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What Comes After "Bubble": London Home Prices Rise By 10% In One Month; Shanghai Up 12% In One Week
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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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.
The last huff and puff on the ballon creates the largest visible expansion right before there is a big "BANG."
And after the big bang, capital controls ensue.
You don't own it if you can't touch it.
5%, were almost tapped out here.
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.
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.
Damn, HH! I was just eating my morning oatmeal too.
"What comes after a bubble?"
the unmistakable scent of a banker
that's a weird place to have boobies. nipple looks a little off too.
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.
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.
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?
There is going to be serious damage, when this overstretched rubber band snaps. Yet there are many idiots buying into this sheer lunacy.
"Better buy now, before the house prices fall."
--my Neighbor
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.
We're crushed between the idiots and the overlords.
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.
>> 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.
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.
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.
Are the prices rising or are the purchasing power of the currencies falling?
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.
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.
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.
Nor, a massive FSA... when the shit goes south, you had better leave the city...
The blow off top.,, physics bitchez
"This is like deja vu all over again." Yogi Berra
Luckily, "house prices never go down."
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.
Exactly. House prices haven't moved here a bit either. Houses around here are still down below 1997 prices.
Here in SW Florida the prices are still pretty stable. People here don't forget that fast.
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.
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).
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...
Not much on the market here that is affordable. Everything over $600k sits. (Coastal Northern CA.)
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.
>> 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.
Please don't give Zillow that much credit.
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
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.
$200 Billion printed per month
Obama in handcuffs?
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?!
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.
"just 5% money down: a recipe for absolute taxpayer-funded devastation and bailouts down the line."
Pikers. Try 2%. Or nothing.
RE:
Fascism
Too late...we're already there.
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.
Give this man a prize
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
after a bubble?
double bubble toil and trouble?
hydrogen filled zeppelin
POP
Moar zero-down [or alomost zero-down] houses, mortgage subsidies, EZCredit, and NINJA's ... it's all Boooyaaah!
Fortunately that hasn't reached the little people, but it will. Unfortunately, although home owners feel smug with their paper profits, it's the insurance and tax man that make out like bandits. Squalid little shit hole that it is, I'm glad I own my estate free and clear right now. This don't bode well for renters either.
"Fart Gas" It's the bubble on steriods and we all know what steriods do to the body odor.
With these kinds of prices you can't even be a peasant on the cheap.
2.4 million will MAYBE buy you a peasant's quarters (litteraly -- i.e. converted horse stables or Dickensian debt serf's quarters on mews) in Kensington and Chelsea. I think the upper end must be skewing the averages (more than normal)...
I hear Dunkin Donuts is making a renewed push in the GB so at least you'll be able to get coffee (quite good coffee actually) and a bagel for 5 bucks US. At least that what it costs over here. What's coffee and a bagel cost over there now? 50 pounds?
Hey DV
I saw an article the other day where some entrepreneurial dude was selling Cronuts!!! (croissant crossed with a doughnut)
He had douchebags lining up to pay £5 ($8) a go.
You can dig an oz of phyzz out of the ground for that!!!
BTFATH!!!
British people have been priced out of their own houses by forigners. Add to that all the UK gas and electric companies putting up their prices by about 10% in the past few days then the Brits, myself included, are stuffed.
Good old Margaret Thatcher selling all the power companies to foreigners and both her and Tony Blair not investing in nuclear power plants - now we have to pay the French and Chinese hundreds of billions to build them.
The UK government is investing directly in the market and doing deals with the Chinese to keep the flames stoked. Like it or not, the bubble is not going to burst anytime soon (at least not until after the next election) and if anything, it is already spreading out to the Home Counties, as parts of London, that were once considered undesirable, such as Hackney, become too hot. It is estimated, that projects such as Crossrail will add 25% to houses along the new line. As far as the Tories are concerned the Midlands and the North do not exist.
No tory ridings up there ...
FFS. UK Housing was already 50% overvalued - across the board.
We have yet to feel the crash felt Stateside.
This will not end well.
Very true, we never felt the American subprime. It's difficult to know how we avoided it and with Cameron now giving 600K to first time buyers, it would seem no one learnt a thing. Personally I feel they are intentionally pumping up the market because there is little else.
The whole UK economy is based on over inflated house prices. It's a joke. All this and any govenrment seem to think is - help bring construction back, that'll fix this mess. Wrong.
House building in the UK is generally awful. Cheap mass build, on tiny plots, generic non descript design, built wafer thin. Soulless suburban developments.
And hugely overpriced.
The govenrment answer has been incentivise new builds, get construction moving. All this has done is continue to keep the price of housing stock out of reach.
In my area £350,000 is an average 3/4 bed detatched house. This isn't even London prices! So you need £70k in your back pocket to get a decent mortgage rate, say 3%. Then to get the £280k mortgage you need 4x salary. So you need to be earning £70k and £70k in hand to buy an average house.
Ludicrous.
This is just loading people with debt.
Added to that there will be various people who have been on self assessed mortgages who will be coming up to renew. Whereas before they could 'say' they were earning X, now they have to prove it! Also they will need to prove enough to get an 80% mortgage, not a 90% mortgage (if they want a reasonable rate).
If they can't prove they have the ability to pay, they are left with two choices - Sell or have to go on the standard variable rate!
But there is no bubble here and this is all totally sustainable!
They are pumping our markets here too, this is the way they rob the population. Crate money from thin air and then give it to their buddies to buy houses and when everything pops their buddies have sold their properties for a profit or they default on the loans and the taxpayers have to make it good through bailouts just like last time. the bankers make billions and the poor sods who can't afford a 3 room flat have to shoulder the tax burden to pay all of it back.
One size does not fit all with respect to the 'why' of home buying Some buy for investment, others to raise a family, others to plan for retirement. Some, to bury cash and arbitrage cheap mortgage rates, current tax deductibility, potential devaluation, with an added intent to reallocate cash in case of bank bail-ins.
Deposits are just numbers on a screen. Cash is good only as long as some other person accepts the paper. You can buy gold, but you can't live in it. Food and shelter (far away from the major metropolitan centers in case TSHTF) is a good investment and has strong tax write offs already in place.
Challenge the system. First rule of real estate: location, location, location. Buy the worst house in a fair neighborhood, pay as much down as possible, challenge the assessment, put in a garden, maybe solar and wind, connect to the utility. Promote urban and suburban farming/homesteading.
Opt out of the system if at all possible. Starve the beast.
Sadly, the number of people willing to do things like that are less than 1% of the adult population.
P.S. - We're screwed.
>> less than 1% of the adult population.
With challenging the assessment being the only exception, I've done exactly what you've recommended. In defense of the other 99%, it is not an easy thing to do. But there is a lot people can do that's not to this extreme. A wise, if self serving, ex-friend of mind had a saying that has a lot of truth to it, there is power in poverty. Pursuit of material goods and status keep the majority of the population chained to the grind stone enriching the PTB. You don't actually have to be impoverished, just live as far beneath your means as you possibly can.
Well said, greatbeard, and kudos to you for taking the plunge into self-imposed austerity, which, truth be told, is actually the way our ancestors and theirs always lived.
The current climate promotes profligacy and shuns frugality. It's a shame, really, how people have lost traditional values in such a short period of time (the last 50 years), but I see great hope for those of us who see through the veneer the media presents. We shall be the leaders of the future prosperity.
I don;t know about you, but I've largely disconnected from the matrix, as have many in the ZH community. As we used to say in the 60s, keep the faith, baby!
First they ignore you, then they ridicule you, then they fight you, then you win. - Mahatma Gandhi
Unless you are planning to sell soon, challenge the assessment. BTW, challenging the amount assessed is the easiest of what was mentioned. If you have some spare time, you can do it yourself. Most populated areas you can get someone to represent you and they will generally do it for what they can save you the first year. But it is easily worth your own time to do the challenge. Here in Texas they just arbitrarily tack a price on property and then leave it up to the homeowners to complain about the valuation knowing that 98% won't say anything about it through either not knowing or understanding they can fight it. My first time around, I was a bit anxious but I was also damned if I would pay the valuation on the property. I good a pretty good laugh out of the review board when I told them that if they thought it was worth what they said it was to hand me a check and I'd give them the house land and everything in and on it including the cats, furniture and dishes.
Second time I had an appraiser come out and while it cost me $500 to get it appraised, I got the price knocked down 50%. The problem here is that they jack the price back up at 10% a year, so you have to continue to go back.
It is nothing but a game to them and a lucrative one for the counties. In the 15 years I've owned my place the county went from renting 3 floors in a building to buying and occupying a 15 story building with at a guess, 500 maybe more, employees to service 1 county. Employees make at least $30-40K to start plus real nice benefits. Speaking of which, it is time for me to tell them again that my pore ole raggedy house jsut ain't worth what they are telling me. While home prices were falling the last few years, mine kept going up because they wanted to jack the price back up from me lowering it. Thieves is all they are.
Wake me up when houses in Camden town reach !m pounds.
Selected burbs of London,sure.Lies ,damn lies and...
I just sold a house over there.No evidence of much of a bubble outside London.
I got 5k over asking,al though the real estate agent wanted me to take 15k under.
Yes, that's the dirty little secret / perverse incentive of the real estate business, the agent mazimizes her expected outcome by try to get you to take the best offer in the first batch of offers (if you are lucky enough to get a batch) rather than try for more. The last agent that did that to me got fired. A month later sold the property myself for 22% more.
I hate to disturb your nap, Sir Winston, but...
This, for example, is on Delancey St., just off the Camden High Street, and yours for only £1,950,000.
It certainly wouldn't be a challenge to spend £1M+ just around the corner in Primrose Hill.
Then there are some lovely ones near Regent's Park for only £13-15M, and even one "exceptional property" at £45M.
NW1 can be seriously expensive too.
Last thing I remember of Camden town was being in a bar fight 30 yrs ago.
Place was a dump.South end was the worst,down towards the X.
Must have improved a lot.Kentish town ?
The south bit's still a dump, pretty much. I'm sure you could still find a good bar fight if you made an effort.
The middle bit, around the Camden Market, is lively, with lots of music clubs, punk clothing shops, ethnic food vendors, and so on. The market itself is great fun on weekends; well worth a visit in summer.
As you go farther north, past Chalk Farm, it gets more posh. Primrose Hill, Belsize Park and Hampstead Heath are seriously expensive. Lots of shops selling overpriced baby strollers and pet accessories.
Don't know much about Kentish Town, I'm afraid. It seems pretty rough in parts, but with some gentrified areas as well. Things can change a lot within the space of a block or two. If you were determined to buy in London, it might not be the worst place to look, come to think of it. Northern Line's pretty busy in the mornings, though the Overground has improved a lot.
RUBBLE comes after the Bubble!
The ice age that has started should bring prices back down.
so, who are these foreign investors and why are they looking for safe haven outside their country?
Anyone with more than 100,000 euros is afraid to keep it in the bank now.
Same goes for wealthy Chinese investors and many others from East Asia. Also if your economy is hyperinflating (Venezuela, Argentina) never hurts to have your assets in a country where the rule of law still exists.
Which country still has the rule of law in working order. The rule of law has been gone for years.
This is what happens when you hire a "Carney" to run your economy.
*yawn*
we are all headed over the cliff - it's just a matter of when - party like it's 1999 until then
You set in train an economic system and off you go. By the time it falls apart and all the things you should never have done the economy now needs to maintain its previous trajectory no matter what to satisfy the levels of debt.
You can't get off because you do not have enough to square the debt but to continue just grows the problem even bigger. What do you do?
You can't pay it off, so carry on as before and hope nobody notices. At some point there will be an unavoidable financial reckoning unless you continue the same policy forever.
Even if the system stagnates the debt will continue to grow because cost to service the level of debt even with ZIRP is too big.
If you removed the normal component of the economy you are left with NEEDING TO FOREVER CREATE MONEY TO PAY THE INTEREST ON DEBT ALONE.
I've got my popcorn supplies, ready to watch the next bubble inflate and deflate and the predicatble reactions on all sides to this silly little fiat game, with a little more hope that we may be closer to rallying a critical mass of angry motherfuckers on the streets.
uh... Dr. Bernacke...I think I found that inflation, it was hiding in assets..
Don't worry Igor, soon it will be everywhere...ha..ha..HA HA HA
Hey look fiat is coming out of the cracks in the Fed dam. Hurry Yellen put your finger in there!
Too many people in the world have too much money. It's an absurdity. I'm no commie but gimme a break.
Giant casino game. All the $ goes to card counters and sleight of hand artists .
Bitcoins will save us.
"What comes after a bubble?"
MOAR BUBBLE! Must eat brainnnnnnsss.