Friday, July 11, 2014

Some interesting analysis of the forthcoming House Price Crash fro the great man himself

Return of the sub-prime

A measure of the ignorance of economists, and the politicians who rely on them, is the current frenzy over house prices in Britain. Is the economy locked into a housing bubble that will burst? That’s the question occupying the pundits, who fail to locate current events in their historical context.

Posted by pete green @ 12:31 PM (2457 views)
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5 thoughts on “Some interesting analysis of the forthcoming House Price Crash fro the great man himself

  • oh, again, those nonsensical technical analysis (18 year business cycle length “theory”) based on spurious observations and presented as if they were some natural laws of physics.

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  • mountain goat says:

    “Most of the pain, of course, will not be felt by London property owners. The proportion of high loan-to-value mortgages has reached 25% in the north-east, compared to 7% in London, according to data provided by chartered surveyors e.surv.”

    Interesting given that prices in the North East have been pretty flat for the past year.

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  • britishblue says:

    Last time we didn’t have the great foreign investors who at some stage may want to cash in on their London property riches. For instance a Spaniard who bought a central London property in 2008, that has appreciated 100% will actually have made 250% on paper as the Euro was on parity with a pound then. But given that property in much of Spain has dropped 40 to 50%, they would get between 400% and 500% more for their money back in Spain. Investors look for safety and they look for gains. A lot of money has come to London for safety and a bi product has been huge gains. However, at some point in future, probably when the Euro zone finally gets some certainty on its future, money will will leave the UK for richer pickings elsewhere. That’s why the 18 year cycle isn’t playing out on the boom and wont play out on the bust.

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  • The 18 year cycle is quite compelling from the articles I have read going back a long time in history. The observations are not spurious. But other factors affect this as was shown in the building boom & the taxation structure of the of the 50’s & 60’s that seamed to keep house prices low over an extended amount of time. This time I think Harrison could be in error, and this HPC is ready to topple. But who knows for sure…

    I think he is correct in is analysis on where the fall will start – my money is the north and it will spread south as it has done in the past, as indicated by the data on lending, but again this time other factors such as a pull out of foreign capital could go against previous trends.

    Anyway listen to his augument:

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  • @2 That’s the explanation for it MG.

    In a climate where prices are rising, the over-leveraged shore up equity very quickly. Whereas when prices are stagnant, anyone who bought with a 5-10% deposit in the last few years will still have a high LTV.

    Also, in London, there are more steps on the ladder. Very few people can afford family homes without making money on a number of other properties first. Only FTBs have high LTVs and there are less of them in London than elsewhere. I know tons of ppl with 50+% equity on 800k homes who are mortgaged to the hilt. 400k is still a massive loan to a household on 80k.

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