London Crash Trigger

[dances with sheeple]

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.

Yes, bizzare, but lots of people are very very thick.

[dances with sheeple]

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.

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.

And sales volumes never recovered. We just need rates up to finish the job now. Taper talk strong on Bloomberg today.

[roblpm]

There is no bubble, there is no bubble, there is no bubble......

OK but say the bubble bursts, there is so much demand that people would start buying even if prices were falling I think. As not everone is in it to make money, some people just want a place to live.

The other main piece on the news was on south east airport expansion, seems the government has no interest in the regions and the south east will just keep getting more congested and more expensive. Crazy really when the rest of the country (bar maybe birmingham and manchester) is empty!

[tomandlu]

OK but say the bubble bursts, there is so much demand that people would start buying even if prices were falling I think. As not everone is in it to make money, some people just want a place to live.

The other main piece on the news was on south east airport expansion, seems the government has no interest in the regions and the south east will just keep getting more congested and more expensive. Crazy really when the rest of the country (bar maybe birmingham and manchester) is empty!

If prices start falling, people will hold off. Would you buy something at £100 today if you were confident it would be £75 tomorrow?

[slacker]

If prices start falling, people will hold off. Would you buy something at £100 today if you were confident it would be £75 tomorrow?

The whole "catch a falling knife: side of it will be interesting.

Also interesting is the impact outside London. Those low HPI numbers out today include a massive relocation of funds from London to the regions.

What would regional HPI be like without the London trickle-down? almost all properties over 250K sold locally here are because of London retirees or London workers cashing out.

[winkie]

The whole "catch a falling knife: side of it will be interesting.

Also interesting is the impact outside London. Those low HPI numbers out today include a massive relocation of funds from London to the regions.

What would regional HPI be like without the London trickle-down? almost all properties over 250K sold locally here are because of London retirees or London workers cashing out.

I think there is a fair bit of that.....and they don't tend to bring debt with them, I would say it is mainly cash and often if old enough the old style index-linked pensions....would be interesting to know how much of this is happening round and about the country.

[Venger]

OK but say the bubble bursts, there is so much demand that people would start buying even if prices were falling I think. As not everone is in it to make money, some people just want a place to live.

In tighter credit / higher interest base rate / US taper / Russian capital-flight arrest (ect ect) market situation, if there were no buyers, prices/values would not fall.

We need some buyers to buy at lower prices. It's what brings the market down. The lower price they pay doesn't just bring down the value of the house they buy, but effects values of surrounding homes.

Lower price points bring in willing/able new buyers, but doesn't mean it would be end of the slide down. As evidenced 2007/2008. There weren't loads of transactions... but people buying each money at lower prices, bought the whole market down in value. (Before determined reflation strategies changed things around).

[Starla]

If prices start falling, people will hold off. Would you buy something at £100 today if you were confident it would be £75 tomorrow?

Exactly that. I saw friends hand back the keys in the early 90's and I didn't buy my first place until 1995, not through amazing judgement, simply because I was too sh*t scared to buy any earlier than that. Who wants to buy into a falling market when you don't know where the bottom is and you've got bankrupt friends.

[Wurzel Of Highbridge]

I know plenty of people here in Ireland who are still renting at 35+, they never bought in the bubble.

Not everyone is in an immediate position to buy and many of those who could buy are sucked into the easy credit bubble so in effect the number of willing and able buyers is substantially reduced.

[wherebee]

Exactly that. I saw friends hand back the keys in the early 90's and I didn't buy my first place until 1995, not through amazing judgement, simply because I was too sh*t scared to buy any earlier than that. Who wants to buy into a falling market when you don't know where the bottom is and you've got bankrupt friends.

I'd buy into a 'falling' market for the right property - but not as investment, as somewhere to live for 20 years. I'd also look to buy for cash, no debt. As such, I am probably in a minority.

Back to the OP topic - I am still seeing NOTHING to actually make a dent on foreign ownership of property in London. All the schemes proposed so far are way too easy to avoid. As others have said, watch what they DO.

The only action that would convince me that they are serious about acting in the best interests of London citizens would be:

1. CGT applies for any property non-owner occupied residential for more than 6 months at any time in the previous 7 years

2. That CGT is worked out from purchase price/sold price. Losses non tax deductible under Uk tax code

3. properties owned by a corporation/trust/PIC/foundations have a LVT annual of 5% of rateable value. This is only offsetable against rental income accrued to entities who pay corporation tax in the UK

4. council tax bands expanded to subdivide those above 1M into multiple bands, with a sliding scale. 2x council tax for properties not lived in more than 120 days per year

5. Anyone found to be non compliant faces a civil test on the asset (as per cash seizure rules under POCA); lose the case and you lose the asset 100%

6. A specialist investigation squad to identify and prosecute such cases

Until the downside cost AND chance of being caught is high, it's all just words.

Edited December 18, 2013 by wherebee