Jump to content
House Price Crash Forum

London Crash Trigger


Recommended Posts

  • Replies 59
  • Created
  • Last Reply

Top Posters In This Topic

It's well documented that the Prime London market (top of the ponzi) has already started to stall. It's worth noting at this point that globally all of the greater fools have been exhausted.

Not only that but yields on Prime London property are already down to 3.6% which will soon be touching base with the rates on 10 year US treasuries (currently about 2.80%).

I would expect a sell off of Prime London property if you can get a better yield in bonds AND prices are not rising.

If savvy/greedy investors decide that they can make more money outside of London property and do decide to sell off before any potential falls, then this will suerly push prices down. Now, if banks are highly leveraged in London property (which they are bound to be as the bankers live their and own it) then it could spell another bail out/in round causing upward pressure on bond rates.

And there you have a potential positive feedback loop.

I'm moving back to London next month from Oxfordshire, and while the house we're renting isn't exactly prime, it's a nicer family house in Zone 2. The house just sold last month, and the gross yield is 2.5%. The only way these prices make sense is if you believe that central banks are out to create an inflationary blow out of asset prices (which they might very well do), but otherwise, prices simply don't add up.

Edited by richc
Link to post
Share on other sites

It's created some odd banding locally.

100-250k nasty - local family housing

200-400k not nasty - retiree or holiday home

400-800k just sit on market flapping between available and SSTC

800k+ London downsizers

......downsizers will not downsize their total net worth......they will make sure they have sufficient to keep themselves comfortable....comfortable means spending earnings, pensions and savings in the local community......rich downsizers that in real terms are better off downsizing or sideways moving, can and will create good employment in local areas and knock on jobs for local people....win.win. ;)

Link to post
Share on other sites

....if you believe that central banks are out to create an inflationary blow out of asset prices (which they might very well do), but otherwise, prices simply don't add up.

I don't believe that you can have a sustainable asset inflation when you have underlying wage deflation caused by globalization and automation. - in fact that's one to add to my signature.

Link to post
Share on other sites

I don't believe that you can have a sustainable asset inflation when you have underlying wage deflation caused by globalization and automation. - in fact that's one to add to my signature.

With the railway mania it took two bank collapses before they did something about it.

2nd bank collapse is quite possible if you ask me.

Link to post
Share on other sites

Realistically mortgage interest rates are not going to fall from here in, even if there is another bank collapse (which is likely).

Agreed. And now they removed the Funding for Lending scheme support for mortgages. I do not see any chance for cheaper mortgages.

Link to post
Share on other sites

Probably true but lots of taxpayer money available for more interest-free loans to keep the prices rising, HtB 1 on steroids and maybe an interest free loan as part of HtB 2 in addition to the guarantee. Lots of options to keep HPI going ... and before people say 'no chance' who would have expected to see a Tory government introducing HtB1 and HtB 2 plus FLS for mortgages when everyone said they were stupid ideas.

HtB1 free interest is coming from the builders. There is no free interest in HtB2, only a free government guarantee. Government and BoE removed the mortgage FLS to give a signal. Housing benefit is caped now in London. New taxes on foreigners and BTL. AFAIK I do not see the government spending any more money on the London housing.

And even if they do the London prices have been growing so quickly that you would need sooner or later negative interest rates.

Edited by Damik
Link to post
Share on other sites

Agreed. And now they removed the Funding for Lending scheme support for mortgages. I do not see any chance for cheaper mortgages.

I wish it was true that cheaper mortgages were impossible

Unfortunately it is within the Government/BOE's capabilities to do any or all of the following:

- reduce base rate to zero

- reduce base rate below zero

- reintroduce Funding for Lending for mortgages

- underwrite the whole mortgage market on whatever rates they want through a Freddie Mac equivalent

- reintroduce MIRAS

- extend HTB1 (the 20% equity loan which is interest-free for five years) to apply to all sales, not just new build

- cut the deposit requirement for HTB2 to 2.5% or indeed zero

- abolish stamp duty

Not sure this matters much in respect of the overdue PCL crash which has to happen sooner or later regardless

Link to post
Share on other sites

Well I am off work sick and there was just an item on the London news about the Walthamstow bubble!! Prices up 50% in a year!

The only thing about London is that I have been waiting for the crash since 2004 and dont see it coming any time soon. There are so many people waiting to buy that even if the prices dropped there would be massive demand.

Luckily I now live in Edinburgh. Wont ever own a million pound house but then again I have a great house, can go sailing after work and dont have to go on the tube or sit on the M25!!

Link to post
Share on other sites

Well I am off work sick and there was just an item on the London news about the Walthamstow bubble!! Prices up 50% in a year!

The only thing about London is that I have been waiting for the crash since 2004 and dont see it coming any time soon. There are so many people waiting to buy that even if the prices dropped there would be massive demand.

Luckily I now live in Edinburgh. Wont ever own a million pound house but then again I have a great house, can go sailing after work and dont have to go on the tube or sit on the M25!!

Why don't rents rocket? This is what I can't get my head around.

Link to post
Share on other sites

Well I am off work sick and there was just an item on the London news about the Walthamstow bubble!! Prices up 50% in a year!

The only thing about London is that I have been waiting for the crash since 2004 and dont see it coming any time soon. There are so many people waiting to buy that even if the prices dropped there would be massive demand.

Luckily I now live in Edinburgh. Wont ever own a million pound house but then again I have a great house, can go sailing after work and dont have to go on the tube or sit on the M25!!

They're 'waiting to buy' because they see the prices rising

If they saw the prices falling, they would be waiting

Link to post
Share on other sites

Why don't rents rocket? This is what I can't get my head around.

Rents are a function of income + supply

House prices are a function of credit + supply.

If you really want rents to rocket then the banks need to start lending rent money at 3% interest only. Sheeple would then go and outbid others to live in better areas where there are less immigrants and the schools are better etc. Those without access to credit will live in the Ghettos and shanty towns of Newport, Margate and Weson-super-mare.

Link to post
Share on other sites

Rents are a function of income + supply

House prices are a function of credit + supply.

If you really want rents to rocket then the banks need to start lending rent money at 3% interest only. Sheeple would then go and outbid others to live in better areas where there are less immigrants and the schools are better etc. Those without access to credit will live in the Ghettos and shanty towns of Newport, Margate and Weson-super-mare.

I'm just baffled that I'm living in a super-prime area in a lovely Victorian house accumulating savings, and yet people look on us with pity because we don't own.

It's bizarre.

Link to post
Share on other sites

Why don't rents rocket? This is what I can't get my head around.

Rents are falling (in London).

If you've got lots of overseas speculative property investment occuring then many of those assets naturally become rentals.

The younger generations are starting to see shared rental occupancy as a norm - even after marriage - there is no kudos to renting a bit pad right now - they are finding ways to pay less.

Low or negative rental yields can be justified if the asset value is appreciating to compensate.

I guess at some point a peak valuation is reached, reality starts to bite on yields and investors start to run for the exits.

Osborne putting a long date on the overseas CGT and Carney talking up coming measures to cap HPI feel a bit like dog whistles - "these asset valuations are peaking in 2015, don't say you weren't warned"

Link to post
Share on other sites

I'm just baffled that I'm living in a super-prime area in a lovely Victorian house accumulating savings, and yet people look on us with pity because we don't own.

It's bizarre.

Oh, and landlord replaced our boiler with a snazzy new one (total cost circa 2K), which saves us ~50 quid a month in energy bills, which is greater than the 25 quid the rent went up last year. What inflation?

Link to post
Share on other sites

Rents are falling (in London).

If you've got lots of overseas speculative property investment occuring then many of those assets naturally become rentals.

The younger generations are starting to see shared rental occupancy as a norm - even after marriage - there is no kudos to renting a bit pad right now - they are finding ways to pay less.

Low or negative rental yields can be justified if the asset value is appreciating to compensate.

I guess at some point a peak valuation is reached, reality starts to bite on yields and investors start to run for the exits.

Osborne putting a long date on the overseas CGT and Carney talking up coming measures to cap HPI feel a bit like dog whistles - "these asset valuations are peaking in 2015, don't say you weren't warned"

When's the election again?

Link to post
Share on other sites
The only thing about London is that I have been waiting for the crash since 2004 and dont see it coming any time soon. There are so many people waiting to buy that even if the prices dropped there would be massive demand.

You sound exactly like those property-twins with their BTL empire, in 2007, just before the crunch hit. Credit conditions/interest rates vs debt levels put a crunch on things late 2007, and prices fell. Buyers not as willing or able to pay previous prices. Some sellers blinked and sold for less, causing value of entire market to fall.

Until later, with many such investors saved and back to HPI... thanks to Gov's/BoE's extraordinary measures to prevent hpc and reflate prices... and flight from overseas. Not helped by the attitude of some soft-hearted weapons, enemies of the young, on this forum who worry for people who paid x2-x3 what I think their homes are worth... now valued at x4 in places thanks to reflation.

We've seen our properties, from the first ones we bought, doubling almost tripling in value, and that's been in 8 years. and I think quite frankly it would be naive to think that over the next 10 years that you're not going to see at least 50%.

We're still buying at the moment. 2007 looks like it will still be a promising year. And I think this is part of the reason why a crash is sometimes prevented, because there's so many people looking to get on the property ladder, and looking to buy property, that any slowdown in the market or decrease in prices is actually seen as a buying opportunity - and that prevents it from sinking back too far.

I've no doubt that in 5 or 10 years time we'll look back at 2007 and say "Wowwww, wasn't everything cheap then."

@ 7:00 minutes in http://www.youtube.com/watch?v=htpjBOFgGoo

Notice Putin last week saying some serious stuff about stopping same levels of future capital flight from Russia, much of which must have hit London. Values depend on what new buyers are willing and able to transact at.

Link to post
Share on other sites

Why don't rents rocket? This is what I can't get my head around.

If they did there wouldn't be many London employers who could meet the higher price.....and what person would bother to work in London knowing that most of their earnings after tax would be going on rent, travel, and CT.

Hardly worth the effort. ;)

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...
  • Recently Browsing   0 members

    No registered users viewing this page.

  • 441 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.