Bank Raises Alarm Over New House Price Bubble

[Bruce Banner]

http://www.thetimes.co.uk/tto/news/

Discussing the front pages on BBC News, last night, we had...

Presenter... "Lot's of people say that it's going to crash at some point and property prices will come down"

Reviewer... "They don't care, as long as it crashes after May 2015, 'it's not our problem boss'"

Of course, it's not a new bubble, just the existing one pumped up some more!

[interestrateripoff]

Reviewer... "They don't care, as long as it crashes after May 2015, 'it's not our problem boss'"

They don't care if they don't win the election. If they win the election it will be all hands to the pump again to stop it from crashing and keep the bubble going.

[Mr 0.01%]

They don't care if they don't win the election. If they win the election it will be all hands to the pump again to stop it from crashing and keep the bubble going.

It's amazing that more people don't realise, or at least care, that they're all being set up for a big fall - whether that's in the short term or long term.

Sentiment does seem to be changing a bit tho...

Edit: typo

Edited March 28, 2014 by Mr 0.01%

[slacker]

I'm not seeing where the fall is going to come from now.

The boomers have just been given a cash release so less reason to sell.

The millenials are 'happy' to rent.

Very few mortgages in existence, those that exist are mainly fixed for 2-5 years.

Chinese/Russians won't be rushing to liquidate their offshore nesteggs.

BOE has already said when rates rise it will be very slow and 0.1% increments.

Osborne has shown no intention to let prices drop.

I heard inheritance tax changes are coming (if Tories win) that will mean people don't have to pay tax if property is less than 1M. So they're all coming back on as rentals.

There are a dozen schemes I can think of to keep these plates spinning for a decade.

My wife does a bit for a BTLer and he hasn't got enough hours in the day to do all the borrowing applications he wants right now.

When I look at the opposing argument - I can't think of a single substantive reason that prices will drop other than they are at record highs - but previous record highs often had clear blue water between the preceding high - so there could be a long way to go yet - and the regions haven't started bubbling yet.

It's basically down to whether a blackswan event happens and the last blackswan got bailed out.

[Wurzel Of Highbridge]

And the really frustrating thing is that the 'they' you refer to above could refer to Labour or Conservative in equal measure.

Who represent their main voting block (supposedly)

Edited March 28, 2014 by Wurzel Of Highbridge

[underscored]

I'm not seeing where the fall is going to come from now.

The boomers have just been given a cash release so less reason to sell.

The millenials are 'happy' to rent.

Very few mortgages in existence, those that exist are mainly fixed for 2-5 years.

Chinese/Russians won't be rushing to liquidate their offshore nesteggs.

BOE has already said when rates rise it will be very slow and 0.1% increments.

Osborne has shown no intention to let prices drop.

I heard inheritance tax changes are coming (if Tories win) that will mean people don't have to pay tax if property is less than 1M. So they're all coming back on as rentals.

There are a dozen schemes I can think of to keep these plates spinning for a decade.

My wife does a bit for a BTLer and he hasn't got enough hours in the day to do all the borrowing applications he wants right now.

When I look at the opposing argument - I can't think of a single substantive reason that prices will drop other than they are at record highs - but previous record highs often had clear blue water between the preceding high - so there could be a long way to go yet - and the regions haven't started bubbling yet.

It's basically down to whether a blackswan event happens and the last blackswan got bailed out.

It is when this sentiment happens, that it goes BANG.

I see London property as heavily driven by Treasury QE.

[Wurzel Of Highbridge]

I'm not seeing where the fall is going to come from now.

Mortgage Interest rate rises caused by borrowers defaulting. This increases the risk associated with lending money therefore interest rates need to be higher otherwise the lender would be losing money on all the loans that they are making.

The defaults do not necessarily have to begin to the UK. For example if you have a high level of defaults in China, then lending there becomes riskier and you must lend at a higher interest rate. It then makes lending to India more risky as they trade with China and defaults in China would negatively affect their risk. Ultimately the 'global' risk rises and interest rates globally rise for their record lows.

[R K]

Re the headline (and as per my thread on it y'day) the Bank didn't 'raise alarm' at all.

The FPC said they were 'remaining vigilant' and 'monitoring closely'.

The Daily Hate today has a pull out section title 'how to profit from the housing boom'.

Edited March 28, 2014 by R K

[fluffy666]

And the really frustrating thing is that the 'they' you refer to above could refer to Labour or Conservative in equal measure.

Fun facts:

- Based on the last election, a Labour-Tory coalition would represent 43.3% of the electorate. (34% of the population).

- A Lab/Lib/Tory coalition would only represent 59% of the electorate, or 47% of the population, it would be the only government that could even vaguely claim a mandate.

Given current turnouts, if you could get 1 person in 3 to bother to vote for you, you'd win by a landslide.

[slacker]

Mortgage Interest rate rises caused by borrowers defaulting.

I'm not see that logic any more - it's more likely that middle income earners pay for defaults via some bail-out mechanism.

Exactly the demographic that doesn't have mortgages right now.

[Wurzel Of Highbridge]

Fun facts:

- Based on the last election, a Labour-Tory coalition would represent 43.3% of the electorate. (34% of the population).

- A Lab/Lib/Tory coalition would only represent 59% of the electorate, or 47% of the population, it would be the only government that could even vaguely claim a mandate.

Given current turnouts, if you could get 1 person in 3 to bother to vote for you, you'd win by a landslide.

Vote for none of the above.

[slacker]

I'm not see that logic any more - it's more likely that middle income earners pay for defaults via some bail-out mechanism.

Exactly the demographic that doesn't have mortgages right now.

... some of the mortgage holders I knew in 2009 dip ended up minting it by being on trackers which enabled them to pay down principal and have now flipped over to *super* low 5 year terms because they are borrowing is below 50% LTV

Edited March 28, 2014 by slacker

[zugzwang]

It is when this sentiment happens, that it goes BANG.

I see London property as heavily driven by Treasury QE.

Latterly, US QE and capital flight from HK, China and Russia.

Everything is traded with margin and leverage. The ability to satisfy your margin requirements is the key determinant of change. Get a margin call you can't pay then you'll have to start liquidating assets. Sentiment is largely for Hallmark anniversaries.

[underscored]

Latterly, US QE and capital flight from HK, China and Russia.

Everything is traded with margin and leverage. The ability to satisfy your margin requirements is the key determinant of change. Get a margin call you can't pay then you'll have to start liquidating assets. Sentiment is largely for Hallmark anniversaries.

Indeed. I have no idea how anyone would verify that a foreign purchase of a UK property is "cash", sure it looks like cash, but I doubt anyone delves deeply into whether it is borrowed form somewhere.

[The Masked Tulip]

I am certain all political parties will try to keep house prices rising. The shock has to come from outside.

[TheCountOfNowhere]

I am certain all political parties will try to keep house prices rising. The shock has to come from outside.

I think many of the 1%-ers were caught out in 2007....they have a chance to sell now and minimize their losses. Was that the plan all along....how many will take their opportunity to get out....any MPs sold up recently ?

The whole thing is a sham....there is no new bubble, their is a minority in London profiting ( losing ) massively and the rest of the country is falling or floating around inflation.

The media hype is a scandal in itself and will hopefully just hasten the end of this nonsense.

[dances with sheeple]

I'm not seeing where the fall is going to come from now.

The boomers have just been given a cash release so less reason to sell.

The millenials are 'happy' to rent.

Very few mortgages in existence, those that exist are mainly fixed for 2-5 years.

Chinese/Russians won't be rushing to liquidate their offshore nesteggs.

BOE has already said when rates rise it will be very slow and 0.1% increments.

Osborne has shown no intention to let prices drop.

I heard inheritance tax changes are coming (if Tories win) that will mean people don't have to pay tax if property is less than 1M. So they're all coming back on as rentals.

There are a dozen schemes I can think of to keep these plates spinning for a decade.

My wife does a bit for a BTLer and he hasn't got enough hours in the day to do all the borrowing applications he wants right now.

When I look at the opposing argument - I can't think of a single substantive reason that prices will drop other than they are at record highs - but previous record highs often had clear blue water between the preceding high - so there could be a long way to go yet - and the regions haven't started bubbling yet.

It's basically down to whether a blackswan event happens and the last blackswan got bailed out.

Keep clinging to that if you wish. BBC today talking about "bad" growth numbers, but also people being asked to review pensions they may have from as far back as the 70`s, the plan being to review them (fees for someone) and maybe release/switch the funds (wringing the last drop into the Ponzi "they" hope) we have reached the back of the couch moment for property IMO. Young people hurting from too high rents will just move home, and how many people do you think have substantial enough pension pots to have "less reason to sell".

Anyone with substantial mortgage debts will be getting a margin call (why else would the government let them access their funds?) They will end up no better off, they just end up with a house they can`t sell that they paid/MEW`ed too much for/from?

Edited March 28, 2014 by dances with sheeple

[dances with sheeple]

Fun facts:

- Based on the last election, a Labour-Tory coalition would represent 43.3% of the electorate. (34% of the population).

- A Lab/Lib/Tory coalition would only represent 59% of the electorate, or 47% of the population, it would be the only government that could even vaguely claim a mandate.

Given current turnouts, if you could get 1 person in 3 to bother to vote for you, you'd win by a landslide.

Many who have never voted, or not for a long time (I last voted pre-Scottish Devolution) will be voting UKIP.

[slacker]

They will end up no better off, they just end up with a house they can`t sell that they paid/MEW`ed too much for/from?

You're talking about the main voting demographic though.

These are made men.

Until another demographic starts voting the politicians are going to keep redistributing cash from everyone else to the ones that do.

[dances with sheeple]

You're talking about the main voting demographic though.

These are made men.

Until another demographic starts voting the politicians are going to keep redistributing cash from everyone else to the ones that do.

Well in this case they are re-distributing their OWN cash to them, and as I said, will there be margin calls? Can the mortgage bank find out if people have released pension money?

I am sure many Mortgage/Mew slaves will want to spend the pension cash and keep the mortgage on the never never, but will the government/banks let them?.....Tune in next week boys and girls when George Osborne will be visiting a house near you to have a rummage down the back of the settee for pennies to keep the Ponzi going!

[cybernoid]

I'm not seeing where the fall is going to come from now.

…

BOE has already said when rates rise it will be very slow and 0.1% increments.

First of all the cost of borrowing is not only determined by the base rate. The banks will make their money somehow, look at the recent BTL whining about rate increases.

Also it is helpful to look at the investment argument to determine value. Rents have a close relationship to affordability whereas prices are all about credit. When the price runs away the yield suffers, because the rent cannot also run away at the same rate, or anything like it.

The real world outside of free credit is an anchor on prices, and this supposed 'recovery' is just a blip on the accelerator caused by HTB as an election bribe, as all the sensible finance commentators are saying.

Without a sustainable recovery you will have no wage increases (business owners know better than to believe we are in a recovery), without wage increases you can have no more rent, with rents relatively stationary you have poor yield and with poor yield you have no (serious) investors.

The fact that the papers are actually talking about a bubble now and that london is running away like crazy AND those in high places are finally getting around to expressing concern about this is an interesting development. Their attempted cooling of this situation might over compensate on the downside as much as HTB has plainly blown it all up far more than they had hoped. Its certainly a precarious situation, neither 'side' can deny that.

[zugzwang]

Keep clinging to that if you wish. BBC today talking about "bad" growth numbers, but also people being asked to review pensions they may have from as far back as the 70`s, the plan being to review them (fees for someone) and maybe release/switch the funds (wringing the last drop into the Ponzi "they" hope) we have reached the back of the couch moment for property IMO. Young people hurting from too high rents will just move home, and how many people do you think have substantial enough pension pots to have "less reason to sell".

Anyone with substantial mortgage debts will be getting a margin call (why else would the government let them access their funds?) They will end up no better off, they just end up with a house they can`t sell that they paid/MEW`ed too much for/from?

Any cash Osborne can extract from the pensions industry will come at the cost of profits and jobs in insurance and banking. That money ordinarily would have been lent out and leveraged in margin accounts so that's even more growth lost from the broader economy in addition to the fees involved. The bond market is likely to reflect on the diminishing pensions aggregate by pushing up yields and making borrowing more expensive acroos the board. There's no free lunch.

[dances with sheeple]

First of all the cost of borrowing is not only determined by the base rate. The banks will make their money somehow, look at the recent BTL whining about rate increases.

Also it is helpful to look at the investment argument to determine value. Rents have a close relationship to affordability whereas prices are all about credit. When the price runs away the yield suffers, because the rent cannot also run away at the same rate, or anything like it.

The real world outside of free credit is an anchor on prices, and this supposed 'recovery' is just a blip on the accelerator caused by HTB as an election bribe, as all the sensible finance commentators are saying.

Without a sustainable recovery you will have no wage increases (business owners know better than to believe we are in a recovery), without wage increases you can have no more rent, with rents relatively stationary you have poor yield and with poor yield you have no (serious) investors.

The fact that the papers are actually talking about a bubble now and that london is running away like crazy AND those in high places are finally getting around to expressing concern about this is an interesting development. Their attempted cooling of this situation might over compensate on the downside as much as HTB has plainly blown it all up far more than they had hoped. Its certainly a precarious situation, neither 'side' can deny that.

Good post. You are right, lots of interesting things starting to happen now.

[Liquid Goldfish]

These are made men.

They'll end up sleeping with the fishes.

Edited March 28, 2014 by oldsport

[dances with sheeple]

Any cash Osborne can extract from the pensions industry will come at the cost of profits and jobs in insurance and banking. That money ordinarily would have been lent out and leveraged in margin accounts so that's even more growth lost from the broader economy in addition to the fees involved. The bond market is likely to reflect on the diminishing pensions aggregate by pushing up yields and making borrowing more expensive acroos the board. There's no free lunch.

So is this Osborne`s final Boomer Blowout so that he can win the election, and start bribing the young in five or six years time?