Thursday, July 7, 2016

Brexit not fully factored in, but will a weak pound attract more buyers?

Property hits levels of unaffordability not seen since before the financial crisis as house prices rise by almost 3k in June

UK house prices continued to rise in June, adding almost 3,000 GBP in a month, stretching affordability to levels not seen since the run-up to the financial crisis in 2007, a new survey suggests. Halifax said it was too early to say how the referendum that sanctioned the UK's decision to leave the EU will impact the housing market, but added there were signs the pace of growth is easing. The price of the average home in the UK rose by 1.3 per cent between May and June, or by 2,708 GBP to hit 216,823 GBP, up from 0.6 per cent the previous month, according to the latest index by the mortgage lender.

Posted by hpwatcher @ 04:21 PM (6590 views)
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7 thoughts on “Brexit not fully factored in, but will a weak pound attract more buyers?

  • Eyeballing the graph on HPC homepage (NW real house price index) on average *real* prices have not recovered to 2003 levels. So what we learn from this is that real incomes (factoring in those not participating in the labour market) have fallen as fast or faster than real house prices over the period. What an appalling situation. If now the housing bubble truly bursts many of those who held out may not benefit since they will be thrown out of work in the ensuing recession.

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  • With net migration of 500k people last year on record (like 1m in reality), there is a mega trend towards less affordability. Clearly, with present house building, those who could afford a three bed house should now only be able to afford a two bed, and families who once could live in a house will have a room in a shared house. This is actually happening in London.

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  • The *inflation* is in the relative *devaluation* of the currency, and not necessarily a rise in house prices; although I would question the monthly rise in house prices and how the figure was ”created”. However, the way that BoE are talking, this sorry state of affairs looks set to continue – albeit at a slower rate due to Brexit.

    In any event, the people running things CB’s, UK Government, EU mandarins are all completely – and the plutocrats running things – are completely nuts.

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  • > This is actually happening in London.

    Not sure you can compare London to the rest of the country. TBH I would not want to live there, Enfield is probably the best of a bad bunch.

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  • “Will a weak pound attract more buyers?”

    Why would anyone buy an asset whose price is falling to make a currency play when they could just buy the currency? I wouldn’t expect foreigners to buy in until the market looks like it’s a few months from bottoming out.

    In any case, most analysts predict many further falls for sterling. There was a significant risk of a sterling crisis before brexit, now it looks a lot more likely. That means rates might go up, not long after they get cut.

    Right now London property’s safe haven status is probably worse than that of brent crude and the uncertainty doesn’t look like it’s about to subside.

    Both a housing crash and a sterling crisis have been on the cards for some time now. Brexit has drastically increased the chances of both. Sterling crisis will lead to increased borrowing costs and further downward pressure on house prices. I keep meeting people going ahead with speculative property purchases in spite of all the tax reforms and brexit but I don’t think that’s where the smart money is. The smart money is waiting for sterling to drop further so they can profit from the options they took out before brexit.

    The US property market blew up in 2006. The resulting credit crunch didn’t happen until August 2007. It took over a year for the Lehman Brothers incident and the recession to begin in earnest. Meanwhile, the property market didn’t really start crashing until June 2008 as the spring bounce had been marked by SLIGHT intermittent falls.

    The only bullish news I hear on housing is:

    1) Construction projects are likely to get mothballed (but this also involves a drop in foreign investment, since most of the money being used to build and buy the high rises is foreign; it’ll also hit GDP, deepening the recession, if any)
    2) Labour supply in construction is obviously going to get hit, but I suspect most of them will stick it out in the short term as the money is so good right now
    3) BOE to try some monetary easing in the short term

    As opposed to:

    1) Massive uncertainty
    2) Tons of wealthy EU professionals who have a massive impact on London rental market demand who will not wait 2 years to leave; those that own are likely to sell up – more retail supply; even if an amnesty is declared, as seems probable, these people don’t feel welcome anymore, nor optimistic about wage growth, or how much their salary is worth in euros etc.)
    3) All the issues bearing down on high-end foreign investors already (Chinese stockmarket, Russian sanctions, complete dearth of oil/gas money)
    4) The new issues bearing down on foreign investment mentioned above
    5) The ongoing concerns about all the luxury high rises being built and who on earth is going to buy them when the luxury market has tanked
    6) The possibility of a severe recession occurring once Brexit scenario is “crystallised”
    7) The banking industry talking about moving to frankfurt
    8) All the other professional services that have been driving economic growth in London for so long, many of which presumably depend not just on our legal system, but on the fact that we’re part of the EU

    That’s not a remotely exhaustive list.

    I don’t really see the ambiguity in any of it. You have every housing commentator saying they expect prices to fall nationwide by some small percentage over the next 2 years. One idiot EA says he’s actually getting loads of interest because sterling has fallen and people make out like it’s a mixed bag. It’s not. These are people whose predictions are consistently optimistic. If they all think it’s about to crash, than an HPC has probably already started.

    I know of people moving who are being gazundered on accepted offers on the basis of brexit. The buyers were not foreign.

    The fact that the article claims affordability is flirting with the heights reached in 2007 just adds weight to the argument that the market has topped.

    I’m not saying that an HPC is a foregone conclusion, but I’d be very surprised if HPs are where they are now this time next year.

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  • @5 Yes good point, people can just buy the currency and not have to deal with fees and issues of selling the assets
    @4 I agree, London shouldn’t be compared to the rest of the country, times have changed and for businesses there is now less of a need to be centrally located in London to do business when you can go elsewhere and cut the costs down a lot. London will always be over rated as its always going to be popular with tourists and as long as they are spending money it will help prop up property prices as businesses are forced to compete for prime locations.

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