Jump to content
House Price Crash Forum
slacker

What If It Turns Out It Is Not Really Cash At All

Recommended Posts

There has been a lot of stats about the London boom being supported by foreign cash buyers and therefore being relatively low risk if property prices revert.

What if this isn't the case and these transactions look like cash but are actually holding companies or similar that have used another investment mechanism to make the purchase that doesn't appear as a direct mortgage on the property.

What if much of this seemingly foreign cash investment is actually still backed off to UK banks via this alternative mechanism.

What if these investments are leveraged as security to gain further investment.

So these investors get any profit while solvent, but the UK is still on the hook for any losses - as these losses would have to be absorbed by UK bank balance sheets which are insured by tax payers.

Share this post


Link to post
Share on other sites

I suspect much of the cash is borrowed from banks abroad then laundered exchanged into £££'s before ending up in London property.

Don't forget that 'cash' is only a tiny percentage of the money supply - everything else is credit.

Share this post


Link to post
Share on other sites

What if this isn't the case and these transactions look like cash but are actually holding companies or similar that have used another investment mechanism to make the purchase that doesn't appear as a direct mortgage on the property.

So these investors get any profit while solvent, but the UK is still on the hook for any losses

I suspect many foreign buyers appear to be cash buyers because the mortgages are arranged in their state of origin. All we see here in the UK is the cash.

It wouldn't surprise me at all if what you suggest is also happening!

Share this post


Link to post
Share on other sites

Maybe we have banks/government buying property owned by banks/government. ?

I've always thought there is something fishy about this London mega bubble and the way previously unsellable houses ( at the crazy prices being asked ) suddenly started flying off the shelves last April.

I smell a rat.

Edited by TheCountOfNowhere

Share this post


Link to post
Share on other sites

When the London mega bubble bursts it will in any event take the rest of London property down with it irrespective of whether it's cash or encumbered.

Rest of UK will of course be on the hook to bail out these millionaires whilst having their own incomes and services slashed yet further.

It's sadly inevitable now, barring some astonishing macro event such as rump UK quitting the sterling zone.

Share this post


Link to post
Share on other sites

There has been a lot of stats about the London boom being supported by foreign cash buyers and therefore being relatively low risk if property prices revert.

What if this isn't the case and these transactions look like cash but are actually holding companies or similar that have used another investment mechanism to make the purchase that doesn't appear as a direct mortgage on the property.

What if much of this seemingly foreign cash investment is actually still backed off to UK banks via this alternative mechanism.

What if these investments are leveraged as security to gain further investment.

So these investors get any profit while solvent, but the UK is still on the hook for any losses - as these losses would have to be absorbed by UK bank balance sheets which are insured by tax payers.

+1

Those numerous "cash rich foreign buyers" are just a myth.

It is "investment funds",VI's,etc. who get the virtual money from BOE at 0.5% to speculate in the property market, and then take a p**s at all of us by blaming the stupidly sky high prices on "cash rich foreign buyers".

This is why they scream from the rooftops that UK property is a "good hedge", and a "good investment" regardless of sky high prices ever going up.Of course, it is - for them only especially at 0.5% interest which I doubt they even pay that.

They never invested their own money (which they never had in the first place).

We will eventually have to bail them out + liar loan "buyers" who are 99.9% of the market.

Share this post


Link to post
Share on other sites

I actually suspect that not only is this NOT cash in origin but that somehow UK banks and finance companies are involved.

All fully integrated and arranged via the promotions of new build flats overseas.

+1.

Share this post


Link to post
Share on other sites

I suspect much of the cash is borrowed from banks abroad then laundered exchanged into £££'s before ending up in London property.

Don't forget that 'cash' is only a tiny percentage of the money supply - everything else is credit.

Yes.....Foreign banks lending to buy London property, good security risk? ;)

Share this post


Link to post
Share on other sites

Yes.....Foreign banks lending to buy London property, good security risk? ;)

There is a lot of product in the Asian market which allows people to borrow to buy London property. Australian property too, but less.

The Asian banks love it - it's a good debt for them. I'd say not that many UK banks are doing it, apart from the specialist lenders.

So yes, a lot of 'cash' buyers are actually using cash lent to them by a non-UK bank.

Share this post


Link to post
Share on other sites

There is a lot of product in the Asian market which allows people to borrow to buy London property. Australian property too, but less.

The Asian banks love it - it's a good debt for them. I'd say not that many UK banks are doing it, apart from the specialist lenders.

So yes, a lot of 'cash' buyers are actually using cash lent to them by a non-UK bank.

The would beg the question.....Why are the BRITISH government allowing FOREIGN investors to push up the cost of housing for BRITISH people.

Makes you wonder.

Share this post


Link to post
Share on other sites

The would beg the question.....Why are the BRITISH government allowing FOREIGN investors to push up the cost of housing for BRITISH people.

Makes you wonder.

Because 60% of UK MP's are buy to let landlords and sand o personally gain from it.

Share this post


Link to post
Share on other sites

The would beg the question.....Why are the BRITISH government allowing FOREIGN investors to push up the cost of housing for BRITISH people.

Makes you wonder.

Perhaps because most, if not all, foreign money is spent on new build. If you wander around London the scale of construction is astonishing. Especially for a country which has spent over half a decade in recession and a city at the very epicentre of the global credit crunch.

AFAICT most of the foreign money is actually leveraged and the actual investors don't understand the assets they've bought. I've seen sales brochures in Hong Kong promising rental yields of 7% when the reality is less than 3%. When all this construction is completed these investors need to offload to greater Asian fools. If they can't then it's game over for London property.

Share this post


Link to post
Share on other sites

Because 60% of UK MP's are buy to let landlords and sand o personally gain from it.

If that was the case that be corrupt or just morally wrong ?

Edited by TheCountOfNowhere

Share this post


Link to post
Share on other sites

Perhaps because most, if not all, foreign money is spent on new build. If you wander around London the scale of construction is astonishing. Especially for a country which has spent over half a decade in recession and a city at the very epicentre of the global credit crunch.

AFAICT most of the foreign money is actually leveraged and the actual investors don't understand the assets they've bought. I've seen sales brochures in Hong Kong promising rental yields of 7% when the reality is less than 3%. When all this construction is completed these investors need to offload to greater Asian fools. If they can't then it's game over for London property.

So when the chinese economy collapses so does londons house prices and the rest of the UK with it.

Nice, we dont have to wait for IR rates, just wait 4 weeks for the Chinese cledit clunch.

Edited by TheCountOfNowhere

Share this post


Link to post
Share on other sites

So when the chinese economy collapses so does londons house prices and the rest of the UK with it.

Nice, we dont have to wait for IR rates, just wait 4 weeks for the Chinese cledit clunch.

Not to worry. It's not as if these overextended Chinese property developers also have huge stakes in undercapitalised Chinese regional banks... :blink:

Major Chinese property developers have in recent months been buying increasingly large stakes in regional banks, posing risk that an unravelling in the real estate market could leave both lenders and builders confronting losses big enough to pose a threat to the economy, experts warn.

Those fears are expected to be amplified next week as China is set to release a report on its weakest economic growth since 2009.The prospect of a continued economic slowdown has spurred a flurry of tie-ups between Chinese property developers and commercial banks, raising questions about the motivation for these deals and the heightened systemic risk.

“The association of real estate companies and banks intertwines the destinies of the two industries and can be an explosive and dangerous mix,” said Jim Butler, chairman of the Chinese Investment Group with Jeffer Mangels Butler & Mitchell.

http://www.investing.com/news/economy-news/chinese-developers-put-all-their-eggs-in-banks%27-basket-277256

Share this post


Link to post
Share on other sites

Major Chinese property developers have in recent months been buying increasingly large stakes in regional banks, posing risk that an unravelling in the real estate market could leave both lenders and builders confronting losses big enough to pose a threat to the economy, experts warn.

Classic Ponzi - you lend us the money (or keep the spigots open) and we will keep your shareprice up so you can pretend it is all fine and dandy.

The Chinese leadership don;t want a ponzified property economy so they are suqashing it. Rightly so. It will be in their long term best interest and that of the majority of people in China. Good for them and yet more disgrace to those that run things over here.

Share this post


Link to post
Share on other sites

The would beg the question.....Why are the BRITISH government allowing FOREIGN investors to push up the cost of housing for BRITISH people.

Makes you wonder.

It's treason if you ask me.

Share this post


Link to post
Share on other sites

Is the following possible?....

Banks set up shell company to buy property off themselves, so wont pay stamp duty.

The sham company then uses HTB scheme during purchase and pump up prices.

Market crashes.

The banks then gratefully accept the governments 20% hard cash, thank you very much, and they still own the property.

Even if this is not happening, if it is remotely possible HTB should be stopped now.

Edited by TheCountOfNowhere

Share this post


Link to post
Share on other sites

Is the following possible?....

Banks set up shell company to buy property off themselves, so wont pay stamp duty.

The sham company then uses HTB scheme during purchase and pump up prices.

Market crashes.

The banks then gratefully accept the governments 20% hard cash, thank you very much, and they still own the property.

Even if this is not happening, if it is remotely possible HTB should be stopped now.

+1

That is it.Enough stories of "foreign buyers" who are "cash rich", and who are allegedly spending tens of billions of pounds on UK property.

It was reported on this forum anecdotally that the above is taking place and that certain City hedge fund has the guy who is buying 100's of properties on their behalf (and not asking for the price) in North of England.

It is natives,not foreigners buying on this scale.

Mystery of allegedly endless queue of "foreign cash rich buyers" who want to buy UK property - solved.

Share this post


Link to post
Share on other sites

+1

That is it.Enough stories of "foreign buyers" who are "cash rich", and who are allegedly spending tens of billions of pounds on UK property.

It was reported on this forum anecdotally that the above is taking place and that certain City hedge fund has the guy who is buying 100's of properties on their behalf (and not asking for the price) in North of England.

It is natives,not foreigners buying on this scale.

Mystery of allegedly endless queue of "foreign cash rich buyers" who want to buy UK property - solved.

I really think that a number are getting a bit too carried away here. Virtually no evidence for a majority of the assertions being made. Apparently that because someone else has written it, it must be a little bit true.

Presumably if this is all true it will be recorded in the land registry somewhere. Not quite sure how deliberately overpaying for stuff with massive leverage will make you rich, but there you go.

Edited by Ah-so

Share this post


Link to post
Share on other sites

I doubt a company is eligible for HTB.

Mind you, if the glorification of the corporation we're seeing by the US Supreme Court is a guide, we might all have to register as one just to vote.

Share this post


Link to post
Share on other sites

Carney said it is cash so he can't control. However, at the margins there will be mortgage borrowers. I don't know how strongly Uk lenders have lent into London. If they are taking say 25% deposit and it goes like Northern Ireland the equity destruction will be immense. London is different?

Share this post


Link to post
Share on other sites

Carney said it is cash so he can't control. However, at the margins there will be mortgage borrowers. I don't know how strongly Uk lenders have lent into London. If they are taking say 25% deposit and it goes like Northern Ireland the equity destruction will be immense. London is different?

I'm not sure it quite works like that. Not with new developments anyway, which is where most of the foreign money in London is going.

Instead, a developer plans a new residential building and he approaches a bank for the money. The bank though will only give you, say, 75% of the build costs. The developer then has to find individuals or companies to stump up the other 25%. Those individuals or companies may use cash or they may use borrowed money. The 25% that the individuals or companies are paying might only get them a 10% off-plan stake in their desired unit.

In this instance there is no traditional mortgage lending involved. Yet. But it's not strictly cash either. Carney can't quite do much about it either. And I'm not sure he should. People moan on HPC that more homes should be built. Well they are getting built. And Asian gamblers are paying for it, who believe the yields they've been sold. The way the deals are structured mean that the banks and developers are unlikely to get burnt, but the so-called "investors" could easily get wiped out. Especially if they have borrowed money. Just like British investors in Spain, Ireland, Bulgaria, etc,etc.

Incidentally, I recently got back from Toronto. I hadn't been for a few years and I couldn't believe the scale of the construction on the waterfront. Just like London. I asked someone in the know where the money was coming from. They said Asia. I asked who's going to rent them, and they said, "at those prices? No-one!".

Share this post


Link to post
Share on other sites

I doubt a company is eligible for HTB.

Mind you, if the glorification of the corporation we're seeing by the US Supreme Court is a guide, we might all have to register as one just to vote.

I agree, it was just a wild theiory, nothing more.

The who thing does seem odd though. ive seen poor quality badly located housing in Northampton sell for 20% more than anything they'd have got in 2007....they were flying off the shelves till about a month ago.

Also, there was the very strange report in the local paper where an E.A. claimed to have been visit by an agent of the devil BoE to guage how the local economy was an to assure them everything this year would be hunky dory, I believe they even open more branches off the back of it.

it strikes me something is going on....but im not sure what.

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now

  • Recently Browsing   0 members

    No registered users viewing this page.

  • The Prime Minister stated that there were three Brexit options available to the UK:   203 members have voted

    1. 1. Which of the Prime Minister's options would you choose?


      • Leave with the negotiated deal
      • Remain
      • Leave with no deal

    Please sign in or register to vote in this poll. View topic


×

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.