What Comes After "Bubble": London Home Prices Rise By 10% In One Month; Shanghai Up 12% In One Week

Tyler Durden's picture

All those who claim there is no inflation, and a tsunami of hot central-bank money flooding the world, are advised to check out the housing numbers reported overnight by UK's property website Rightmove, according to which asking prices in London saw an "unsustainable" 10% month-on-month increase in October. This sent the typical asking prices in the capital to £544,232, a new record high surpassing the previous high set in July by more than £28,000.

Who is to blame, in addition to central banks injecting nearly $150 billion in fresh liquidity in the market every month? Why Europe's Cyprus template of course:  according to Rightmove, the "frenzy" of activity in parts of prime inner London is due to overseas investors who are looking for a safe haven to place their cash, which is "leaving the shelves bare." It also means anyone who is not a robber baron, oligarch, money launderer, or otherwise has criminal access to billions, is fresh out of luck and priced out until the next housing crash.

The berserk chasing of ultra-luxury properties can be seen on the chart below, which compares the transactions in the top price band between 2013 and 2012. One term can describe the shift: whoosh, as transactions on the most expensive property class have nearly become the single most active bucket in all of London!.

The Evening Standard has more:

A major property website has seen London house sellers' asking prices soar to a new high this month, beating their previous record by nearly £30,000 and fuelling fears that the capital is overheating.

 

Across England and Wales, asking prices rose more gently by 2.8% month-on-month, following two months of falls, to reach £252,418 on average.

 

Prices across the country are 3.8% higher than they were a year ago, although in London they have shot up by 13.8% over this period, Rightmove said.

 

Despite the overall upward march in prices, Rightmove said that "a bubble seems a long way off in the majority of regions". The patchy state of the housing market was still shown, as four areas recorded year-on-year falls in house values - Wales, the North, the North West and the West Midlands.

 

The North recorded the biggest year-on-year drop, with asking prices falling by 2.2% to reach £145,094 on average. Sellers in Wales have dropped their asking prices by the second biggest amount over the last year, with prices falling by 1.4% annually to typically reach £165,708. After London, the East Midlands saw the second biggest annual increase in house prices, with a 6.0% annual uplift taking them to £171,913 on average.

 

The findings come after the Council of Mortgage Lenders (CML) reported last week that lending activity is at its strongest in five years and the Office for National Statistics (ONS) said that UK house prices reached an all-time high of £247,000 in August, surpassing a previous 2008 peak.

 

Housing market activity among people with low deposits who have previously struggled to get on the property ladder is expected to increase further in the coming months, as a new phase of the Government's flagship Help to Buy scheme is fully fired into action.

Of course, since only those armed with copius loans can afford anything anymore, there are naturally banks - and in this case even the UK government - willing to provide it for them, in exchange for just 5% money down: a recipe for absolute taxpayer-funded devastation and bailouts down the line.

Royal Bank of Scotland (RBS), NatWest, Halifax and Bank of Scotland started offering state-backed loans to people with deposits as low as 5% under the scheme this month and the lenders have reported strong interest so far.

 

Lenders including HSBC, Santander and Barclays have also confirmed they plan to come on board and start offering loans under the scheme.

 

The City of Westminster was named by Rightmove as London's strongest-performing house price area in October. Prices there have soared by 11.9% month-on-month to reach £1.6 million typically. Kensington and Chelsea and Hammersmith and Fulham also recorded increases of 11.8% in sellers' asking prices over the month.

 

Sellers are now typically asking £2.4 million for a home in Kensington and Chelsea and £1.1 million for a home in Hammersmith and Fulham.

Buyers, however, oblivious of the prices, keep pouring in:

Rightmove said that wealthy overseas buyers are continuing to snap up properties in prime central London as they are seen as "safe" investments amid the troubles of the eurozone.

 

Rightmove director Miles Shipside said that while this is happening and developers can achieve sales at premium prices, this "eats up a much-needed source of fresh supply and drags up existing property prices at an even faster rate".

 

He said: "Although not sustainable in the longer term, some agents currently report there is a buying frenzy in parts of prime inner London, with available stock so low that their shelves are now bare."

Lol: the longer run. Who cares about that. Certainly not China. Because if you thought a 10% increase in one month was bad, what is the proper adjective to describe a 12% increase in home prices in... one week!?

As Bloomberg reports, the average Shanghai new home price rose 12% on the week. Shanghai’s average new home price rose to 26,527 yuan/square meter in the week ended Oct. 20 from the previous week, property consultant Shanghai Uwin Real Estate Information Services Co. said in an e-mailed note today.

In short - what is going on in the global housing market is no longer a bubble: we don't know however how to describe it. What comes after a bubble?

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One And Only's picture

Because governments have never confiscated property or real assets before. There is no "safe haven" when the government has an insatiable blood lust for stealing.

I am more equal than others's picture

 

 

The last huff and puff on the ballon creates the largest visible expansion right before there is a big "BANG."

 

AlaricBalth's picture

And after the big bang, capital controls ensue.  

You don't own it if you can't touch it.

Divided States of America's picture

We are definitely reaching terminal velocity on the upside...and out of the blue, gravity will come bite the entire financial markets in the ass real soon.

hedgeless_horseman's picture

 

 

In short - what is going on in the global housing market is no longer a bubble: we don't know however how to describe it.

Dr. Bernanke says he can fix it in just 15 minutes  However, I say that when this pimple pops it is going to be messy.  There will be puss and blood running in the streets.

FL_Conservative's picture

Damn, HH!  I was just eating my morning oatmeal too.  

Bananamerican's picture

"What comes after a bubble?"

the unmistakable scent of a banker

Bro of the Sorrowful Figure's picture

that's a weird place to have boobies. nipple looks a little off too.

Peter Pan's picture

No wonder Greenspan could not see a bubble forming. It was on the back of his neck.

They might all be avoiding a Cypriot style haircut but when it busts they will cop one in the form of lower prices or unsaleable property.

overmedicatedundersexed's picture

to some extent this is not optimism of future gains, but fear money trying to find a safe place  good luck. there are no safe places, the CB's and .gov's are leading -pushing us to the cliff.

philosophers bone's picture

But if you tell people that capital controls are coming here, they look at you kind of funny.  How does that old saying go - if you're one step ahead of the curve, you're a genius, but if you're two steps ahead, you're a wingnut? 

Nothing but the truth.'s picture

There is going to be serious damage, when this overstretched rubber band snaps. Yet there are many idiots buying into this sheer lunacy.

Handful of Dust's picture

"Better buy now, before the house prices fall."

 

--my Neighbor

Bro of the Sorrowful Figure's picture

i really think reading this website and interacting with others of a similar mind skews our perception of reality to a certain extent. the fact is, it's not just many idiots who are buying into this, it's everyone. we are a tiny, tiny minority of people. out of the hundreds of people i consider friends or acquantainces--all considered to be intelligent and well off--i have yet to meet one who has the faintest idea of the hopelessness of our situation. most of the guys i graduated with work at goldman sachs, morgan stanley, BoA etc etc and even they have no idea what the fuck is going on.

i have innudated them with facts upon facts showing how screwed the system is and how close we are to disaster, and the end result is that people think im crazy. my dad, who otherwise is a very smart guy, can't see what is happening at all. he frequently tells me to take off my tinfoil hat when i point out, for example, that the "recovery" is a goddamn joke.

so basically, as everyone here knows, we're fucked.

PT's picture

We're crushed between the idiots and the overlords.

holgerdanske's picture

Asking price and sales price are two different things. If you want to be sensationalist, then make sure you use real figures. All trades are registered, so why are you not comparing actual traded prices.??
I have no doubt about inflation in certain things, but let us use facts, not just figures.
One single idiot asking 50 million for a one bedroomed flat could skew the whole stack.

greatbeard's picture

>> If you want to be sensationalist, then make sure you use real figures.

Asking prices are a more cutting edge indicator of where markets are probably going, although I'll grant you the actual closing prices are a more concrete basis.

Peter Pan's picture

Even real prices are misguiding in that they reflect the value of the last home sold and do not reflect what the price would be if the number of homes for sale was to increase for any reason.

ZH11's picture

The graph indicates sales through the HM Land Registry, these are confirmed deals.

In London, at the top end of the market, it is becoming the norm to have an asking price to which bids are received above this in order to obtain the property.

Elsehwhere in the country property is junk because, at best, it can't even keep up with inflation.

This is a pure demonstration of the Cantillon Effect mixed with corruption (off-shoring dodgy cash) which is the only source fueling this hyper-bubble. When mixed with the welfare reforms, a devestated labour market and mass regentrification of the inner city the combustable material rises every day. August 2011 is going to look like a WI meeting when it eventually expresses itself in the only way that will ensure it's listened to.

NewAmericaNow's picture

Are the prices rising or are the purchasing power of the currencies falling?

Peter Pan's picture

I can relate to what you are saying if people are buying using very little borrowings. But if they are borrowing a large percentage then they are tempting the gods of the roulette wheel.

disabledvet's picture

If the bailout does not materialize then indeed they are. I'm still waiting for the million dollar print on an acre of (quality) farmland in Iowa. Then i'll breathe easy.

lasvegaspersona's picture

Assets do OK in hyperinflation. Gold does better. Equities worse...When Money Dies, Adam Fergusson ...a good look at how HI hit the Austrians and Germans in the 1913 to 1924 period. 

Who knows how this will play out because we've never had the derivatives market we have now. Much is hidden today that was out in the open in prior events.

Maybe we get wheelbarrows, maybe we just get a pop...all over...so sorry...your dollars are no good...We shall see and probably soonish.

Praetorian Guard's picture

Nor, a massive FSA... when the shit goes south, you had better leave the city...

Jason T's picture

The blow off top.,, physics bitchez

GetZeeGold's picture

 

 

"This is like deja vu all over again."  Yogi Berra

Never One Roach's picture

Luckily, "house prices never go down."

fonzannoon's picture

I live 40 minutes outside NYC in a nice suburb of LI. My house on Zillow shows a value of about 120k less than what I paid for it, not counting the 30k plus I put into it. There is no bubble on a large scale. This is just in tiny pockets.

Dr. Engali's picture

Exactly. House prices haven't moved here a bit either. Houses around here are still down below 1997 prices. 

indygo55's picture

Here in SW Florida the prices are still pretty stable. People here don't forget that fast.

 

 

Jason T's picture

i moved out of LI to upstate NY .. we paid $122k in 2010 for our house and now zillow says it's worth $185k .. we also put in a good $30k worth of work.

NoDebt's picture

I'd say that roughly agrees with what I'm seeing.  "Regular guy" houses are going nowhere.  The further up the price ladder you go, though, the more they are increasing in price and demand.  I was speaking to someone last week who sold their $900K home in 1 day.  Meanwhile, my Mom's cute-n-cheap townhome in a good school district languishes for more than 3 months, despite dropping the ask twice now (off almost 10% from first price which itself was already "under market" to begin with).

MachoMan's picture

Seeing the opposite here...  the shitbird homes are being snatched up for more than top dollar by slumlords and eager beavers trying to get more return on their retirements.  The middle of the road homes are increasing in price due to population influx, low rates, slow/moderate growth, and downsizing.  The top end houses (10x avg. household income; ~$350k) sit on the market indefinitely, as there is no one that can pony up the tariff.  If anyone has the money to blow on a house like that, then they simply choose to build it themselves, rather than live with their seller's mistakes.

Of course, we never had the run-up either...  so, not much bust...

joego1's picture

Not much on the market here that is affordable. Everything over $600k sits. (Coastal Northern CA.)

 

jmcadg's picture

fonz - UK Housing is a huge bubble though, as is much of Northern Europe. People say, it's just London. No, it's that London is EVEN MORE of a bubble.

This will end in misery. We will be feeling the position you are in in LI at some point in the near future.

greatbeard's picture

>> Zillow

I use Zillow a good bit, as well as a number of other sites.  IMO, Zillow is the least reliable source for home values.  Last year I sold a little place out in the stix for $50K and zillow now has it at $130K.  They show my current ghetto dump as increasing $10K last month.

The actual county property appraiser seems to be the most consistent in valuations.

serog's picture

Please don't give Zillow that much credit.

RaceToTheBottom's picture

If you are anywhere close to the middle class, you have been, are, and will be, left behiind.  International money will chase international habitats.  You should drive by sometimes and see what your missed salaries for the last 30 years and your childrens future salaries are buying

lasvegaspersona's picture

Notice all the  sales seemed to be in the low end (that got hedge fund interest?) and the 1 million plus (where hot money goes to be saved). In the middle things are dead. 

Better raise the price on my house to over a million if I want it to sell.

AlaricBalth's picture
What Comes After "Bubble". What is toil and trouble, Alex?
Widowmaker's picture

STFU Tyler, no one sees it coming!

No one in banking, government and real estate sees a thing.

TBTF is a myth, mark to market is a myth, and printing money has no unintended consequences.

Where is Tim Geithner to tell us it's all okay?!

Dr. Engali's picture

Everybody is trying to get as close to the printers as they can so they can get their fingers on the funny fiat money before it loses all of it's value trickling down to the serfs.

NoDebt's picture

"just 5% money down: a recipe for absolute taxpayer-funded devastation and bailouts down the line."

Pikers.  Try 2%.  Or nothing.

Shizzmoney's picture

RE:

What comes after a bubble?

Fascism

Dr. Engali's picture

Too late...we're already there.

MachoMan's picture

If you want to draw an incredibly narrow time span for an analysis, I guess...  but the reality is that the consolidation of power always occurs (from the dawn of man) and it manifests itself in different ways...  ways which I contend are largely distinctions without a difference.  As a result, classifying the current method of our assfucking is akin to engaging in the red/blue debate...  a desperate misdirection.

TuesdayBen's picture

What comes after the bubble? Either:
A. disciplined governance, collapse/correction, much pain, lessons learned, eventual recovery, or
B. Gubmint intervention at behest of wealthy/powerful, illusion/lies/propaganda from complicit media, fascism, international conflict, chaos, war, mass deaths of commoners, wealth transfer