Could London Escape A Slump?

[London-loser]

Steve,

Are you saying nothing was moving in Chiswick last April?

Good to see RJG18 reading - long time no see. Any comments on the market?

[Quokka]

London is hanging over the top of the roller-coaster, readying itself for the big swoop down. The rest of the country is either tick-ticking up the slope or is just cresting.

<{POST_SNAPBACK}>

great analogy, maybe someone could put this into graphic form..

[Ignorant Steve]

Steve,

Are you saying nothing was moving in Chiswick last April?

Good to see RJG18 reading - long time no see. Any comments on the market?

<{POST_SNAPBACK}>

Yes, we had our flat on the market and were also looking to trade up in Chiswick. The market was absolutely dead. EAs were very downbeat.

We eventually got 2 unproceedable offers after 6 months and took the flat off for Xmas.

This year totally different selling experience - 3 offers from the first 7 viewings.

(No longer buying in Chiswick - relocating due to work).

[RJG18]

Steve,

Are you saying nothing was moving in Chiswick last April?

Good to see RJG18 reading - long time no see. Any comments on the market?

<{POST_SNAPBACK}>

Thanks LL. I've nipped in and out a few times in recent weeks, but I'm not doing the 2-hours a day of posting that I was doing a few months back.

I haven't lost interest in the market, I'm still here. I'm just less active here as I seem to be far busier lately than ever before, plus there seems to be less of a debate to have these days. The market is behaving exactly as the (smart)bears said it would, so it's all pretty much playing out as we thought it would. Even the types of bullish resistance to what is clearly being observed in the present market is as predicted (i.e. VI's contantly trying to prematurely call the bottom of the bear market, or spin the numbers, etc).

However, tonight I'm going to try to make an effort to put up a new post giving all my recent observations over the past couple of months, and current predictions on the market.

BTW - on the topic of this post. This journalist has quite a selective grasp of reality. London lead the boom, sooner and faster than the rest of the country. It boomed between 2000-2003, levelled off between 2003-2004, and since mid 2004 has been falling in all aspects (price, transaction volume, buyers, mortgage approvals, etc).

Can you simply take an observation in a time-frame outside which an event actually occurred and use it as proof the event did not occur? I'm guessing not. Otherwise I can prove there was no Christmas last year. I looked at detailed analysis ranging between June to November, and didn't see christmas occur once. Therefore I have proved there was no Christmas day in 2004.

[London-loser]

Yes, we had our flat on the market and were also looking to trade up in Chiswick. The market was absolutely dead. EAs were very downbeat.

We eventually got 2 unproceedable offers after 6 months and took the flat off for Xmas.

This year totally different selling experience - 3 offers from the first 7 viewings.

(No longer buying in Chiswick - relocating due to work).

<{POST_SNAPBACK}>

Interesting.

I thought last April was estate agent nirvana.

Good luck with the move.

[Boffin]

Of course London will escape a slump, for the following reasons:

1. Property there is still highly affordable for those on average salaries

2. Public sector spending is set to increase, ensuring continued growth in demand for quality properties for young professionals to rent, supporting the BTL market

3. The economies of our major trading partners, the US and Europe, are in rude good health

4. Energy is cheap and getting ever more so, so producer costs are stable or falling

5. Interest rates are in historical terms high, so are likely to fall over the medium to long term, resulting in increasing affordability

6. Present high levels of unemployment ensure that employers don't need to compete on salary to get staff

7. Falling levels of taxation mean consumers will have rising disposable incomes

Oh bugger, hang on a minute

[BandWagon]

Ok, we have to leave people selling in Chiswick out of the equation, because, let's face it, Chiswick is by far the best place to live in London.

No argument there.

Ok, back to house prices. London will escape unscathed because, hmmm, I know, it's different this time!

For Bloomberg, this is an appalling article, written by someone with very little research and a complete disregard for the facts.

[Ignorant Steve]

Ok, we have to leave people selling in Chiswick out of the equation, because, let's face it, Chiswick is by far the best place to live in London.

No argument there.

Ok, back to house prices. London will escape unscathed because, hmmm, I know, it's different this time!

For Bloomberg, this is an appalling article, written by someone with very little research and a complete disregard for the facts.

<{POST_SNAPBACK}>

If you look at the attachments that ZZG113 provided you'll see that in the last crash. Significant areas of London "crashed" (dipped) early and recovered quickly so that by 1995 nominal prices were in some cases very much higher than 6 years previously.

I quoted the Chiswick anecdote as this seems to be a pattern re-emerging again this time. If you need forced sales at significantly reduced prices to trigger a crash then you won't see that in London at the moment.

Outside of desirable parts of London there will be a completely different pattern.

[London-loser]

It's not clear when those charts are for - start or end of 1988 and start or end of 1995?

However, it is worth pointing out that inflation (RPI) was almost 37% over the period from the end of 1988 to the end of 1995 (give or take the length of the bear market)...

...and, on this basis, looking at zzg's pictures it seems virtually no areas of London avoided real terms losses over a seven-year period with some apparently posting real terms losses of up to 80%.

And some people say the last crash wasn't that bad?

I guess they all lived in Highgate/South Kensington.

Using quarterly data from Nationwide from 30 September 1988 to 31 March 1996 (apparently London's peak-to-trough in REAL terms) the average London property had lost 45% of its REAL value over this period.

On this basis it took until early 2001 to recover the REAL value of the average London property level at the end of September 1988.

In nominal terms the peak was in Q3 1989, the London market bottomed out by the end of 1992 and it recovered this NOMINAL peak by Q1 1998 (almost nine years later before the NOMINAL value of an average London property had been recovered).

[mercsl]

Was not that trendy to live in central london 10 years ago but places like shoreditch and bermondsey have developed ...now plenty of places to go locally and with train fares going up way faster than inflation each year (they are 3-4K a year for some people!) its always going to be desirable.

Edited April 26, 2005 by mercsl

[Once Bitten x2 Shy]

What happened to London in the last property slump?

Does anyone have a graph of average London prices since 89?

Thanks

<{POST_SNAPBACK}>

I lost 20% on a property I owned between 1990 and 1996 in a reasonably good suburb and know of others who lost 50% in a similar area over the same period.

The difference between the two was that my property was pretty unique and the other was a studio flat.

the price reductions were relative not only to area but also to property type.

[Once Bitten x2 Shy]

Good post RD.

<{POST_SNAPBACK}>

Out of interest do you have other information that gives this information countrywide? I have been trying to find detailed information on what happened in the last crash but so far have been unsuccessful.

I see some similarities between now and the late 80s in economic terms especially in terms of overspending.

There is a good article in Moneyweek this week which has attacked Gordon Brown in no uncertain terms. After reading this everything that is happening now reminded me of what happened in the late 80s.

The common parts seem to be complete overspending by the public, enhanced by easily borrowed money, largely secured against over inflated property prices. The current property boom has been funded by state spending and easy access to borrowed money.

This state spending must now be accounted for as it can no longer continue and those that have over borrowed will soon have a rude awakening.

Whatever inflation we have now is measured in such a way that disguises the real figures, until there are no other options to conceal or spin any further, which leads to reality dawning gradually over the coming months/years.

Hangover after the party.

[BandWagon]

I was once told by a wise man that if you believe the goverment is fudging the inflation numbers (like many of us currently believe), watch the exchange rates.

These are set by the markets, and unfortunately if inflation creeps up, the value of Sterling will fall. And then roll on higher interest rates.

Moneyweek have written quite a bit about how the goverment fudge the inflation numbers. When the RPI was about to go over 2.5%, Gordon Brown blatantly changed to the CPI. And interest rates were allowed to stay low.

The goverment can't keep pulling the wool over people's eyes forver...

[Once Bitten x2 Shy]

I was once told by a wise man that if you believe the goverment is fudging the inflation numbers (like many of us currently believe), watch the exchange rates.

These are set by the markets, and unfortunately if inflation creeps up, the value of Sterling will fall. And then roll on higher interest rates.

Moneyweek have written quite a bit about how the goverment fudge the inflation numbers. When the RPI was about to go over 2.5%, Gordon Brown blatantly changed to the CPI. And interest rates were allowed to stay low.

The goverment can't keep pulling the wool over people's eyes forver...

<{POST_SNAPBACK}>

I agree

It would be interesting to see what inflation would be now if the cost of housing (house prices) were added.

I can't imagine it would make good reading, and would beg the question why haven't interest rates been higher over recent times?

Could it be that the government have been spending to try and keep us from recession and keeping interest rates low was part of the illusion, which allowed people to feel that they were richer when the real wealth generation within the economy has been falling?

The time after the election willbe an interesting one for whoever becomes Prime Minister.

It could happen that Gordon Brown actually has to own up to his own mistakes rather than basking in the glory he seems to be enjoying now.

Pride before a fall!

[spoon]

i 'm bumping this article by Matthew Lynn for Bloomberg. it makes interesting reading given his latest effort which i shall post this morning.

the author is a nobody but it's an example of the how fast the rhetoric is changing.

[BoredTrainBuilder]

What a load of nonsense

London went mad in 01/02 then stabilised til last summer and has been falling ever since.

What do you thinks goner happen?

<{POST_SNAPBACK}>

Absolutely correct. My quaint terraced house in Greenwich (good for Docklands and finance etc) tripled in value from 96-02. Luckily I sold then and there have been no sales of comparable houses since for higher. Finance and high-paid city jobs are a tiny fraction of the overall job market in most of London (but admittedly not the army of support staff but they're mostly on £25k). London's property market has been notoriously volatile for centuries. To say it did not take part in the boom is absurd. It just happened earlier.

Edited June 22, 2005 by BoredTrainBuilder

[zorn]

If you actually live here (and are not a VI / EA) you can see how its all gone to hell in a handcart. The City has a BIG shock coming, and the job losses posted over the last 12 months have been spread out to try and avoid creating a panic.

<{POST_SNAPBACK}>

Even as nutbar conspiracy theories go on this site, this one is pretty demented. What mechanism do you think is used in order to co-ordinate the job losses? Do you imagine that there is some kind of secret committee of the HR managers of dozens of financial institutions who get together to see what job losses are planned? And that some of them then agree to defer their company's redundancies for months, at vast cost to the company, in order to avoid creating some kind of "panic"? And if not, then what do you think happens?

[zorn]

I agree

It would be interesting to see what inflation would be now if the cost of housing (house prices) were added.

<{POST_SNAPBACK}>

You don't need to speculate. RPI, which includes mortgage costs, is currently at 2.9% -- down from 3.2% the previous month. The government still measures RPI, it just doesn't use it for its targets.