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London Living Through Biggest House Price Bubble Ever


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What should happen: The new rules for mortgage lending start in April 2014. Banks will take a lot more data and stress test before lending money to prospective house buyers. This should slow the house market down (if only because it takes longer to process all this new paperwork!). The BoE are waiting for two/three more months of data to confirm this. If the market doesn't slow down on the next quarterly datapoint they will instigate higher interest rates on lending to banks and force higher charges on capital to banks - negating some of the benefits of help to buy and making it less economically attractive to service borderline customers. The economy will slow a bit and credit will only be extended to the ultra-safe bets once again awaiting the next "guaranteed" trade provided by the government.

What will probably happen - Banks and estate agents will attempt to move demand forward (as applications before the deadline did not need the additional checks). Estate agents will create thousands of dummy entries asking for loans from banks and then retrospectively fill them with clients as they emerge. This is what all brokers did when they knew a good bank interest rate deal was ending. This will mean a spike in lending for the next quarter at least if not longer (remember the lending market is slooow it takes a few months to close most deals). When the rules do come in, they will also find a way around these rules by ensuring estate agents complete the forms favourably on behalf of their clients ("all in the great service"). George will hail his scheme as a success whilst politically giving the can to Mark Carney to stop any "bubble" (who could predict it?) if required. Mark knows he can't change policy as it may stop the Tories winning the election so he has to go along with it praying he can do something by May 2015. As always, that will be too late to actually do anything but hasten the crash which will probably start to occur by Oct 2015 (not a prediction just a guess)

i.e. Keep the PREDATORY LIAR LOAN system up and running.....

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I suppose in theory a rate hike would pull the plug on HPI- but then so would an invasion from Mars- of the two the latter seems more likely to happen.

I was at a meeting with a regional agent from the bank of england last week. Hell will freeze over before they raise rates significantly. 0.25 % a time if you are lucky.

So I have bought an off plan place in London!! Only logical thing to do! If prices go up by 50% I am ok. If prices go down 50% I will sell at a loss and buy a better place at 50% off.

London is never going to crash in a big way.

I think people forget that it has always been expensive? I am not sure a teacher could have afforded a nice house in Islington 50 years ago??

If we had kept 2 flats we owned in the mid 2000s and not sold and moved out I would be retired by now at 45 (and bored you might say!)!

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http://

www.telegraph.co.uk/finance/economics/10739124/London-house-price-boom-could-unravel-warns-Deutsche-Bank.html

London house prices could "unravel" in the face of a toxic mix of a strengthening pound and the Bank of England rushing through interest rate rises from next year, Europe's largest investment bank has warned.

Deutsche Bank has brought forward its expectations for the Bank to increase interest rates starting from May 2015 - raising concern among mortgage holders already struggling to service their debt.

The German lender expects rates to increase to 1pc by the end of next year, in a research note titled "Strong growth not built to last".

Coupled with the end of "easy money" on global capital markets as central banks rein in loose monetary policies, Britain's housing market could come crashing back to earth as the influx of foreign buyers dries up.

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I think people forget that it has always been expensive? I am not sure a teacher could have afforded a nice house in Islington 50 years ago??

Islington fifty years ago was a dump; nobody wanted to live there and there were very few nice houses. What you see in Islington now are the slum dwelling of the fifties which teachers bought, tarted up and sold on. Teachers would have been quite likely to have had council houses in the sixties anyway, so would not have needed to buy.

London has always been expensive but nothing like it is now. My father bought a 3 bed terrace house with garden in a zone 3 suburb in 1968 for £5000, which was twice his salary, probably not much more than a teacher's. My mother was a housewife and had no income. Imagine that now!

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Go for it!

What can go wrong?

It's different now.

I have been a bear since 1997 when we first bought in london. I was an IT contractor and my other half was a trainee doctor and we bought a plce of 94k, didnt want to stretch to 137k.

All I mean is that we are not going to go back to those sort of prices.

I think it was around 1997 when Buy to Let mortgages came in. The yield where we bought in Brixton would have been 10-15%. That's one reason why prices went up so fast.

I then got cold feet around 2005, sold up and moved to edinburgh. Was convinced it was going to be armageddon. Since then the last place we sold has gone on to double in price.

I think there are many things, not least governrment policy that prop up London prices. So by all means plan for a crash. But it may never come. I truly think it is different now, in that at this meeting I asked the guy what the natural base rate should be. 5% he said. Cue indrawn breath from everyone else in the meeting.

The population at large think interest rates being low is a good thing. Aint going to change soon.

I can see London going up another 20% and then crashing 30?

Whats your best estimate.

All the estimates on this site for the last 10 years as far as London is concerned have been way out.

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Islington fifty years ago was a dump; nobody wanted to live there and there were very few nice houses. What you see in Islington now are the slum dwelling of the fifties which teachers bought, tarted up and sold on. Teachers would have been quite likely to have had council houses in the sixties anyway, so would not have needed to buy.

London has always been expensive but nothing like it is now. My father bought a 3 bed terrace house with garden in a zone 3 suburb in 1968 for £5000, which was twice his salary, probably not much more than a teacher's. My mother was a housewife and had no income. Imagine that now!

OK maybe Islington was a bad example. A nice area of London 50 years ago was probably quite expensive!

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Islington fifty years ago was a dump; nobody wanted to live there and there were very few nice houses. What you see in Islington now are the slum dwelling of the fifties which teachers bought, tarted up and sold on. Teachers would have been quite likely to have had council houses in the sixties anyway, so would not have needed to buy.

London has always been expensive but nothing like it is now. My father bought a 3 bed terrace house with garden in a zone 3 suburb in 1968 for £5000, which was twice his salary, probably not much more than a teacher's. My mother was a housewife and had no income. Imagine that now!

+ 1. ;)

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I have been a bear since 1997 when we first bought in london. I was an IT contractor and my other half was a trainee doctor and we bought a plce of 94k, didnt want to stretch to 137k.

All I mean is that we are not going to go back to those sort of prices.

I think it was around 1997 when Buy to Let mortgages came in. The yield where we bought in Brixton would have been 10-15%. That's one reason why prices went up so fast.

I then got cold feet around 2005, sold up and moved to edinburgh. Was convinced it was going to be armageddon. Since then the last place we sold has gone on to double in price.

I think there are many things, not least governrment policy that prop up London prices. So by all means plan for a crash. But it may never come. I truly think it is different now, in that at this meeting I asked the guy what the natural base rate should be. 5% he said. Cue indrawn breath from everyone else in the meeting.

The population at large think interest rates being low is a good thing. Aint going to change soon.

I can see London going up another 20% and then crashing 30?

Whats your best estimate.

All the estimates on this site for the last 10 years as far as London is concerned have been way out.

I think using the last ten years as a financial barometer for anything, let alone property, is a bad idea, it probably will still end very badly for the overleveraged. As big and important as London is, it won`t buck global trends if they are powerful and volatile enough to re-direct cash flows?

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I think using the last ten years as a financial barometer for anything, let alone property, is a bad idea, it probably will still end very badly for the overleveraged. As big and important as London is, it won`t buck global trends if they are powerful and volatile enough to re-direct cash flows?

true.....people follow the money, safety, security....few questions asked.....set the stage, gather the behaviours. ;)

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I have been a bear since 1997 when we first bought in london. I was an IT contractor and my other half was a trainee doctor and we bought a plce of 94k, didnt want to stretch to 137k.

All I mean is that we are not going to go back to those sort of prices.

I think it was around 1997 when Buy to Let mortgages came in. The yield where we bought in Brixton would have been 10-15%. That's one reason why prices went up so fast.

I then got cold feet around 2005, sold up and moved to edinburgh. Was convinced it was going to be armageddon. Since then the last place we sold has gone on to double in price.

I think there are many things, not least governrment policy that prop up London prices. So by all means plan for a crash. But it may never come. I truly think it is different now, in that at this meeting I asked the guy what the natural base rate should be. 5% he said. Cue indrawn breath from everyone else in the meeting.

The population at large think interest rates being low is a good thing. Aint going to change soon.

I can see London going up another 20% and then crashing 30?

Whats your best estimate.

All the estimates on this site for the last 10 years as far as London is concerned have been way out.

isaac-newton-south-sea-bubble-emotions.jpg

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That's today.

- but last month

Which is true?

What Carney has said is the BoE have no 'tools' to prevent capital flows or to prevent foreign cash purchases of London (UK) property.

Basically that completely bypasses the banking/credit system and Bank of England remit.

What he claims he does have is macro-prudential counter-cyclical 'tools' to lean against bank lending for mortgages. By altering asset weightings and so on. Obviously he also has monetary policy, but has pretty much admitted they ain't going to use that to reign in credit for houses because it would also impact lending to business which they're trying to stimulate. Moreover the base rate affects lending across the UK not just in London so again he won't use it to cool speculative lending in the London housing market.

On top of which they actually WANT to stimulate the housing market to increase supply and GDP, so again he preventing a London bubble is the last thing on their minds. Hence all they're going to do is 'monitor' and 'remain vigilant'.

He's effectively given the green light to overseas property investors to blow the biggest bubble they can rather like Greenspan did in 1996. I dare say they'll give it their best shot.

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We shouldn't lose sight of the fact that the liquidity taps are still jammed wide open.

The Taper's reduced the US QE binge by $30bn/mth but the dealers are still getting around $70bn/mth from the Fed's POMO purchases. Add to that the $50-60bn QE that Abenomics is throwing at the Japanese subsidiaries of the self-same banks and the fact that the Chinese are furiously backtracking on their tighter money policy and there's clearly still an abundance of reasons for a continued asset price melt up worldwide.

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What Carney has said is the BoE have no 'tools' to prevent capital flows or to prevent foreign cash purchases of London (UK) property.

Basically that completely bypasses the banking/credit system and Bank of England remit.

What he claims he does have is macro-prudential counter-cyclical 'tools' to lean against bank lending for mortgages. By altering asset weightings and so on. Obviously he also has monetary policy, but has pretty much admitted they ain't going to use that to reign in credit for houses because it would also impact lending to business which they're trying to stimulate. Moreover the base rate affects lending across the UK not just in London so again he won't use it to cool speculative lending in the London housing market.

On top of which they actually WANT to stimulate the housing market to increase supply and GDP, so again he preventing a London bubble is the last thing on their minds. Hence all they're going to do is 'monitor' and 'remain vigilant'.

He's effectively given the green light to overseas property investors to blow the biggest bubble they can rather like Greenspan did in 1996. I dare say they'll give it their best shot.

As time goes on the picture gets clearer and the issue is worth a continued airing because for sure those involved are pretty slippery and as last year the politicians were saying the BoE does have the powers to cool a house price bubble and that was with no exclusions such as London - no details of the powers were being broadcast at the time although there were reports from behind the scenes (behind the scenes for the general public that is) of new powers more or less along the lines you describe.

Then the London bubble becomes more dramatic and Carney says he doesn't have powers to cool it (probably mainly referring to London but can anyone be completely sure of that) - so in any event a contradiction with the original claims about BoE powers.

For sure the government (government = Conservative and LibDem coalition - mentioning just to remember that the LibDems are also responsible for policy) would have powers to control capital flows and foreign cash purchases but they've evasively passed the "control the house price bubble" parcel and hope that people don't notice the pass the parcel, sleight of hand, now you see it now you don't, smoke and mirrors, tell half the story, change the story, contradict and create a diversion etc tactics.

Then the Conservative MP says the BoE does have powers to cool house prices - another contradiction in a line of contradictions.

In the meantime the unquestioning media just stands by without comment or ever asking what the people making these statements actually mean.

They should be far more transparent and open about the new powers (some hope of course if Forward Guidance is anything to go by). They should get their story straight. If house prices really take off outside of London it's a fair bet from past performance that the new powers will evaporate even further and that's no way to run a country.

Edited by billybong
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  • 442 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%



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