Thursday, July 3, 2014

The start of retro “1987”

London house prices rising at fastest pace in 27 years

Have just seen Sir Jon Cunliffe - Deputy Governor, Financial Stability; on the BBC insisting house price rises are not the fault of Financial Policy Committee FPC. So when the brown stuff hits the fan the FPC is not at fault as explained on the BBC.

Posted by sosoon @ 08:28 AM (5085 views)
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10 thoughts on “The start of retro “1987”

  • If interest rates were higher, say 5% would people be piling into property? Thought not.

    The underlying problem is the west trying to compete with Asia using cheap credit against low wages.

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  • The underlying problem is the west trying to compete with Asia using cheap credit against low wages.

    But with a massively expensive western government, and massively expensive house prices. There is NO WAY the UK is going to be able to compete, with rent/property prices the way they are. The cost of living MUST drop, in order to be competitive.

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  • hpwatcher, that is almost correct. Infact, the reality is that access to cheap labour in the third world via “free trade” is combining with labour saving technologies, labour mobility in Europe and USA and networking capabilities on the internet, all keeping a lid on consumer prices, placing downwards pressure on interest rates.

    The West is not creating low interest rates to compete, the context we operate within is forcing interest rates lower. Given that this trend is not abating we could see the Eurozone plunge rates deep into negative territory after dabbling with -0.01% deposit rate to test the capability of their systems to cope with negative rates. No crisis occured, so expect minus 5%, at least in the Eurozone, before you see plus 5%.

    People are living quite frugally and the new technology since around 1980 has not resulted in shorter working weeks, significantly more holidays, etc, and so what is required to bring that on is massive demand increases or massive increase in leisure time. The cycle comes to an end, and spare capacity gets used up once workers capitulate and move to a three or four day week. That is how intense and momentous this technological revolution is, but with free movement of labour that process will be slow and progressive in Europe, steadily eroding the five day working week, as we adjust to less work, more leisure, more consumption and higher productivity per worker hour.

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  • stillthinking says:

    I think they would at 5% because the average rise is 9% and you could easily make a case that real inflation is at 5% or more.

    People on this site are buying property!

    What I think is causing the panic is not London, but the fact that the bubble is inevitably going to spread out over the whole country. Every time somebody makes a leveraged house purchase aka a mortgage, they create their own inflation to reduce the value of the loan. It is a loss of faith in the currency basically.

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  • Buy to let IS a loss of faith in currency, because if rates were 5%, why risk your deposit on a house? Just keep it risk free in a bank. Buying a home on the other hand IS NOT a loss in faith in the currency. It is just an expression of the personal human need for a home.

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  • Infact, the reality is that access to cheap labour in the third world via “free trade” is combining with labour saving technologies, labour mobility in Europe and USA and networking capabilities on the internet, all keeping a lid on consumer prices, placing downwards pressure on interest rates.

    You are overstating the argument, because when labour is cheaper than technology, [human] labour wins. That’s the bit these ‘standard’ arguments miss.

    The West is not creating low interest rates to compete, the context we operate within is forcing interest rates lower.

    No, the low interest rates are actually due to government debt.

    Buy to let IS a loss of faith in currency,

    Not necessarily. It’s a scramble for yield – the BTL’s accept payment in £’s not bitcoins……

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  • Today’s Independent published part of an IMF white paper detailing how financial debt crises might be managed. They seemed to concentrate on grabbing bank balances and pension fund confiscation.
    Snatching a terraced house is administratively harder – but there you are!

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  • Snatching a terraced house is administratively harder – but there you are!

    Depends on how big the mortgage is and how much equity…and with who. A bit harder than grabbing a bank balance, but not much.

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  • Property taxes would be introduced when the UK is bailed by the imf. Ireland and Greece are good examples toblearn from.

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  • Record house prices with less than 3 per cent yield on btl and record stocks with history very low historic dividends. What could go wrong?

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