Sunday, December 9, 2007

More gloom from the City

City warns of 10% slump in house prices

British house prices are set to tumble by more than 10 per cent next year, according to City traders. This weekend they warned that residential property values might continue to suffer up until 2012. Invesco Perpetual's star fund managerNeil Woodford warned: "There is every possibility that the housing market... will deliver a shock to consumer confidence and spending. In this situation, it is likely we will flirt with recession."

Posted by confused76 @ 11:08 AM (1070 views)
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10 thoughts on “More gloom from the City

  • “In a dramatic turnaround, bearish investors in the Square Mile are betting that values will slide by 10.5 per cent by the end of November next year,”

    “At the beginning of 2007, those same traders estimated that the price of the average UK house would climb …”

    Sheesh. You’ve gotta hand it to those city boys. Genius. Pure genius.

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  • Well it was a 10% rise at the start of this year from most experts, then 5%, then 0%, now a 10% fall. With the media behind it and the city betting on it, it looks like the UK’s homeowners are going to get shafted by the same people on the way down as they did on the way up. The force is building for a crash, just as it did for the boom – speculator sentiment and media driven. At the end of this we will truly see who the only people were who really benefited from the whole debacle. The question will be, will anyone have the balls to stand up and ask the real questions and supply the real answers.

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  • “shafted by the same people on the way down”

    very well said!

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  • This is no dramatic turnaround.

    I work in a large investment bank (interestingly one that does not dabble that much in fixed income investments) and here the property boom has always been seen for what it is – a bubble that will burst.

    “The figures will come as a bitter blow for homeowners hoping for a less precipitous fall in house prices following last week’s quarter-point cut in interest rates from the Bank of England.”

    You SUCKERS.

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  • So, Paul, you are essentially confirming what I thought (which seems fairly obvious anyway), that the banks knowingly participated in the pumping up of the bubble and will knowingly profit from (even if that means exaggerating) the fallout. That the banks knowingly suckered people into mortgages that they could barely afford, all the while talking up a market in the full knowledge that those people would suffer in the inevitable downturn, because the banks would profit either way. Did the banks warn people, both individually or in public, about the inevitable downturn? I think we know the answer to that one.
    Do you think that is OK, just tough for the people concerned? Are you happy to work for a company like that?

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  • This was one of over half a dozen articles in the IoS today talking about a fall in the UK house prices and what it might mean or would impact.

    First it filters into the media, then into avid media readers, then the wider intelligent population, then eventually into estate agents – sentiment always gathers pace, up or down – and the lack of damping as a result of modern communications just amplifies the message, a la Peston on the Rock. How long before the phrase ‘boom and bust 2.0’ appears….

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  • Ship
    please let me give some input here.
    this bubble has been manufactured by the government through Lord George at the BoE, and the inept FSA watchdog (probably more akin to a “watchmole” if you see what I mean)
    IBs, high street banks, and the like have just maximized profits in an environment of ultra low interest rates and irrational risk taking. A few IBs have walked out of this toxic environment once realized it was a bubble deemed to explode. But to be frank, IB analysts, from GS to ABN Amro, CS, UBS, Professor David Miles at MS, etc.have been warning investors since fourt quarter 2006.
    Here in central London the smart money (like Barclays’ John Varley) sold their multi-million homes between the end of 2006 and the spring of 2007 and happily rented thereafter
    But this was totally public info, reported in the same Times bullpapers that on the next page were reporting comments by the so-called-economists working for estate agents and mortgage lenders. People like fionnualallalla alla alla of Nationwide, and Yolanda Barnes of Savils are not economists. These are salespeople, have no qualifications to speak and would never be hired by a respected financial institution but to clean toilets. David Smith may qualify for the post room.
    If the true [email protected] have believed the opinions of these cheerleaders over the example of John Varley, let me tell you these [email protected] deserve to be shafted.

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  • shipbuilder, I am a city footsoldier rather than a high flying city captain (and my pay reflects that role!).

    There were an awful lot of people who were happy to be sucked in, riding the wave. This is what banks do, what capitalism does. I make no apologies for the strategies of my employer – there is no mean agenda only lots of people making lots of small and logical decisions.

    Besides, confused76 is on the money – he is correct. This whole boom was not created by the investment banks, it was created by the MPC and the government lacking the foresight to balance the equation – not figuring out that fuelling a boom based on the never-never will only lead to catastrophe. Banks have been warning about this for some time, because they can smell a bubble a mile off, and they never like that because investment is the first thing to drop when a country hits recession. I value my job, and I don’t like to see it threatened by a captain who is drunk at the wheel.

    Investment banks have ridden the wave, but they did not create it, or fuel it.

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  • @c76, sorry to be nit-picking but….
    Fionnuala Earley, Nationwide bank’s Chief Economist, holds an MSc in Economics. She was Head of Research and Statistics at the European Mortgage Federation in Brussels, Senior Economist at the Council of Mortgage Lenders and also worked as a government economist in the Financial Services Authority and the Office of Fair Trading.
    (Source: http://www.nationwide.co.uk/mediacentre/individual.asp?person=earley)

    However that doesn’t prevent her from either being wrong or deliberately misleading the public. If somebody has a firm belief in a particular thing, not even the most incontrovertible evidence can make them see their mistake. Their belief systems can be so deeply ingrained that they find it impossible to shift perceptions. Just as a north sea oil worker might have an unshakeable belief that the oil will never run out, Fionnuala and others like her have an unshakeable belief that house prices will never fall.

    The alternative is that she is wilfully misleading the public. Back in the dot-com boom, an analyst in a big investment bank was caught publicly recommending a stock while privately emailing friends telling them how bad it was. Fionnuala and others could be like that too.

    I think of Fionnuala Earley as being like the former Iraqi Information Minister who made famous quotes such as: “The americans are going to surrender and be burned in their tanks” in the days before the government was toppled. Fionnuala can see house prices falling all around her, but she denies it entirely.

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  • Paul, that’s fair enough – I’m certainly not talking about some conspiracy theory, just that there were a lot of institutions making a lot of money, whilst knowing exactly which way it would go. I appreciate that you work for an investment bank which would not be directly involved in lending mortgages. But there was certainly no real effort made to warn the public or tighten lending policy to avoid such a scenario. I guess it comes down to whether you believe that it is the bank’s job to do that, the media’s or the government’s. I believe all three, because I have somewhat old-fashioned views that we all perhaps have a responsibility to one another. Call me a socialist, I guess. Instead I see people shafting each other for a bigger slice of the pie.
    I’d like to believe that someone tried to stop this whole thing, even if it was to avoid recession and create a sustainable economic future for people to invest in, thereby protecting profits, but I don’t believe it for a second. They profited on the way up, and put in place strategies to profit on the way down, because at the end of the day, this years profits are all that matter. From all i’ve seen in my working life, that’s one thing I know all too well.

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