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mbga9pgf

Monday Morning Bear Frenzy...

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FT artlcle 1

Growth only as safe as houses

It takes time for house prices to fall, but when the process starts, it can quickly build its own momentum. The Case-Shiller house price index for the US peaked in the second quarter of 2006. In the second half of 2006 prices fell at moderates rates, but this year the decline in prices accelerated. I have no doubt that the various European property markets will follow a similar path, with the usual time delay. By this time next year, I would expect to see house price declines in the UK, in Spain and Ireland.

Since the economy in all these countries is heavily dependent on the property market, a house price recession is obviously bad news. Of course, very aggressive interest rate cuts would help reduce the impact, especially in countries with variable-rate mortgages such as the UK or Spain, or where mortgages can be easily refinanced, such as in the US. But unlike in 2001, there is much less scope for interest rate cuts this time round, including in the US.

FT - UK economy in Sh*t state

The place to look for trouble is the housing market. Its long boom has enabled British consumers to spend freely and run up debt without feeling any poorer. If the housing market suffers, so will employment and economic growth.

Recent scaremongering is overdone: although some indicators have suggested weakness, the data are too sketchy to offer certainty either way. But the prospect that house prices will start to stall – or worse, to fall – is all too plausible.

The housing market ultimately relies on fresh sources of demand: the first-time buyers and buy-to-let investors. Both may well face steeper borrowing costs, subprime borrowers even more so. Towards the top of the market, City bonuses may dry up, and with them some of the demand for pads in Hampstead.

FT - Browns Dilemma - got DAYS to decide whether to run or not

The UK government’s finances swung into deficit in August, registering the worst readings for that month since records began, official data showed on Monday.

The public sector borrowed £9.1bn in August, £2.3bn more than in the same month the previous year and above forecasts for borrowing of £6bn.

The public sector net cash requirement was £5bn, £1.3bn higher than in August 2006, the Office for National Statistics said in a release delayed from last week’s scheduled publication date.

Edited by mbga9pgf

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The housing market ultimately relies on fresh sources of demand: the first-time buyers and buy-to-let investors. Both may well face steeper borrowing costs, subprime borrowers even more so. Towards the top of the market, City bonuses may dry up, and with them some of the demand for pads in Hampstead.

I have probably already mentioned this on another thread, but I reckon as more empty BTL flats come on the market, there is going to be a 2 pronged attack on the housing market.

There is the obvious over-supply issue where ex LLs will be desperately offloading at any price, but the second one can be just as damaging:

There will be no chain. It starts and stops at the BTL flat.

So any demand at the bottom end will be soaked up by these flats, effectively cutting off everyone further up a prospective chain.

If the BTL LLs do start selling in numbers, assuming that they have to drop the price, it could seize up the whole housing market until that slack is taken up.

Is it time for a muwahahahahaha?

I think so.

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Is it time for a muwahahahahaha?

I think so.

Too early for a full scale muwahahahahaha, more a slight titter at this stage. I wouldn't put it past Brown to bail out the BTL landlords.

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Too early for a full scale muwahahahahaha, more a slight titter at this stage. I wouldn't put it past Brown to bail out the BTL landlords.

good call, indirect assistance via housing benefit and mortgage support (early 90's style) is on the way I reckon.

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