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London And Why Hpc Has Been Wrong For 10 Years

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Well it seems like its 10 years that I have been a member on here. Haven't posted much for the last 5 years though...................

I lived in Central London, and was convinced of a forthcoming crash well before I "found" hpc in 2005.

We bought a flat in Brixton for £97k in 1997, (joint income about 80k!), then kept that and bought a flat in Bermondsey for about £320k in 2000, in what we thought was stretching ourselves to the limit kind of a way!

Current values probably £300k and £800k conservatively.

So we wanted a family home which we couldnt afford in London in 2005 so moved to Edinburgh and now own a perfectly nice house in a great area, good schools etc. I have a successful business and my wife is doing a PHD at Edinburgh Uni. So all good and miles better than if we had stayed in London.

However from a financial perspective we lost out on about £500k of growth in property values. So we would have made more money just sitting tight and eeking out a crap existence in London.

Now I can understand a lack of sympathy from anyone on here who cant afford a house. Its a disaster having high house prices for anyone. And to be honest the kids are better off out of it as London prices skew what you think you will do with your life.

A mate of mine is bemoaning the fact that if he sells his small 2 bed zone 1 flat for 1.2m by the time he has paid off his mortgage he wont be able to get anything inside zone 3!! Bonkers!

But my point is that London IS different. I was watching the Jaques Peretti program on the TV last week and it is clear to me that in London you are not competing with the UK for houses but the whole world. So the economic rules go out the window.

So my advice (which I am sure people dont need) is dont think about the London market the same way as the rest of the country. Ie inflation up - interest rates up - prices down etc etc etc as there will be a Russian oligarch standing behind you happy to park his money out of his country. I imagine that a Russian oligarch wouldnt even care if the values went down by 20% as his money in property in london is not taxed and is safe.

The non dom rules are a joke. We are one of the biggest tax havens in the world. But I cant see a Russian Oligarch wanting to park his money in Aberystwyth. London is what they want.

Cheers

Rob

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Living in London seems to be the lowest common denominator for people with little imagination. Don't know what to do with your life = move to London.

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The Lympics squirted a ton on money into London and SE too.

Long term still reckon they will kill the golden finance goose and that will follow manufacturing abroad.

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There's a lot of truth in the original post, however I think the big danger to the London market is the incessant speculation going on there.

Using a property as a way of making or even storing money requires that property to either grow in value, or at least not fall too dramatically.

It also means that market is in competition with other markets around the world.

If a rich person from Russia or China or Greece or Malaysia puts their money into London property, they can put it into Monaco property, or New York property, or Dubai property, or Berlin property - wherever it will make or save money.

If they think their money can do better elsewhere, they'll move it. It's not as easy as buying or selling shares, for example, but it's possible.

So London is different, but not necessarily in a good way for investors.

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Humm London is looking more and more like a high investment account, a place to park your cash,then cash it in to release your spoils when appropriate..taking the money and run to live and invest proceeds elsewhere?

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International money/millionaires explains the central market...I cant believe many millionaires have a bolt hole in the scabby boroughs that make up about 80% of the rest of London.

I think its just the HB effect. 1% on savings, or 2-3% in slumlord land. Thats all it comes down to for most people...didnt someone round here post about the absurd amount of HB that ends up in London?

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Wrong ?

Prices collapsed in 2007.

The government printed money and gave it to london bankers to speculate on and support house prices.

The created a pre-eleciton london mega bubble

Loads of people saw what was coming with FLS/HTB/Mass state proaganda and rightly predicted what would happen, the brave profitted from it, the sane is sitting watching it.

If by wrong you mean right then I agree.

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Well it seems like its 10 years that I have been a member on here. Haven't posted much for the last 5 years though...................

I lived in Central London, and was convinced of a forthcoming crash well before I "found" hpc in 2005.

We bought a flat in Brixton for £97k in 1997, (joint income about 80k!), then kept that and bought a flat in Bermondsey for about £320k in 2000, in what we thought was stretching ourselves to the limit kind of a way!

Current values probably £300k and £800k conservatively.

So we wanted a family home which we couldnt afford in London in 2005 so moved to Edinburgh and now own a perfectly nice house in a great area, good schools etc. I have a successful business and my wife is doing a PHD at Edinburgh Uni. So all good and miles better than if we had stayed in London.

However from a financial perspective we lost out on about £500k of growth in property values. So we would have made more money just sitting tight and eeking out a crap existence in London.

Now I can understand a lack of sympathy from anyone on here who cant afford a house. Its a disaster having high house prices for anyone. And to be honest the kids are better off out of it as London prices skew what you think you will do with your life.

A mate of mine is bemoaning the fact that if he sells his small 2 bed zone 1 flat for 1.2m by the time he has paid off his mortgage he wont be able to get anything inside zone 3!! Bonkers!

But my point is that London IS different. I was watching the Jaques Peretti program on the TV last week and it is clear to me that in London you are not competing with the UK for houses but the whole world. So the economic rules go out the window.

So my advice (which I am sure people dont need) is dont think about the London market the same way as the rest of the country. Ie inflation up - interest rates up - prices down etc etc etc as there will be a Russian oligarch standing behind you happy to park his money out of his country. I imagine that a Russian oligarch wouldnt even care if the values went down by 20% as his money in property in london is not taxed and is safe.

The non dom rules are a joke. We are one of the biggest tax havens in the world. But I cant see a Russian Oligarch wanting to park his money in Aberystwyth. London is what they want.

Cheers

Rob

New paradigm. This time it's different. Demand to infinity. Price to the moon.

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Well it seems like its 10 years that I have been a member on here. Haven't posted much for the last 5 years though...................

I lived in Central London, and was convinced of a forthcoming crash well before I "found" hpc in 2005.

We bought a flat in Brixton for £97k in 1997, (joint income about 80k!), then kept that and bought a flat in Bermondsey for about £320k in 2000, in what we thought was stretching ourselves to the limit kind of a way!

Current values probably £300k and £800k conservatively.

So we wanted a family home which we couldnt afford in London in 2005 so moved to Edinburgh and now own a perfectly nice house in a great area, good schools etc. I have a successful business and my wife is doing a PHD at Edinburgh Uni. So all good and miles better than if we had stayed in London.

However from a financial perspective we lost out on about £500k of growth in property values. So we would have made more money just sitting tight and eeking out a crap existence in London.

Now I can understand a lack of sympathy from anyone on here who cant afford a house. Its a disaster having high house prices for anyone. And to be honest the kids are better off out of it as London prices skew what you think you will do with your life.

A mate of mine is bemoaning the fact that if he sells his small 2 bed zone 1 flat for 1.2m by the time he has paid off his mortgage he wont be able to get anything inside zone 3!! Bonkers!

But my point is that London IS different. I was watching the Jaques Peretti program on the TV last week and it is clear to me that in London you are not competing with the UK for houses but the whole world. So the economic rules go out the window.

So my advice (which I am sure people dont need) is dont think about the London market the same way as the rest of the country. Ie inflation up - interest rates up - prices down etc etc etc as there will be a Russian oligarch standing behind you happy to park his money out of his country. I imagine that a Russian oligarch wouldnt even care if the values went down by 20% as his money in property in london is not taxed and is safe.

The non dom rules are a joke. We are one of the biggest tax havens in the world. But I cant see a Russian Oligarch wanting to park his money in Aberystwyth. London is what they want.

Cheers

Rob

Russian ( or other oligarchs) is not causing these bubbles.Plenty of evidence for that: there were bubles constantly frothing for the past 17 years ( and before) both in London and the rest of UK - oligarchs were not buying in those days and there were not that many oligarchs then anyway.,,,Each time the Government introduced any prop ups (QE , Help to buy, FLS, backdoor schemes,..) house prices have gone up. Surely, there were no ques of oligarchs forming to buy the house coinciding with the above Government schemes. Also, I live in zone 2/3 London and have not seen those oligarchs or their kids buying here for all these years. Instead, it is Help to buy, etc. debt slaves " buying" these criminal and illegally built properties ( window is 10 feet from the passing train in "exclusive development or almost built on the roundabout) where the density of population far exceeds the common sense and building regulations. Anyhow, I am sure that these oligarchs also take the substantial mortgage from UK banks, hence we are all on hook for their debts. And you can be pretty sure that these oligarchs are not into BTL.

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It's probably the case that oligarchs and other wealthy foreigners saw what 0.5% interest rates, FLS, HTB and media ramping was doing to house prices and saw an opportunity to make money. That was their motivation, not the opportunity to live in Hackney (vibrant though it is ... ).

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It's probably the case that oligarchs and other wealthy foreigners saw what 0.5% interest rates, FLS, HTB and media ramping was doing to house prices and saw an opportunity to make money.

....errr...and our foreigner friendly government allowed them into the country if they bought houses and bailed out the bankers.

This while things is about the thieving bankers.

Are their any politicians promising to start the 2007 prosecutions ?

No, thought not, the politicians, IMHO, are in the bankers pockets.

Edited by TheCountOfNowhere

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Living in London seems to be the lowest common denominator for people with little imagination. Don't know what to do with your life = move to London.

Couldn't agree more. My wife who is from Camden Town originally thinks I am crazy to want to spend my time sailing, travelling, doing adventurous stuff with the kids, sport etc. Its only about work and buying property! Maybe a little light relief of going to a museum and and overpriced and overcrowded posh cafe!

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It's not just foreign money. The magic money machine (aka banks), tax avoidance professions and other parasites and their obscene salaries (compared to engineers doing real stuff) are mostly based in London.

Bravo! Anyone who is doing any real stuff is so disrespected here and even persecuted with poor job prospects, low salary,..

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Wrong ?

Prices collapsed in 2007.

The government printed money and gave it to london bankers to speculate on and support house prices.

The created a pre-eleciton london mega bubble

Loads of people saw what was coming with FLS/HTB/Mass state proaganda and rightly predicted what would happen, the brave profitted from it, the sane is sitting watching it.

If by wrong you mean right then I agree.

I am sure I agree whatever way you put it!

Where I disagree is that the government printing money ZIRP etc stopped a massive crash in the rest of the country. London didnt need it and therefore boomed.

I suppose what I am saying the rest of the country reacts to UK economics. London reacts to world economics.

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Russian ( or other oligarchs) is not causing these bubbles.Plenty of evidence for that: there were bubles constantly frothing for the past 17 years ( and before) both in London and the rest of UK - oligarchs were not buying in those days and there were not that many oligarchs then anyway.,,,Each time the Government introduced any prop ups (QE , Help to buy, FLS, backdoor schemes,..) house prices have gone up. Surely, there were no ques of oligarchs forming to buy the house coinciding with the above Government schemes. Also, I live in zone 2/3 London and have not seen those oligarchs or their kids buying here for all these years. Instead, it is Help to buy, etc. debt slaves " buying" these criminal and illegally built properties ( window is 10 feet from the passing train in "exclusive development or almost built on the roundabout) where the density of population far exceeds the common sense and building regulations. Anyhow, I am sure that these oligarchs also take the substantial mortgage from UK banks, hence we are all on hook for their debts. And you can be pretty sure that these oligarchs are not into BTL.

As you say the London boom has been going for about 18 years. I agree that the government has propped up the prices. The problem for London is the additional demand from abroad.

I have lived in zone 2 myself and havent seen any oligarchs. But if there werent any I wouldnt have been living in Brixton I would have been living in Marylebone.

Actually we used to have 1800 trains go past our back window when we lived just off Tower Bridge Road. I quite liked it!! Christmas Day was weird!

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(Greater) London house prices mirrored the fall in national house prices in all previous house price downturns. In the most recent national prices annualised peak fall was minus 16.5% (Feb 09) and in London it was minus 16.1% (May 09).

There has always been plenty of foreign money in London. I am old enough to remember the Arabs buying up swathes of prime London in the 1970s. The relatively new arrival of Russian oligarchs has had little impact on prices in most London areas. Nor did the Arabs.

In my view, the (additional) house price bubble of the last two years that has seen prices across London rise out of kilter with the national changes has been underpinned by a mixture of London-specific and national factors.

Nationally we have things like ZIRP and knock-on effects on mortgage payments, bank lending policies, the impact of equity built up during 2000-2007 now being pumped in to second and third ladder homes, H2B, BTL, etc.

In London we have additionally had bank bailouts and FLS and QE etc. which has all ensured city bonuses and salaries can remain overinflated, which in turn drives up many other sectors of the London economy e.g. services. Plus we have had the wave of new Asian 'investors' using their own HPI (e.g. in China) to leverage and buy up property both in and outside of London prime, causing a ripple effect and new 'bench mark' prices. And in winter 2012-13 the lowest stock levels coming to market seen for a very long time.

I say underpinned because when it comes down to it the biggest factor in any bubble is sentiment, and in London, the sentiment throughout 2013 and the first half of 2014 from vendors was basically 'sell now and make a huge profit' and from buyers it was 'if I do not buy now I will never be able to afford to' and for 'investors' (BTL and Asian etc.) it was 'buy now and sell later for a huge profit'.

Of course, sentiment alone does not create the ability to purchase. That takes money. And if the sentiment is as above then many of those with liquid money pile in to property and those who have not got liquid money leverage themselves in every way they can to keep up e.g. 5 x joint salary mortgages, BOMAD, Asians borrowing on the back of growing equity in their houses in China etc.

In the last 6 months sources of leveraging have started to become restricted (e.g. MMR, China house prices now falling). There are new uncertainties e.g. election, mansion tax, etc. There are known new policies e.g. CGT on foreign investors buying from April 2015. There are economic factors to contend with e.g. China slow down, Eurozone struggle to grow, Russian imploding.

But most of all sentiment has changed. When it is generally accepted that the current London bubble is over then its game over. Personally I think the smart money knew it 6-9 months ago. Based on sales and failed sales attempts of flats within 1/2 mile of where I live I would say most of the BTL crowd worked it out 3-6 months ago. Based on the Zoopla view of SW8 with the 'most reduced' filter on I think foreign investors got wind about the same time. And based on the Rightmove market trends data for virtually all London post codes I think most would-be vendors will now be realising they have missed the peak.

But what exactly will game over mean for London property? Well, probably a number of things but I suspect for the 'normal' housing stock nothing as dramatic as the fear induced by the credit crunch. Probably just reduced sales volumes for a few years (started already) and a gradual but prolonged real decrease in asking prices (started already).

Where the impact may be more spectacular is the new build market. London is currently in the grip of massive speculative new developments everywhere you look. It is far, far higher in volumes than it was before the credit crunch. Indeed some of the developments near me (e.g. East Putney) are on land banked in 2006-07 that could not be developed previously as it would crystalize the loss when prices fell 2008-09. Many, many others are being built on new land banks. All of this is with borrowed money that can not be paid back over 25 years like a mortgage. And the vast majority of them were built specifically to be marketed to the foreign investment buyers which seem to have suddenly vanished.

Depending on which colour of Government we get in May 2015 there may or may not of course be a deal to bail out these developers.

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This crash has been painful to many HPCers because they only believed one thing

& only read one forum. I was a bear for a long time but had to grow some bull horns

When I saw little / no sign of a recession around London.

When deposits had to be out down all of a sudden I guessed that it would take joe blogs round London maximum of 2/3 years to save for a deposit.

I would advise anyone who thinks London will crash to seriously take a look at the wealth the youngsters have

To spend on a fri / sat night around town and in bars etc

Big cars, big money, big wallets and that's NOT inc the bankers etc

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[...]

Actually we used to have 1800 trains go past our back window when we lived just off Tower Bridge Road. I quite liked it!! Christmas Day was weird!

That's insane. It won't give you 1800, but I assume you moved to somewhere off Dalry Road (those developments at the tracks) to have at least some train noise in your life? ;) I lived for more than 5 years between Leith Walk and Easter Road (posh, I know :) the rent was a steal!), and the airport noise was sometimes just annoying (yes, you can hear it there).

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As you say the London boom has been going for about 18 years. I agree that the government has propped up the prices. The problem for London is the additional demand from abroad.

I have lived in zone 2 myself and havent seen any oligarchs. But if there werent any I wouldnt have been living in Brixton I would have been living in Marylebone.

Actually we used to have 1800 trains go past our back window when we lived just off Tower Bridge Road. I quite liked it!! Christmas Day was weird!

I don't think that oligarchs go outside of zone 1, but it still amazes me how far on the fringes of the centre they seem to go now. The new development at the south side of Blackfriars bridge that caused all of the furore recently has got flats that go up to £23m apparently, to live in an area that is going to take years to improve from it's current s**tty state. Who else is going to buy those, but how many oligarchs want to live there unless they really do fly in by helicopter all of the time?

The main thrust of foreign investment isn't oligarchs, it is investors buying anything from one flat to whole blocks all over London, often without ever even coming to the UK. Another recent example in the press was a block in Abbey Wood where 1 bed flats are merrily being sold to foreign investors at £275k+ on the basis that Crossrail will turn the area into into the new Dulwich. If Abbey Wood, Elephant & Castle and all of the other poor areas of London gentrify, what happens to all of the poor people that made them poor areas in the first place?

I live right out in the suburbs (zone 6) in a reasonable area with a good train link. Standard semis are pushing £1m here now and that is because the people buying here now are the type of people that would have bought in zone 2 or good bits of zone 3 ten years ago. Areas in the SE suburbs are even worse - houses that would have been £150k 10 years ago are £600k now because people are priced out of areas further in.

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This crash has been painful to many HPCers because they only believed one thing

& only read one forum. I was a bear for a long time but had to grow some bull horns

When I saw little / no sign of a recession around London.

When deposits had to be out down all of a sudden I guessed that it would take joe blogs round London maximum of 2/3 years to save for a deposit.

I would advise anyone who thinks London will crash to seriously take a look at the wealth the youngsters have

To spend on a fri / sat night around town and in bars etc

Big cars, big money, big wallets and that's NOT inc the bankers etc

I agree, I think a lot here have put too much faith into the quite reasonable arguments put forward on this forum only for the government to have different ideas on how to create a 'new paradigm'.

If things ever do start to turn downwards, I am not sure how much money that the rich kids have got will matter. At the moment, a lot of this money is going into property because property has long been proven to be a cash machine offering ridiculously high gains compared to any other investments. If those gains go away for a while, a good proportion of this money will start going elsewhere.

I do think there is a safety net for prices caused by genuinely priced out buyers who have got cash waiting and will pile in if prices come off by a certain amount, but not in anything like the same volume as the speculators who will only invest for profit.

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That's insane. It won't give you 1800, but I assume you moved to somewhere off Dalry Road (those developments at the tracks) to have at least some train noise in your life? ;) I lived for more than 5 years between Leith Walk and Easter Road (posh, I know :) the rent was a steal!), and the airport noise was sometimes just annoying (yes, you can hear it there).

No train noise at all where we live in Edinburgh now.

Every train in and out of London Bridge went past our flat, 900 in, 900 out!!

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