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Property Bubble Warning - Prime London 'overvalued And Could Fall 20Pc'

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Telegraph 23/7/13

' If the Federal Reserve fails to engineer a smooth removal of the vast quantitative easing programme buoying global markets, it could provoke a dramatic fall in “overvalued” prime London property, said economists at Fathom Consulting.

A typical prime central London (PCL) property is now valued just under £1.5m, more than 6.5 times the national average. Prices in one such area, the W1 postcode covering Marylebone, Mayfair and Regents Park, are up 165pc since 2005.

“It [the PCL market] is more overvalued than we’ve ever found it to be before - and our model goes back to 1985,” said Danny Gabay, a director at Fathom and former Bank of England economist. “Demand is not inexhaustible and supply is not inelastic.”

According to Fathom, the three key factors driving PCL prices are the value of the pound, as it impacts how attractive properties look to foreign buyers; the performance of global equity markets, as they act as a proxy for people’s wealth; and the “safe haven” phenomenon whereby people have bought into London as a hedge against the euro.

Fathom said its examination of how these factors drive the market now shows PCL prices as clearly overvalued, which was not the case last year. While Mr Gabay did not rule out further climbs in PCL prices, he cautioned the situation looked more risky for would-be buyers.'

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Telegraph 23/7/13

' If the Federal Reserve fails to engineer a smooth removal of the vast quantitative easing programme buoying global markets, it could provoke a dramatic fall in “overvalued” prime London property, said economists at Fathom Consulting.

A typical prime central London (PCL) property is now valued just under £1.5m, more than 6.5 times the national average. Prices in one such area, the W1 postcode covering Marylebone, Mayfair and Regents Park, are up 165pc since 2005.

“It [the PCL market] is more overvalued than we’ve ever found it to be before - and our model goes back to 1985,” said Danny Gabay, a director at Fathom and former Bank of England economist. “Demand is not inexhaustible and supply is not inelastic.”

According to Fathom, the three key factors driving PCL prices are the value of the pound, as it impacts how attractive properties look to foreign buyers; the performance of global equity markets, as they act as a proxy for people’s wealth; and the “safe haven” phenomenon whereby people have bought into London as a hedge against the euro.

Fathom said its examination of how these factors drive the market now shows PCL prices as clearly overvalued, which was not the case last year. While Mr Gabay did not rule out further climbs in PCL prices, he cautioned the situation looked more risky for would-be buyers.'

Nice if it happened but monetary policy will do everything to keep the £ down, even if it means starving the natives through excessive inflation.

Foreign buyers leaving their properties empty is a good thing for London (according to politicians). I hope they can find people to serve their coffees, get their homes cleaned and empty their rubbish in the future because the way it's going, no-one on the minimum wage will be able to afford to live in London. Forget commuting from outside, it's too frigging expensive.

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Prime London is a Ponzi cubed. The merest suggestion that Bernanke is about to stop printing and prices will collapse. And when they do Carney and Osborne will be left fighting a desperate rearguard action to save the entire, sordid enterprise of UK plc from the forces of entropy and decline. The clock is running down.

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Ripple effect:

Those who couldn't afford Chelsea went to Fulham.

Those who couldn't afford Fulham went to Putney.

Those who couldn't afford Putney went to Roehampton, Balham, Tooting, Raynes Park and New Malden. All now unaffordable.

The investors are starting on the East End now and doing their best to push prices up.

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The investors are starting on the East End now and doing their best to push prices up.

A comment someone left on a USA housing blog I read the other day.

I’m being pushed out of buying a home in my own country, and frankly I’m not looking forward to moving to China and working/living in an Apple factory. I can see why people are pissed off…

Nice if it happened but monetary policy will do everything to keep the £ down, even if it means starving the natives through excessive inflation.

Foreign buyers leaving their properties empty is a good thing for London (according to politicians).

If they do, it's going to spook and hurt a lot of foreign owners who've already invested in 'safe-haven' (WTH) London, with the value of their assets tending to be denominated in pound sterling.

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Prime London is a Ponzi cubed. The merest suggestion that Bernanke is about to stop printing and prices will collapse. And when they do Carney and Osborne will be left fighting a desperate rearguard action to save the entire, sordid enterprise of UK plc from the forces of entropy and decline. The clock is running down.

There will be some deflation which will help the little debt free guy and screw the big supermarkets and the over borrowed?

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“It [the PCL market] is more overvalued than we’ve ever found it to be before - and our model goes back to 1985,” said Danny Gabay, a director at Fathom and former Bank of England economist. “Demand is not inexhaustible and supply is not inelastic.”

According to Fathom, the three key factors driving PCL prices are the value of the pound, as it impacts how attractive properties look to foreign buyers; the performance of global equity markets, as they act as a proxy for people’s wealth; and the “safe haven” phenomenon whereby people have bought into London as a hedge against the euro.

An economist's "model" (we know how good those are), driven by difficult-to-quantify and/or subjective inputs. Which only includes a single completed boom/bust cycle. Nice bit of headline-grabbing though.

Comparing London against national measures has becoming increasingly irrelevant as the world has shrunk. It's peers are to be found elsewhere in the global village.

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Foreign buyers leaving their properties empty is a good thing for London (according to politicians). I hope they can find people to serve their coffees, get their homes cleaned and empty their rubbish in the future because the way it's going, no-one on the minimum wage will be able to afford to live in London. Forget commuting from outside, it's too frigging expensive.

Have you followed any of the threads here about in-work-benefits?

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If they do, it's going to spook and hurt a lot of foreign owners who've already invested in 'safe-haven' (WTH) London, with the value of their assets tending to be denominated in pound sterling.

Partly depends how leveraged they are. Plus there are no doubt "greater fools" out there who will be drawn in by London property becoming cheaper again, especially if sterling depreciation outpaces PCL HP inflation.

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Estate agents round here (E14) predicting 'double your money' on property within five years. Where's this money going to come from?

It stinks like a bubble. Over half a million for a poxy flat? Wages being driven down, hmm. I smell the excrement of a bull.

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Estate agents round here (E14) predicting 'double your money' on property within five years. Where's this money going to come from?

It stinks like a bubble. Over half a million for a poxy flat? Wages being driven down, hmm. I smell the excrement of a bull.

200 quid for a loaf.

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When they calculate Britain's trade deficit do they include the export of London's houses?

I have a mental picture in my mind of some one owning an expensive London property that made his money out of selling electronic pets the tamagotchi all now filling the land fill sites of Britain however the property will hold value forever.

I would rather own London property than hold gilts to the same value.

Edited by gf3

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Ripple effect:

Those who couldn't afford Chelsea went to Fulham.

Those who couldn't afford Fulham went to Putney.

Those who couldn't afford Putney went to Roehampton, Balham, Tooting, Raynes Park and New Malden. All now unaffordable.

The investors are starting on the East End now and doing their best to push prices up.

& All "buyers" will have to take out a

MASSIVE PREDATORY LIAR LOAN

to "afford" the pig-sties there.......

I am absolutely speechless at how G Osbourne has fallen for this one......

I reckon the Banksters have completely blackmailed him...... They have basically said to him "Do this, or else we pull the plug and we ALL go down....."

=====================================

We are witnessing History in the Making here imho.......

This is the South Sea Bubble, Tulipmania & Railway Mania all wrapped up together as The World's Greatest Ever Ponzi/pyramid Scam x 1,000,000 :rolleyes:

AND --- Osbourne has completely lost the plot..... When this baby goes down, he joins Gordon Idiot-Brown as a fellow-member in the Pantheon of Morons.... :rolleyes:

=====================================

Edited by eric pebble

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(...)

I am absolutely speechless at how G Osbourne has fallen for this one......

(...)

We are witnessing History in the Making here imho.......

This is the South Sea Bubble, Tulipmania & Railway Mania all wrapped up together as The World's Greatest Ever Ponzi/pyramid Scam x 1,000,000 :rolleyes:

AND --- Osbourne has completely lost the plot..... When this baby goes down, he joins Gordon Idiot-Brown as a fellow-member in the Pantheon of Morons.... :rolleyes:

=====================================

+ 1

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Nice if it happened but monetary policy will do everything to keep the £ down, even if it means starving the natives through excessive inflation.

Foreign buyers leaving their properties empty is a good thing for London (according to politicians). I hope they can find people to serve their coffees, get their homes cleaned and empty their rubbish in the future because the way it's going, no-one on the minimum wage will be able to afford to live in London. Forget commuting from outside, it's too frigging expensive.

It doesn't matter. Millions more low paid foreigners can be crammed into London to serve the super-rich. It's already happening. Multiple occupancy is the norm in London (six people crammed into flats designed for two), beds-in-sheds are becoming increasingly common also. The next logical step will be huge hall-of-residence type jerry built flats in the cheaper parts of London, or prison-hulk residential boats on the Thames (downriver of course).

Edited by Austin Allegro

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Am I the only one shocked that the Prime Central London property market now has it's own acronym so those in the industry can save themselves a bit of time when repeating it.

Never mind that presumably intelligent teams of people are producing reports on how its future prospects are dependent on the actions of a bank thousands of miles away from it and expecting someone else to read/act on them.

When this sucker goes down, it'll be massive.

Edited by StainlessSteelCat

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  • 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%



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