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London Housing: Same Old Story

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It’s the same old story being told in the London housing market and it’s like a re-run of a boring series or some B movie starring George Osborne, the UK Chancellor of the Exchequer and the Prime Minister David Cameron. That’s when they both have taken off their wellies and put their brollies away after running round the Home Counties and Surrey to visit the poor people that live there and that have been immersed in water up to their necks due to the weather conditions. It’s all low-budget and headless-chicken media hype for the voters, where ‘money has no object’ (apparently according to David Cameron). Although, he will be asking for the EU to pay for it all. Is that the same EU that David Cameron wants to opt out of in 2017? Interesting! Yes, they have far more to contend with and why would they even be bothered about the London housing market at all?

The asking price of UK properties rose nearly 7% on last year’s price, hitting £250, 000 (or $419, 000) this month. That’s once again the highest increase in price for the past six years. There are some property specialists that are once again talking of a housing bubble. Had they not seen it coming before? It couldn’t be plainer that there is a bubble ready to burst with a shortage of properties, increased numbers of people gaining access to the property market via schemes that have been set up by the Chancellor of the Exchequer (and yet still not having either the creditworthiness nor the job security to go with the loans that are being taken out). Shortages in properties are just fuelling prices in London. Prices in London have risen by 11.2% in the past year and by 7.8% in the South-East of the UK in general. But, it looks as if there is only a housing bubble waiting for Mr. Cameron to stick a pin into it in London and the SE of the country.

The average house in London is today £541, 313, which is double the price of the national average. That price is nothing in comparison to certain affluent boroughs in London where the average house price is in excess of £2 million (such as in Kensington or Chelsea, for example).

Interest rates have never been lower. But, the Governor of the Bank of England Mark Carney left the 0.5% interest rate as it stood at the start of this month, fuelling ideas that he was having his puppet strings pulled from up above in the government and that he was simply the frontman. Interest rates have been at this level since March 2009. In January, Mr. Carney stated that 2014 was going to be a fantastic year for the UK housing market. Perhaps, not fantastic, but memorable (in the bad sense of the word) might be on the cards. But, even back then, he was being warned that he would eat his words.

Mr. Carney stated yesterday in a BBC interview that: “What we've seen in the housing market is an adjustment from very low levels. So if you look at the level of transactions, how many houses are purchased how many mortgages are struck, they dropped more than 50 percent…they have not bounced back but they are still more than 25 percent below historic averages, let alone stronger than historic averages”. 
But, the Bank of England has no power to stop what was imagined up to be the recipe for a better economy. It’s just back to 2007 like a shot.

The only things that are keeping the housing market buoyant, wherever that may be in the world are the over-generous (stupid?) central-banking policy of easy money and investors. It has nothing to do with the economy actually getting better at any stage. Foreign buyers are also fuelling the increase in prices, by buying in cash.

In the USA, house prices are set to increase by roughly 5 or 6% this year. We’ll see what happens there in the land of the birth of the housing bubble.

Anyhow, in the UK it’s all the same, Carney, Osborne and Cameron have been the three witches around the cauldron and they have been throwing in a few old toes of frogs and tongues of dogs, hubble, bubble, toil and trouble. The spell has been cast, the cauldron is a bubbling: it’s time! It’s time!

Originally posted: London Housing: Same Old Story

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Wed, 02/19/2014 - 15:43 | 4453833 Never_Put_Down
Never_Put_Down's picture

Carney made a mess of Canada's housing market with bubble after bubble, now he can do the same with Englands

 

Wed, 02/19/2014 - 13:12 | 4453036 RozeGlasses
RozeGlasses's picture

The thing is, most buyers in London know that the prices are inflated, and likely to deflate, but everyone wants to be the last one out. It's a dangerous game of chicken that burned the US  and could kill RBS when it pops.

Wed, 02/19/2014 - 13:40 | 4453191 Sandmann
Sandmann's picture

An expensive investment in London property brings a permanent resident visa with it

Wed, 02/19/2014 - 11:48 | 4452609 Calculus99
Calculus99's picture

The London property bulls would be well advised to properly understand the exponential...

 

Wed, 02/19/2014 - 12:24 | 4452791 Watson
Watson's picture

My trade would be _long_ the GBP 2mm+ props in best parts of London, against a _short_ portfolio of GBP 0.25mm props chosen outside London/South-East UK.
Because the long side may well not be bought with any debt at all, but the short side will be full of debt, in part financed under various government 'this is designed to win the next election' schemes.

Slightly off-topic: Many UK lenders are offering the _same terms_ as the government schemes, but _not actually part of the goverment schemes_ (ie all their own risk).
That is very unlikely indeed to end well...

Watson

Wed, 02/19/2014 - 10:28 | 4452260 DavidC
DavidC's picture

Carney left a housing bubble in Canada (and its highest debt to GDP if I remember correctly) and now Osborne wants him to do the same in the UK...

DavidC

Wed, 02/19/2014 - 10:53 | 4452354 tonyw
tonyw's picture

Of course he does, predicted for several years, there's a general election coming next year so the government will want people to be feeling good about the economy (see "it's the economy stupid" Clinton?)

If homeowners see rising prices they will generally feel good, the govt can point to new schemes to aid buyers (even if very few in London)....

There have been few new houses built over the last say 15 years, it is picking up now but still too few for the added numbers of people who are attracted to London becuase of the good job situation. So ther will continue to be pressure on prices - unless another big crash.

At the top end property taxes are low compared to many other places, say max GBP 4,000 p.a. how does that compare to New York??

Also no restrictions on foreigners buying unlike Switzerland, easy and quick to sell - so seen as a good place to park some money.

 

Wed, 02/19/2014 - 10:02 | 4452148 Stuck on Zero
Stuck on Zero's picture

Google real estate anywhere in Europe, even Spain and Greece, and it's astounding how high the prices are.  The U.S. looks positively cheap.

 

Wed, 02/19/2014 - 09:07 | 4451950 Coldfire
Coldfire's picture

Look closely into Mark Carneybarker's eyes. Now take a look at that thing staring out of them. Enjoy Bolgia Ten, fucker.

Wed, 02/19/2014 - 07:28 | 4451798 RaiZH
RaiZH's picture

I dream of the day that mortgage lending completely stops... then we can finally see what a home truly costs! 

Wed, 02/19/2014 - 08:09 | 4451832 Ar-Pharazôn
Ar-Pharazôn's picture

as i'm completely ignorant of the housing market, what is your guess?

prices fall or prices skyrocketing?

Wed, 02/19/2014 - 09:04 | 4451944 Its_the_economy...
Its_the_economy_stupid's picture

the price will be the price of a tent.

Wed, 02/19/2014 - 06:17 | 4451751 boggles
boggles's picture

Could it be that real wages have nothing to do with house prices and more to do with (first) central bank policies and (subsequently) lending regulation and (ultimately) competition between banks? If true then economic growth and wage increases are irrelevent to house price inflation. Wait... isn't that what we've already seen over the past 30 years?

Wed, 02/19/2014 - 02:35 | 4451601 BigDuke6
BigDuke6's picture

When you invite in the worlds gangsters to london and the worlds goatherders to serve them then thats bullish for property.

Civil war down the track is a small price to pay

Wed, 02/19/2014 - 01:49 | 4451557 celticgold
celticgold's picture

Dogs very rarely vomit up tapeworms ...... they are much more likely to exit at the rear....

Wed, 02/19/2014 - 11:00 | 4452410 shovelhead
shovelhead's picture

This comment is why I come to ZH.

Always something new to learn.

Wed, 02/19/2014 - 01:19 | 4451520 Jonny poor boy
Jonny poor boy's picture

London property has been in a bull market for 1200 years!!.......an occasional down tick(1989/90) makes it hard to call the top

 

Tue, 02/18/2014 - 22:53 | 4451140 logicalman
logicalman's picture

George Osborne, the UK Chancellor of the Exchequer and the Prime Minister David Cameron.......

I've scraped stuff off the soles of my shoes more deserving of respect than those two.

What a fucking world.

Tue, 02/18/2014 - 23:10 | 4451195 wintermute
wintermute's picture

Tapeworms vomited up by a dog would be less slimy.

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