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Damik

Is Finally London Bursting Now ?

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I am calling first here on HPC that the London bouble is bursting now into the proper crash (not like 2008). You have been warned. I call it the "Dubai Syndrom". The Pandora Box has been opened ....

http://www.bloomberg.com/news/2013-08-09/london-luxury-home-prices-fall-in-june.html

Home prices in seven of London’s eight most-expensive neighborhoods fell in June as the number of properties bought with cash dropped, Acadametrics Ltd. said.

...

“A fall of prices in central London could bring about a decline in the market’s expectations of the future movement of prices for the remainder of the country.”

...

“The prime areas of London have been booming ahead, but more recently they’ve come off the boil a little bit, probably because the price rises in the past have been so great,” said Matthew Pointon, a property economist at research firm Capital Economics Ltd.

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The report also says the following. Does a 68% rise over the last year sound at all plausible? If so, even something approaching a crash might leave the prices higher than in 2012 ...

Prices in the City and in Westminster rose 68.4 percent and 18.1 percent, respectively, in the 12 months through June, according to the report. Prices in all of London’s 33 boroughs rose 7.1 percent for the year. Prices in central London “have been increasing to what can only be described as ‘eye watering’ levels,” Williams said.

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The report also says the following. Does a 68% rise over the last year sound at all plausible? If so, even something approaching a crash might leave the prices higher than in 2012 ...

A 40% fall would do it!

It never ceases to amaze me that people will readily accept, welcome even, a rise of 68% but refuse to countenance a fall of of 68%, or even 40% or 50%.

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London rose partly due to being perceived as a safe haven. Gold has crashed from the high, treasuries have started to fall so it might be London prime next. A safe haven is not safe if everyone is invested in it.

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Prime Central London is the bubble's bubble.

What does the future look like for London Prime Residential?

An artificial market

The London development industry, although buoyed by a general positivity, is increasingly questioning whether the rate of central London prime residential sales value growth can be sustained. Most would agree that it is to no-one’s benefit to have an artificially created market with prices moving up far too quickly. In our experience, the more prudent developers are currently stress testing their appraisals with cautious sales value inflation forecasts or even deflation rather than simply expecting more of the same. Most funders are also demanding this assumption as part of the business case.

Source: EC Harris - London Prime Residential Development Pipeline 2012

There appears to be a fair amount of investment by funds (e.g. The Prime London Capital Fund - interesting report from their "advisers", D&G Asset Management from May 2011 here), so I don't entirely buy the narrative that prices are dominated by flight capital flows that won't reverse if prices tick down. It seems more reasonable to suggest that there were trends which precipitated the rise in the asset price but we long since passed the time when prices moved up because of those trends (e.g. Euro area banking crisis) and we've been in proper tulip territory for a while with prices moving up just because they are moving up.

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London rose partly due to being perceived as a safe haven. Gold has crashed from the high, treasuries have started to fall so it might be London prime next. A safe haven is not safe if everyone is invested in it.

+1

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Might be, let's hope so, I wish...

Don't get me wrong, it's got to happen at some point. But the establishment will make sure it won't happen for a while yet, at least until the Tories win the next election. That's my (depressing) prediction.

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Granted, a complete anecdote, but large swathes of prime central London now appear to be almost deserted. I'm thinking of the area between Harrods and Hyde Park and also some of the residential streets in Notting Hill. Now I appreciate it's the holiday season and people may be away, but this has been something I've increasingly noticed over the last few years. My thinking is that so many non-dom investors have bought in these areas that they are now depopulating. That's actually backed up by the statistics.

Census results

The result is that some of the most 'sought after' and expensive real estate on the entire planet are just empty shells with unwashed windows and flower boxes full of weeds. The local bars, restaurants and shops are soulless and empty. Bizarre.

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Might be, let's hope so, I wish...

Don't get me wrong, it's got to happen at some point. But the establishment will make sure it won't happen for a while yet, at least until the Tories win the next election. That's my (depressing) prediction.

The government will do everything in their power to prevent it happening before the election and will possibly succeed. However, if foreign investors decide to withdraw their money and invest it elsewhere, there's little the government can do about it.

As I've said before, I expect UK house prices to fall by 30% to 40% (nominal), more in London, by the end of the decade, exactly when will depend on government intervention and external factors.

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Granted, a complete anecdote, but large swathes of prime central London now appear to be almost deserted. I'm thinking of the area between Harrods and Hyde Park and also some of the residential streets in Notting Hill. Now I appreciate it's the holiday season and people may be away, but this has been something I've increasingly noticed over the last few years. My thinking is that so many non-dom investors have bought in these areas that they are now depopulating. That's actually backed up by the statistics.

Census results

The result is that some of the most 'sought after' and expensive real estate on the entire planet are just empty shells with unwashed windows and flower boxes full of weeds. The local bars, restaurants and shops are soulless and empty. Bizarre.

Two articles from the Standard last Friday:

Earn £100,000 to afford rent in central London

Workers in central London have to earn almost £100,000 to be able to rent homes defined as “affordable” by the Government and still enjoy a decent lifestyle, new research has shown.

Since 2012 the Coalition has said that any rent which is “up to 80 per cent” of market levels is deemed to qualify as “affordable”.

But in many parts of London market rents have rocketed to such levels that even 80 per cent would be very hard to manage for anyone on a five-figure salary. The research assumes a ceiling of 35 per cent of income going to the landlord, leaving enough to cover other living costs.

On that basis the income needed to pay 80 per cent of market rent on an average two-bedroom flat is nearly £100,000, in Kensington & Chelsea and Westminster according to data commissioned by the magazine Housing Today. Stuart Macdonald, editor of Inside Housing magazine, said: “Our research assumed 35 per cent of net income was spent on housing costs and reveals just how unaffordable the government’s ‘affordable rent’ is.”

In a further eight local authority areas tenants need to earn between £60,000 and £80,000 a year to pay an “affordable” rent. They are the City of London, Camden, Islington, Hammersmith & Fulham, Tower Hamlets, Wandsworth, Southwark and Brent. In London’s cheapest borough for house prices and rent, Barking and Dagenham, tenants still need to be earning nearly £40,000 a year.

Brendan Sarsfield, chief executive of Family Mosaic and leader of the G15 group of London’s largest housing associations, said: “These figures show that the affordable rent regime is not working.” London boroughs have seen rent rises of between 30 and 230 per cent between 2001 and 2011, research for estate agent Strutt & Parker has found.

The boroughs with the steepest increases were Barking and Dagenham, with a rise of 230 per cent, and Tower Hamlets, up more than 150 per cent. In Newham average rent rose by 115 per cent over the decade.

The Strutt & Parker research also found that between 2001 and 2011 the number of people renting privately in London rose by 79 per cent.

Link 1

Posh stop for elite motorists

You’d never guess, from the modest exterior of a motor service centre in south London, that it’s often the first port of call for international statesmen, sheikhs and the plain rich. And not just for problems with their cars...

Newly refurbished at great cost by Jack Barclay parent company HR Owen, it’s a far cry from the glitzy Berkeley Square showrooms, where you can buy a new or used Bentley or Bugatti. But this is where the real ownership experience begins, as I discover on an exclusive behind-the-scenes tour.

While the reception is unremarkable, the brightly lit workshop owes more to a well-run hospital ward than your average grease-on-the-floor garage.

Rows of Bentleys are nosed into 22 immaculate bays, like patients in beds. On the first half-dozen ramps Continentals and Flying Spurs are undergoing minor repairs and servicing. Other cars getting more prompt attention than you’ll ever find at A&E include a venerable but tired-looking Mulsanne Turbo, a mighty Arnage, a brace of royal cars about which I’m forbidden to write a word (other prestige marques are allowed through the doors) and a Rolls-Royce Phantom in a hermetically sealed booth that keeps out the dust.

Around the corner is a rarely seen white Excalibur, surrounded by soon-to-be-operated on Bentleys. There’s even an ethereal 1960s Rolls-Royce Wraith, with see-through Perspex roof and Lalique mascot. “It’s all about meeting expectations,” says aftersales manager David Fellowes. “And that means delivering excellence.”

Nowhere more so than in one quiet corner, where Jake Owen is piecing together miles of “spaghetti” in a rewiring job that will — when done — have cost nearly £100,000. He’s replacing the entire wiring loom in a sorry-looking Bentley Mulsanne, which — it’s clear from the bent bodywork along with the absence of engine, gearbox and seats — has been dismantled following a brutal encounter with a solid object.

The impact severed a critical piece of wiring and — as it’s the latest, high-tech “FlexRay loom” — the whole thing must be replaced in one go. It’s the first time this delicate operation has ever been attempted. Jake — the youngest master technician at Jack Barclay’s service-centre-with-a-difference — is clearly the man for the job; he assures me it will be impossible to tell that the car’s been stripped down to its basic components when, in a month’s time, it purrs back out of the showroom. Apart, of course, from the telltale trail of paperwork.

A few bays along, service manager Shahzad Alvi is gabbling into his phone as he sorts out another customer crisis. A Saudi prince ordered a pair of hand-made shoes from Sloane Street but had to fly home before he could drive his Bentley round to pick them up.

So Shahzad is establishing how — in between servicing the prince’s fleet of Bentleys — to get the footwear freighted to King Fahd International Airport. He’s a dab hand at this sort of thing. Previously, he came to the rescue of another customer who phoned from overseas in a panic when a central heating pipe burst in his Mayfair home, and another whose children temporarily “ran out of money” at university.

It’s not just a service centre where London’s elite go to get their cars serviced or stored. It’s also, it seems, where they get part-concierge service, part-personal valet-extraordinaire.

Clients can pay £25 a day to have cars pampered, cleaned, occasionally run — and delivered to them on demand. Even if that means to the Monaco Grand Prix for the weekend or Switzerland for the ski-ing. All technicians go on a special driver’s course to ensure they handle customers’ cars “with respect”, and JB also employs four highly trained chauffeurs, who must be available at the drop of a hat.

To ensure high levels of service and what Fellowes calls “transparency”, photographic dossiers of work in progress are routinely sent to clients, so they can monitor developments. For similar reasons, hidden “faults” are introduced to cars, to see if they are picked up during servicing ... “It keeps technicians on their toes,” he says.

When a head of state flies into the capital, it’s commonplace for a Jack Barclay technician to be put on 24-hour call. You never know when a car might need that extra bit of pampering. Or when an outing to a top restaurant suddenly means those hand-made shoes are needed again, double-quick.

Link 2

As an anecdotal, the buses through Fulham and Kensington have been quite quiet over the last couple of weeks (not that I'd expect the people who own said properties to be taking the bus) and a Bahrainian couple I know come over here in the summer to get away from the heat in the Gulf.

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Granted, a complete anecdote, but large swathes of prime central London now appear to be almost deserted. I'm thinking of the area between Harrods and Hyde Park and also some of the residential streets in Notting Hill. Now I appreciate it's the holiday season and people may be away, but this has been something I've increasingly noticed over the last few years. My thinking is that so many non-dom investors have bought in these areas that they are now depopulating. That's actually backed up by the statistics.

Census results

The result is that some of the most 'sought after' and expensive real estate on the entire planet are just empty shells with unwashed windows and flower boxes full of weeds. The local bars, restaurants and shops are soulless and empty. Bizarre.

Think your observation was backed up recently with power usage as well. Sure there was a post on here about it or somewhere else.

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nice try. i said in March London would collapse before the end of the year. i still think it will...the prices are insane.

I will forgive you Sir it if is the case ... God bless renters and people with no aquity ...

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PCL/London rents are falling too. The siege may be ending, and we can break-out.

PCL has topped out. Last opportunity for smart sellers to cash out, and the mugs to keep holding expecting further value gains.

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If London goes down the house price index`s will go negative rapidly as London (especially prime ) have been skewing the numbers for a long time now ,bring it on

Yes, I will be watching the bbc again then, just to see the faces on them, hopefully C*untway will have the silly smile wiped off his. The way he nearly giggled recently saying savers were once again shafted and mortgage holders and debt holders would have "their wealth (WTF?) protected" made me sick.

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Yes, I will be watching the bbc again then, just to see the faces on them, hopefully C*untway will have the silly smile wiped off his. The way he nearly giggled recently saying savers were once again shafted and mortgage holders and debt holders would have "their wealth (WTF?) protected" made me sick.

:lol:

Conway should have been fried first time around. Lucky boy they eased things all the way to help debtors. Now options are limited, especially as Rest-of-The-World/China/South Korea ect, has more of their own troubles recoiling back onto themselves.

Times running out for his over-borrowed HPI debt-mules.

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Yes, I will be watching the bbc again then, just to see the faces on them, hopefully C*untway will have the silly smile wiped off his.

Oh BBC. Obviously another HPI debt-is-wealth person I can't place for the moment. There's so many of them in media-land.

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:lol:

Conway should have been fried first time around. Lucky boy they eased things all the way to help debtors. Now options are limited, especially as Rest-of-The-World/China/South Korea ect, has more of their own troubles recoiling back onto themselves.

Times running out for his over-borrowed HPI debt-mules.

Nobody does smug like Declan Curry, but Conway does a gut wrenching miserable when he's forced to report "bad" news.

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I am calling first here on HPC that the London bouble is bursting now into the proper crash (not like 2008). You have been warned. I call it the "Dubai Syndrom". The Pandora Box has been opened ....

http://www.bloomberg.com/news/2013-08-09/london-luxury-home-prices-fall-in-june.html

Home prices in seven of London’s eight most-expensive neighborhoods fell in June as the number of properties bought with cash dropped, Acadametrics Ltd. said.

...

“A fall of prices in central London could bring about a decline in the market’s expectations of the future movement of prices for the remainder of the country.”

...

“The prime areas of London have been booming ahead, but more recently they’ve come off the boil a little bit, probably because the price rises in the past have been so great,” said Matthew Pointon, a property economist at research firm Capital Economics Ltd.

In order for there to be a crash there has to be a trigger. The gunshot that starts the stampede.

There has been no trigger and therefore a crash is not underway.

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Oh BBC. Obviously another HPI debt-is-wealth person I can't place for the moment. There's so many of them in media-land.

Sorry, Conway is Sky, shows my extensive knowledge of the idiot lantern. In that case I will be flicking between both channels to see the faces on them :lol:

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Granted, a complete anecdote, but large swathes of prime central London now appear to be almost deserted. I'm thinking of the area between Harrods and Hyde Park and also some of the residential streets in Notting Hill. Now I appreciate it's the holiday season and people may be away, but this has been something I've increasingly noticed over the last few years. My thinking is that so many non-dom investors have bought in these areas that they are now depopulating. That's actually backed up by the statistics.

Census results

The result is that some of the most 'sought after' and expensive real estate on the entire planet are just empty shells with unwashed windows and flower boxes full of weeds. The local bars, restaurants and shops are soulless and empty. Bizarre.

London seems to be fuelled by billionaire foreign investors and bankers alone.

People deep into their careers with what should be enviable salary can maybe scrape a 1 bed flat in Hackney for £250k with some help from the bank of Mum and Dad or slog in from places like Milton Keynes.

With the non-money down self-cert days long gone the London market continues to baffle.

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