Jump to content
House Price Crash Forum
Sign in to follow this  
fru-gal

Housing Market Speculation

Recommended Posts

Just wondered if this is likely to happen and what is to stop it happening;

If housing in the London (and other places but London only relevant to me) has been a bubble for the past 15 or so years and the banks and bankers have made a lot of money betting on the price of London housing rising, what is to stop them deciding that they are going to make lots of money by rigging the market in the other direction, for example betting against London house prices and then manufacturing a bursting of the bubble?

Since the housing market is now one big speculative game, it seems that when the bankers have had their fun betting on prices going up (and got everyone to believe that prices will only ever go up and make huge profits), that they would actually make more money by betting against London housing and engineering a crash.

Share this post


Link to post
Share on other sites

Just wondered if this is likely to happen and what is to stop it happening;

If housing in the London (and other places but London only relevant to me) has been a bubble for the past 15 or so years and the banks and bankers have made a lot of money betting on the price of London housing rising, what is to stop them deciding that they are going to make lots of money by rigging the market in the other direction, for example betting against London house prices and then manufacturing a bursting of the bubble?

Since the housing market is now one big speculative game, it seems that when the bankers have had their fun betting on prices going up (and got everyone to believe that prices will only ever go up and make huge profits), that they would actually make more money by betting against London housing and engineering a crash.

They are happy with an ever-increasing mortgage book. If it goes pop, the banks end up holding devalued property.

Edited by opt_out

Share this post


Link to post
Share on other sites

what is to stop them deciding that they are going to make lots of money by rigging the market in the other direction, for example betting against London house prices and then manufacturing a bursting of the bubble?

Simple answer: market forces.

The banks could bet on prices rising by increasing loans against the asset - pretending that the new, inflated, price is intrinsically justified - and reaping profits from fees and increased transaction volume.

To bet on prices falling, the banks need to have offloaded the risk of past loans to third parties (and that's not been going so well) and then they need to find counter-parties who will offer to sell the bank insurance against falling house prices - while it's blatantly obvious that the banks aren't fuelling the bubble.

Goldman Sachs famously bet on falling subprime US - but only to the tune of $4bn-ish, which is a tiny fraction of what banks (including GS) bet the other way...

Share this post


Link to post
Share on other sites

Just wondered if this is likely to happen and what is to stop it happening;

If housing in the London (and other places but London only relevant to me) has been a bubble for the past 15 or so years and the banks and bankers have made a lot of money betting on the price of London housing rising, what is to stop them deciding that they are going to make lots of money by rigging the market in the other direction, for example betting against London house prices and then manufacturing a bursting of the bubble?

Since the housing market is now one big speculative game, it seems that when the bankers have had their fun betting on prices going up (and got everyone to believe that prices will only ever go up and make huge profits), that they would actually make more money by betting against London housing and engineering a crash.

It's really difficult to short-sell housing, so I wouldn't expect it to be an issue.

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...
Sign in to follow this  

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 242 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%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.