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honkydonkey

Preferred Habitats And Safe-Haven Effects: Evidence From The London Housing Market

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http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2353124

Abstract:

The infrequent nature of economic and political crises means that pure time-series methods struggle to distinguish safe-haven demand effects on asset prices from a wide range of alternative drivers. We present a new cross-sectional approach, motivated by the insight that investors may have different "preferred habitats" within a broad asset class. We employ this strategy on large databases of historical housing transactions in London, finding that economic and political risk in Southern Europe, China, the Middle East, Russia, and South Asia helps explain price and volume dynamics in the London housing market over the past two decades. Safe-haven effects on the London housing market are long-lasting and significant, but temporary. The method also uncovers intriguing insights about cross-country variation in preferred habitats within London.

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The safe haven uk...

The only safety is the unparalleled tolerance by the british public for liblabcon politicians to sell them down the river, and neither vote them out nor riot.

Meanwhile, the US identifies 'safe haven' UK as a breeding ground for terrorists.

http://www.dailymail.co.uk/news/article-2673511/Obama-sends-CIA-UK-probe-terrorist-breeding-ground-President-pointed-snub-MI5-lone-wolf-mission-interrogate-British-security-experts.html

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http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2353124

Abstract:

The infrequent nature of economic and political crises means that pure time-series methods struggle to distinguish safe-haven demand effects on asset prices from a wide range of alternative drivers. We present a new cross-sectional approach, motivated by the insight that investors may have different "preferred habitats" within a broad asset class. We employ this strategy on large databases of historical housing transactions in London, finding that economic and political risk in Southern Europe, China, the Middle East, Russia, and South Asia helps explain price and volume dynamics in the London housing market over the past two decades. Safe-haven effects on the London housing market are long-lasting and significant, but temporary. The method also uncovers intriguing insights about cross-country variation in preferred habitats within London.

This is the important sentence imo.

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A couple of sentences from the paper to put the headline into context.



"The results show that a one standard deviation increase in the 12-month moving average of political risk overseas is associated with prices that are 3.2 percentage

points higher (from the Registry dataset estimates) in London wards with high foreign-origin shares, than in wards with low foreign-origin shares."



"after 38 months, the predicted price gap arising from this source is statistically indistinguishable from zero"


In other words, a relatively large increase in political risk (one standard deviation) causes only a 3.2% increase in house prices of regions where people subject to that political risk tend to flock, and the effect is gone after 3 years. I would safely conclude from this that political risk abroad explains very little if any of the massive London bubble.

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The method is one interesting part:

Our empirical approach is to sub-divide London into smaller geographical areas, and to enumerate the strength of the links of each such London area with specific foreign countries. When there is an increase in political or economic risk in a given foreign country, our specifications forecast intra-London rates of price appreciation which differ according to the strength of the links between the London area and the foreign country.

So, in order to determine whether people from certain countries have been buying more when their country experiences difficulties, they must first 'estimate' which areas they would traditionally/likely purchase in. (So presumably it's Australians in Shepherds Bush, Irish in Kilburn, etc and all other stereotypes),

This means they don't actually have the real data which directly would tell them who (which nationality) is buying each property.

Either the Land Registry and ONS don't have this data, or they don't publish it.

It would seem like obvious data to capture wouldn't it?:

1) Who is buying the property (including what nationality they are).

2) How many properties they own in the UK.

3) Was it paid in cash-only, or mortgage (data which I am sure the Land registry has)

4) Will it be lived in or let out.

If they don't have that data then the Government are essentially flying blind.

:blink:

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So if it's not the weather then it's a flare up of the politics of somewhere overseas.

It's always excuses and never reckless and home grown economic policies.

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nice to see some decent data and an effort for more understanding than 'banks aren't lending!!!' but I can't help but think the equations and 82 pages obscure rather than elucidate

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Does this read as nonsense to anyone else?

It's possible for something to be long lasting and temporary. To be long lasting is to be temporary, if it weren't temporary it would have to be ever lasting.

But pedantry aside, maybe they mean that the haven is temporary but the effects are long lasting?

Or perhaps they couldn't make up their minds whether 3 years is short lived or long lasting.

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http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2353124

Abstract:

The infrequent nature of economic and political crises means that pure time-series methods struggle to distinguish safe-haven demand effects on asset prices from a wide range of alternative drivers. We present a new cross-sectional approach, motivated by the insight that investors may have different "preferred habitats" within a broad asset class. We employ this strategy on large databases of historical housing transactions in London, finding that economic and political risk in Southern Europe, China, the Middle East, Russia, and South Asia helps explain price and volume dynamics in the London housing market over the past two decades. Safe-haven effects on the London housing market are long-lasting and significant, but temporary. The method also uncovers intriguing insights about cross-country variation in preferred habitats within London.

depends what you mean by safe haven,#i would say safe have is probably central canada.

low population density,and reasonably coherent government, apart from quebecois not much in the way of internal political differences either.

US has northern ireland 2.0 on the southern border(mexico/MS13 and atzlan), and they are all tooled up.that could get ugly...but they do have several thousand miles of sprawling prairie , so not a significant issue unless opponent decides to use virals or defoliant.(or deiced to buy a job-lot of quad-copters modified to have convex-lens plastic hulls they hover over cornfields to do eco-terrorism arson-without -accelerant en masse.)

I made the last one up, but it's quite devious as a strategy.

having high population density on a small island is not good strategy if you have either a pandemic,or an enemy who will attempt a naval blockade.

(in fact hitler was going to attempt this last time, so don't dismiss a re-visitation)

I am suggesting somebody has been studying his musings,so we good boy scouts need to be prepared, because our elected representatives are either criminally negligent or in bed with the opposition.

Edited by oracle

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