. They don't get given a single penny of "free" money since they must purchase high quality assets/bonds before exchanging them for QE money, if they choose to do so. The BoE don't call it the "asset purchase facility" for nothing.

The problem however is that QE is rather like pushing on a piece of string, there is only so much balance sheet rebuilding necessary, and with weak demand for loans the extra QE liquidity is struggling to provide a productive use. This may be driving an equities bubble, but it most certainly isn't feeding into bonuses or such.

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Not sure I'd use the phrase 'all these people' when we have a record low number of transactions.

Some properties are changing hands, but not many. Huge gifts from parents, inheritance, people swapping houses due to relocation etc. That's fine when property transactions are at an all time low, but hopelessly unsustainable.

I see dire two bed properties come on in my part of London and they go really quickly. Properties that are really poor value - small, leasehold, no parking. I just don't understand how anyone can think that paying so much (almost half a million pounds) for a small flat in outer London is good value. However, it is totally disheartening to think that if you want to get on the infamous property ladder in London you have to be prepared to pay well over the odds for something really shit (if you want to be in an area that is halfway decent) and then you have to go through the whole process of dealing with EA and their crap and games, solicitor, stamp duty, leashold stuff. Not only is it extortionate but stressful for very little benefit. I love London but I don't think it is *that* great, it's certainly a lot more Emperor's new clothes than it used to be.

What I also don't understand is why rents/house prices have not reverted to what happened in 2009. It seems to be a lot easier to get a mortgage now than it was a few years ago and the thinking is that when young couples/professionals can once again get a mortgage that this means less competition for rents since they can buy and puts downward pressure on rents. This doesn't seem to be happening. Also, you would think that with all the crazy prices there would be more sellers desperate to get in on these crazy prices while it lasts but that doesn't seem to be happening either. It feels a bit like the rental market especially is being manipulated. I wouldn't be surprised if the whole hike in rents over the past 3 years has been partly due to EA and LA talking up the market and now the idea of high rents is imprinted on the minds of tenants, so sort of a catch-22. I also don't understand where all these people with the ability to pay so much in rent for such small properties come from?

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It's exactly the same for the UK. The same mechanism and largely the same banks. In the US they're called Primary Dealers, in the UK they're called Gilt Edged Market Makers. A difference exists only in terms of the instruments the BoE is prepared to accept as collateral. The Fed is buying treasuries and mortgage backed securities (MBS); so far the BoE has been buying only gilts. That will change when Carney gets here.

Did the Fed only start buying MBSs after their housing bubble had deflated somewhat?

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I see dire two bed properties come on in my part of London and they go really quickly.

Some friends of mine recently spent 430k on a small terrace in Walthamstow. They paid over the asking price in the end. They earn well over 100k between them, this is their first home, and it's tiny, not to mention situated in a crime-ridden run-down corner of outer London. They earn a huge amount of money, even for London, and yet that was all they could afford. Depressing.

The problem is these anecdotes mean nothing - the housing market is warped due to very few properties in affordable price ranges being sold (although that may be changing as pent-up supply comes onto the market and BTL'ers throw in the towel in the face of negative yields in London). Prices are distorted as a few well-heeled buyers are panic-purchasing the odd property, giving the impression that high sale prices are somehow sustainable. They're not.

So you have people caught up in ridiculous bubble mentality ("we'll miss out if we don't buy SOMETHING") paying over-the-odds for mediocre properties in run-down parts of London. This isn't rational. You can't think of it rationally. The tulip bubble wasn't rational and cannot be explained by the idea of rational economic actors interacting with a functional marketplace. The market is broken and people are being stupid.

Sales volumes are low enough at the moment to maintain the illusion, that's all.

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Well, firstly, QE money isn't "free", it's exchanged for an asset. So the banks are able to transfer high quality assets (usually UK government bonds) into cash, and the government has no problems finding buyers for it's debt.

QE is not designed to raise the profits of banks, and cannot directly do so, it is designed to improve liquidity. They don't get given a single penny of "free" money since they must purchase high quality assets/bonds before exchanging them for QE money, if they choose to do so. The BoE don't call it the "asset purchase facility" for nothing.

The problem however is that QE is rather like pushing on a piece of string, there is only so much balance sheet rebuilding necessary, and with weak demand for loans the extra QE liquidity is struggling to provide a productive use. This may be driving an equities bubble, but it most certainly isn't feeding into bonuses or such.

But that's my point! Forget the mechanism of QE, the end result has been the creation of enormous bubbles in equities, commodities and real estate all around the world. Who trades these things more than investment banks do? As a consequence they are the direct beneficiaries of QE liquidity and profit handsomely by trading on their own account and in providing margin for their customers.

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Did the Fed only start buying MBSs after their housing bubble had deflated somewhat?

I think the Fed has always operated a small MBS facility to help America's smaller regional banks out of difficulty - US regional banks are much more numerous than in the UK, and often fail. Bernanke has expanded that function enormously, especially with the last year's QEinfinity program.

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I see dire two bed properties come on in my part of London and they go really quickly. Properties that are really poor value - small, leasehold, no parking. I just don't understand how anyone can think that paying so much (almost half a million pounds) for a small flat in outer London is good value.

Where is that?! I see this all the time on here. Not disputing it but I can show you 3 bed Victorian terraces in zone 3/4 that are 20 mins from central London on the train for 200k with parking and large gardens. Not in a great area but what on earth are people doing paying 500k if the places are bad? A panic to buy and an ignorance of where they are buying or what else they could buy? A hope it will never drop I suppose and believing the rubbish in the Standard that those places are somehow up and coming, as they have a deli within 10 minutes walk and one (!) decent pub 20 minutes away.

Here's the other side of the coin -

Here is a 2 bed for 210k in zone 4 suburbia http://www.zoopla.co.uk/for-sale/details/27369072?search_identifier=7c1e5872a495a1e6ea947e5a81d25aee

A 3 bed semi-detached in zone 4 for 195k minutes from what will be a crossrail station and is currently 20 minutes to London Bridge, and soon to be 10 mins to canary wharf http://www.zoopla.co.uk/for-sale/details/27660658?search_identifier=c96968aee1f294b330a2f665aa520e5f

3 bed nearby for 175k http://www.zoopla.co.uk/for-sale/details/28871386?search_identifier=bb41d3d1d67e2c0f42c31576d9747ea3

These areas are all at 2004 prices.

Edited by sf-02

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London rents hit record high?

http://www.telegraph...ecord-high.html

Rents in the capital have reached £1,110 a month while average rents across England and Wales are 3.9pc higher than last year.

By Emma Wall, and agencies

7:00AM BST 17 May 2013

Tenants are facing further pressure on their finances as rents have increased in every region across England and Wales for the first time in 18 months, a lettings network has reported.

Private rents rose by 0.2pc month-on-month in April to reach £736 on average - and for first time since November 2011 rents were up year-on-year across the whole country - according to LSL Property Services, which owns chains Your Move and Reeds Rains.

Rents started edging back up again month-on-month in March, following a period of falls amid the seasonal winter slowdown.

The further push up in April means average rents have returned to levels not seen since November last year and they are 3.9pc higher typically than a year ago.

London saw the biggest annual increase in rents, with a 7.6pc rise pushing average rents to £1,110 a month. Wales recorded the second highest spike, with a 5pc rise taking rents to £566 typically.

The South West, which was the only region to see rents fall year-on-year in March, recorded a 0.5pc annual increase in April, putting average rents at £634.

On a monthly basis, rents rose in eight out of 10 regions, with the East Midlands recording the strongest increase at 0.6pc, to reach around £552.

Edited by zugzwang

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But that's my point! Forget the mechanism of QE, the end result has been the creation of enormous bubbles in equities, commodities and real estate all around the world. Who trades these things more than investment banks do? As a consequence they are the direct beneficiaries of QE liquidity and profit handsomely by trading on their own account and in providing margin for their customers.

QE was introduced after the housing bubble inflated and popped, so had nothing to do with the housing bubble. You could argue that it depressed the yields on government bonds, making London housing a more attractive investment which inflated prime London prices. But QE didn't do this directly, and banks have not invested directly in residential London property, so it's arguable that it did it at all - especially since prime London started inflating before QE was launched.

The wider point though, is that QE didn't give "free money" to anyone. The banks already had the money, just tied up in high quality assets. What they then choose to spend that money on is really their business, but they are being forced to use it (quite rightly) to shore up their balance sheets.

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London rents hit record high?

It's a press release from a PR agency on behalf of an organisation with a vested interest in the notion that rents are increasing.

The reality is completely different. Rents are falling and more and more property is sitting on the market. I am looking for a place to rent around Shoreditch/Hackney at the moment, and prices are about 20% lower than they were 6 months ago - I can afford a much nicer place as a result.

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  • 295 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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