Is The Housing Market Collapse Imminent ?

[lastlaugh]

I'll say it till I am blue in the face - to anyone east of Greece, losing 90% on a house in London is better than losing 100% to your government.

Yes, but why would someone "east of Greece" want to lose 90% on a house in London if they could lose 50% on a better investment? Besides, it's a bizarre investment strategy that relies on other parties willing and happy to bear losses.

I don't deny there is a wall of hot money flowing out of Asia, but I would expect Asian investors, like everyone else, to be expecting positive returns from London property. And if so, then many investors will be leveraged. But the fundamentals are still lacking - residential yields are below 3%. Positive returns are only happening because of the flow of money, which is flowing because of the positive returns. It's a ponzi scheme!

Now there are a lot of clever people in China, but much of what passes for business there is actually cronyism. I would wager the money flowing into London is from the latter, wanabe tycoons who aren't savvy enough to see the risks they've been sold by shiny-suited London wide boys. (London Bridge anyone?) If the Chinese money is leveraged then they will be vulnerable sooner or later to margin calls. My point being that London could quickly go out of fashion with the Asians, and the flow of money could stop and even reverse very quickly. It could take 10 years - but it could take a lot, lot less. I'm interested to see how much of a boot - if any- Osborne's Autumn Statement puts into foreign ownership.

[1929crash]

I'm more likely to stand out side parliament with a placard than vote for any of them.

+1

I think that Carney has started to panic about the bubble, and this may well burst it.

Plus the fact that there is nothing to sustain it other than the help to Buy schemes - both English and Welsh variants.

[wherebee]

Beg to differ.

Chinese/Asians can't afford prime London property, they make up just a tiny minority of buyers (below).

Since the most likely trigger for a UK house price crash is a worldwide correction in bond and stock market prices starting in Asia, Fu Manchu is almost certain to be potless before he gets anywhere near Limehouse.

These stats make me laugh. A lot of the purchases will have been through companies and trusts set up in the UK, Channel Islands, IOM, Lux, etc. These appear as 'european' or 'UK' in the stats.

Edited November 29, 2013 by wherebee

[steve99]

IMO prices troughed in 2009 on a nominal basis or 2012/13 on a real basis. After a real correction of about 20% in the south and about 40% in the North, it's hard to see that we have a further imminent correction just around the corner. It would be unusual for prices to go negative in the foreseeable future with an economic recovery firmly rooted and a rising price trajectory which still has about 10% to go to achieve its 2007 nominal highs. After 2015 it is anybody's guess, by which time we may have just about got back to where we were in 2007 and that would still represent one huge inflation adjusted fall.

Whats this nominal/ real??? forget inflation when working out the 'Real' inflated price drop./rise. The only thing that counts is nominal. Why? Because our wages are not increasing in 'real' terms, jobs are insecure and we are working longer hours for the same pay and in many cases for less. If you lose your job then many will not get the same wage next time if at all. I dont know anyone that is getting wage rises in line with the falsely calculated CPI never mind in terms of real inflation therefore wages in all reality are dropping. The other aspect related to this is the ignored inflation in very real terms for all our essential needs, energy, food and transport. These things have gone up exponentially in recent years and as such also cut into our real wages.

As an aside to this, interest rates will only rise when wages increase,, this is what happened in the 70's. Interest rates were applied when wage rises were calculated each month, price inflation has never been the concern of government or central banks (as per today for eg) only wage inflation. They call this wage push inflation which really means that workers can cause wages to rise. Now of course the preferred options are to either offshore jobs, automate production or import cheap labour hence we have no real pricing power anymore and thus the govt has no reason to raise interest rates. All this was designed back in the 1950's - 1970's by US centric right wing think tanks whos agenda was No Unions, freedom of the banks, perma debt for the middle and working class, open borders re labour allocation and a host of other things that we are living with today.