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London Gives Boe An Emerging Economy Problem

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http://blogs.reuters.com/breakingviews/2014/04/23/london-gives-boe-an-emerging-economy-problem/

The UK has a popularity problem which the Bank of England cannot solve. Foreigners have an unhealthily strong desire for London property. Before the financial crisis, many emerging markets tried, and basically failed, to deal with a similar excess of attention.

The central bank’s Monetary Policy Committee is not focusing on the issue, to judge from the latest minutes, published on Wednesday. That’s a shame, since the capital flows and regional distortion risk undermining the whole nation’s economy.

London is in a housing bubble. Property prices are up 18 percent in a year, and are 19 percent over their 2007 peak, according to Nationwide Building Society. The average in the capital is now twice as high as in the rest of the country, above the previous 80 percent peak premium. Non-London housing markets are mostly recovering, but the average price is still below the previous peak, much like British GDP. The economy’s thaw is still slow.

Much of the money used to bid up London’s market is foreign. The funds flowing into property and other UK assets are so abundant that a huge current account deficit, well over 5 percent of GDP in the second half of last year, was not enough to weaken the pound. On the contrary, the currency is rising, crimping UK competitiveness and its sustainable growth.

Before the global bubble burst, central bankers from Brazil to Turkey tried to discourage foreigners from bidding up their currencies. But nothing – rate cuts or rate increases, strong words and taxes on capital flows – really worked.

Still more jam for London, the more jam London has the more jam will get spread around the country....

As prices keep raising the mania for London property is only going to intensify as it will be seen as a safe investment.

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Sometimes you wonder why you bother to vote....'cause the ones that don't vote end up with more and are listened to more than the ones that do. :blink:

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Ha! Would be funny if the mega bubble became even sillier, like 50% yoy by 2015. See BOE and the coalition wriggle then.

Exactly my thinking. I want London prices to double in 2 years. The higher and faster the better. It's the only way we'll see any change.

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http://blogs.reuters.com/breakingviews/2014/04/23/london-gives-boe-an-emerging-economy-problem/

Still more jam for London, the more jam London has the more jam will get spread around the country....

As prices keep raising the mania for London property is only going to intensify as it will be seen as a safe investment.

The mania for London property is being hyped by the VI's and their media for the interests of VI's.

The mania for London property is being solely supported by liar loans issued by banks who solely rely on "special liquidity" schemes,FLS,QE,HTB,...

The mania for London property is designed only for naive indigenous sheeple who beg the VI's to become debt slaves.

VI's are definitely having a good laugh.

They managed to drag this farce for all these years and even 2007 crisis did not stop it.

They managed to cash on it without investing a single penny, and yet sheeple still believe that it is that external enemy over which no-one has influence: "cash rich foreign buyer".

In years following 2007 VI's and media were endlessly blaming "cash rich pensioners" who cushioned the fall of house prices.

I doubt that those (allegedly) endless "cash rich" foreign buyers follow UK daily "news" on "ever rising house prices" and on that basis decide to invest in the "safe heaven" as UK property prices and the UK pound.

Not to mention that the quality and the size of the UK property for the mad asking price is definitely not a good value for money. VI's can only brainwash indigenous sheeple population to believe in that.

Many properties in the UK are either shoddily built, in disrepair, very small or monstrously ugly (mainly newer developments).

Just look at Lewisham (SE London) and Peckham which have been trumpeted as an "upcoming" areas by estate agents for several years now. Crime in these areas is 2-6 times higher than national average,housing stock including new developments is mainly crap, population (hmmm, just go to the local shopping centre) is not affluent.

2 bed small,awful Council flat in awful urine/faeces flooded building sells easily for £230k (thanks to HTB and FLS)

Many other properties are similarly awful with ever higher prices whose jump ALWAYS coincides with EVERY government lending scheme.

Cash rich foreign buyer would not live or BTL these properties.

People live here because of family or established (low paid) job if very lucky.Majority is on social security in one form or another.

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Exactly my thinking. I want London prices to double in 2 years. The higher and faster the better. It's the only way we'll see any change.

Can't be done. Prices are already way too high and Osborne can't keep subsidising affordability by continuously adding to the national debt. Debt interest is set to hit £80bn/yr by 2017 as it is. Bernanke's QE-led housing bubble 2.0 has bust, London won't be far behind now.

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