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

[billybong]

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

A variation of off balance sheet debt.

Simultaneously advertise flats in Asia for the headline cover story and it helps with the recovery story for the election(s).

It's so well timed and neat after the UP UP UP Conservative Conference last Autumn just to coincide with suddenly more demand from overseas cash buyers. Maybe there's some borrowing involved as well with the risk being offloaded onto Mortgage Backed Securities.

Of balance sheet debt on the way up (boom) off balance sheet assets on the way down (bust).

Edited April 16, 2014 by billybong

[slacker]

And Asian gamblers are paying for it, who believe the yields they've been sold.

My concern here isn't really conspiracy, just that everyone is talking about it being 'Asian gamblers' but I have a strong suspicion they may be gambling with funds that are ultimately on UK bank balance sheets - the entities may be offshore but they've raised the funding in UK.

So the risk is the close to what it would be if was regular mortgages, but it's unseen as there are no regular mortgages against the property - it is just an asset of an investment company.

So everyone is presuming this 'mostly cash' market is fairly safe as worst that can happen is a few banks in Asia take a bath if it all goes south again - but in reality billions of it would need bailing out by UK tax payers if there was, for example, a 40% correction.

If it does go south I could seen feigned shock that we were so exposed - like sub-prime all over again - "how could the bankers have known these investment funds were just buying/revaluing houses".

Could you just create a giant ponzi?:

1. Create a property development / investment company

2. Seed with enough cash to buy a property in Mayfair

3. Next year revalue asset at +20%

4. Raise more funds from pension funds, hedge funds, bank investment arms etc.

5. Buy more west-end property - revalue assets again

6. Use newly minted value to increase leverage further

7. Pay out any liquidating investors from newly raised funds and rental income - but balance sheet still expands from asset values increasing

8. Pay massive dividends from the growth in value of assets, even though the company doesn't really generate ash (just uses new investment cash for the dividends)

Until property asset values stagnate or reverse at which point the liquidation of the assets are unable to pay back the investors who then need to refinance their balance sheets from UK tax payers again.

The more I think about this - the more it looks like some ponzi effect is going on. The schemes only work if these high value properties keep increasing in value every year - and the more cash the management/shareholders extract the more they need those values to increase.

So if you have 20 houses in Mayfair you paid, lets say £5K per sqft avg, it becomes in your interest to pay 6K for the next one as it increases the value of your entire balance sheet by 20% when you do.

You don't need public to buy these properties, you just need enough market confidence that banks etc. feel comfortable lending more funds.

[billybong]

The way the financial sector behaved so crookedly upto the economic collapse and then continued to behave in the same crooked way afterwards along with the bailouts via government then if there's a ruse to help to try to win an election for the incumbents then for sure they'll be UP for it.

If the ruse doesn't work and the incumbents lose the election then they'll be using some ruse to inveigle with and help the next incumbents.

Edited April 16, 2014 by billybong

[Debbiebegood]

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.

All I said is true.I wanted to buy the property outright in 2 places from 2 developers 3 years ago, but they refused because these properties "were only for people who take out the mortgage".

They refused cash (?!) whilst at the same time they were crying to government that they need taxpayer's money to start building.The whole property farce is about recruiting new debt slaves and we all pay for it.

In Lewisham (where I did not want to buy),,London the developer knocked down terraced Council houses (70's and 80's stock) which were quite large and decent each with own garden.Again with the blessing from the Council, they were repainting the fence of the empty site for 4(?!) years. After all the hype from the developer that they were selling these ( overdveloped) off- plan appartments to "rich Asian buyers" which was going on for years, the actual building did not start on a meaningful scale until Government started with these schemes of "shared buy",HTB,...

Each time the initial effect of these schemes subsided, the building stopped and once the new scheme kicked in,the building restarted with 10% higher price advertised.

Until the last year they advertised these "Manhattan apartments" for £320k of 800 sq ft just next to the railway line and the high street.My whole neighbourhood got this unwanted glossy brochures which developer hoped will sell his development.Still nothing sold until FLS and HTB kicked in.

People who " bought" these "appartments" are poor.They even can't afford to buy a parking space or residential parking permit hence they park all day long in my road which does not require parking permit.Their cars are very far from Ferraris, Bentley's,BMW's, Mercedes,...

Also, the commercial properties ( part of this development) still was not " snapped up" buy these ( non existent) cash rich foreign buyers.Surprise,surprise...