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London's Whopping 18.7% Home Price Surge Means UK's Housing Bubble Slams China's

Tyler Durden's picture




 

A month ago, using the latest UK housing data from Rightmove, we asked a simple question: whose housing bubble is bigger: China's, or the place where increasingly more of China's $25 trillion in bank assets are being parked: the UK (specifically London). Using then available data, the answer was still a toss-up, even if the divergence in directions was quite clear.

Earlier today, we finally got the official data from the UK's Office for National Statistics, and we politely retract our question, as rhetorical as it may have been. The reason: there is no contest - the UK's housing bubble has officially slammed China's, and the result is nothing short of a knock out.

From the FT:

The Office for National Statistics said on Tuesday that the cost of purchasing a home rose 9.9 per cent in the year to April across the UK, with a double-digit growth rate of 10.4 per cent in England.

 

The rise, including a 2 per cent gain in April alone, comes as the BoE’s Financial Policy Committee meets on Tuesday to consider imposing restrictions on risky mortgage lending in an attempt to cool the market. The FPC will, however, only announce any decisions it takes on June 26.

 

Representatives of mortgage lenders urged the FPC not to take draconian action even though house prices were growing at a pace. Peter Williams, executive director of the Intermediary Mortgage Lenders Association, said: “With house prices continuing to climb we are staring at a glaring mismatch between a rampant housing market and subdued mortgage activity that needs handling with care.”

 

The ONS measure of house prices is based on mortgage approvals of all the leading lenders and shows house prices at a new record level, now 6.5 per cent higher than the previous peak in January 2008.

 

The 2 per cent monthly change was the fastest pace of house price gain recorded on this index since the housing market recovery started to gather momentum last year.

And focusing on the only place that really matters:

Rapid price rises are still concentrated in London and southeast England, where prices rose 18.7 per cent and 8.9 per cent respectively. Outside London and the southeast, the annual rate of house price inflation was 6.3 per cent, although this figure had risen from 1.4 per cent a year earlier.

It may no contest, but for those who cares, here are the two housing bubbles in context:

 

Even more disturbing: a chart showing the value of all UK dwellings from 2004 to April 2014.

 

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Tue, 06/17/2014 - 10:50 | 4864987 The man with po...
The man with pointy horns's picture

Fuck me. I'm getting more screwed over by the day.

A lifetime of rent awaits.

Tue, 06/17/2014 - 10:51 | 4864993 Sudden Debt
Sudden Debt's picture

but whatever happens... service with a smile oke?

Tue, 06/17/2014 - 10:53 | 4865002 The man with po...
The man with pointy horns's picture

Skateboarding, story-writing and Simcity 4 are the only things making me smile these days.

Tue, 06/17/2014 - 11:06 | 4865064 blabam
blabam's picture

Why stay in the UK? The weather is shite. 

Tue, 06/17/2014 - 11:06 | 4865069 CH1
CH1's picture

BTFATH, London Bitchez!

Tue, 06/17/2014 - 11:08 | 4865085 cifo
cifo's picture
"UK's Housing Bubble Slams China's"

Because the UK bubble is probably of Chinese origin.

Tue, 06/17/2014 - 11:11 | 4865093 Pinto Currency
Pinto Currency's picture

 

 

London real estate has not quite reached escape velocity.

 

Tue, 06/17/2014 - 11:08 | 4865078 The man with po...
The man with pointy horns's picture

I like the rain and grey skies. Cloudy days are more moody and more interesting to look at than endless blue.

Tue, 06/17/2014 - 11:14 | 4865106 pods
pods's picture

How can I say this nicely?  I think that you have been there too long.

I grew up in the same type climate.  Except we also got snow 6 months out of the year.  

pods

Tue, 06/17/2014 - 11:31 | 4865188 The man with po...
The man with pointy horns's picture

The housing may be expensive, but the countryside in the North of England is second to none. Cloud inversions, haze and grey skies make it stand out; particularly sunshine and clouds.

Tue, 06/17/2014 - 14:26 | 4866068 DetectiveStern
DetectiveStern's picture

I'm pushing for North West independence. Fuck London.

Tue, 06/17/2014 - 11:36 | 4865210 williambanzai7
williambanzai7's picture

China bubble, hmmmm…

 

.  

Tue, 06/17/2014 - 14:57 | 4866238 davidgdg
davidgdg's picture

I live there and this is out of date. That was in the Spring. There's loads of stock on the market now but not much is shifting. The stupid Government will bring in a whole load of new rules to calm a market that's already calm. Actually the result will be a slump. Then they'll bring in some stupid subsidy to revive the market that they crashed. So on and so forth.

Tue, 06/17/2014 - 10:53 | 4864988 Sudden Debt
Sudden Debt's picture

At a certain point, people just can't pay for them anymore.

Rents of 2/3 of the salary?

yeah... sustainable...

 

so:

1. Young people will never get a pension.

2. Young people can't save money because they don't have a job or make enough money.

3. If they can save money, inflation catches up and interests are near zero

4. A house is priced at a price adjusted for inflation in 2050

 

How will young people do when they turn 40? Totally depressed?

We'll get riots. Serious riots. And they'll burn our houses.

 

Houses go up more than people earn as a salary??!!!

sure... it looks like the American housing crisis... smells like the American housing crisis... and indeed it's totally different... It will be called "Small Chack Crisis"

Hundreds of thousands of euro's for enough space to park your car.

Tue, 06/17/2014 - 11:01 | 4865044 Soul Glow
Soul Glow's picture

Old people won't have pensions soon either.

Tue, 06/17/2014 - 11:04 | 4865060 Sudden Debt
Sudden Debt's picture

well, after the developpements these last few weeks over here, that's indeed becomming pretty clear.

And all the TV shows is the WK 2014...

 

ps: BELGIUM IS PLAYING MAROKKO IN 1 HOUR!!!

WE WILL... CRRRRUUUUSSSSSSHHHH THEM!!!! WWWAAAAAAAARRRHHHHH!!

Tue, 06/17/2014 - 11:07 | 4865079 Mister Ponzi
Mister Ponzi's picture

Algeria is not Morocco.

Tue, 06/17/2014 - 10:51 | 4864994 XAU XAG
XAU XAG's picture

I said it before the last crash.

 

You cannot have house prices going up 10/20% per year and wages only a small 1/2 %................

 

THE MATHS DO NOT WORK!

Tue, 06/17/2014 - 10:55 | 4865014 XAU XAG
XAU XAG's picture

And when rates go up

 

Boom and the market will crash.

 

Peeps will be forecloseing with just a small .25/.5 % increase in rates.

 

And is the UK leaves Europe............there will be alot of empty houses and flates.............with no one to rent.

 

It's a bomb just waiting to go off.

Tue, 06/17/2014 - 10:59 | 4865033 Soul Glow
Soul Glow's picture

Wait, you'll kill the meme!  Take an ARM loan, or better yet - reverse mortgage!

We'll all be millionaires soon!  Just keep printing those dollars!

Tue, 06/17/2014 - 11:59 | 4865347 walküre
walküre's picture

LOL @ "when rates go up"

The FED, BOE, ECB commonly known as "Brothers Grimm".

Rates go up when CBs are teets up, out of business, whacked 6ft into the ground.

Tue, 06/17/2014 - 12:16 | 4865428 elegance
elegance's picture

If the UK really leaves EU I see the house prices more than halving economy built on financialization go up in mushroom cloud. Which ain't gonna just bomb the economy here but completely nuke it. Lol trying to do the thing you want to do the most which also at the same time is going to kill you. Oh the dilemma. 

Tue, 06/17/2014 - 10:53 | 4865003 greatbeard
greatbeard's picture

Relax.  Gold is under $1,300.  Silver is under $20.  Everything is just fine.  If inflation was out of control gold and silver would relfect it.

Tue, 06/17/2014 - 10:57 | 4865022 Soul Glow
Soul Glow's picture

Well said Mr Gensler.

Tue, 06/17/2014 - 10:54 | 4865010 Rainman
Rainman's picture

I read just the other day the Queen was approved for a billion pound HELOC .. blimey !

Tue, 06/17/2014 - 10:56 | 4865017 Stuck on Zero
Stuck on Zero's picture

Detroit has London beat by a mile.  It is recording house prices gains of 30% or more. Some houses that went for $200 last year are selling for $300 or more this year.

 

Tue, 06/17/2014 - 10:56 | 4865021 Calculus99
Calculus99's picture

The exponential's going to get ya!

http://en.wikipedia.org/wiki/Albert_Allen_Bartlett

 

 

Tue, 06/17/2014 - 11:21 | 4865142 RadioactiveRant
RadioactiveRant's picture

So a guy moaning about exponential population growth decided he should have FOUR kids?

Tue, 06/17/2014 - 10:58 | 4865026 Josephine29
Josephine29's picture

Apparently according to the UK's official measure of housing cost inflation everything is fine. Move along nothing to see here! Or perhaps not.

What about the official measure?

We do have a measure for this called Consumer Price Inflation Housing or CPIH which you might reasonably think would be registering a substantial increase.

In May 2014, the 12-month rate (the rate at which prices increased between May 2013 and May 2014) for CPIH stood at 1.4%, down from 1.6% in April.

For newer readers this particular number may be hard to believe at a time of house price inflation but the UK establishment neutered this particular measure at birth.I remember arguing the alternative case for the use of actual house prices at the Royal Statistical Society and predicting the dangers and indeed likelihood of a situation like right now. I got support from the numbers produced by the RSS itself which in a nutshell argued that rents were a poor guide in previous house price booms.It did not take long for me to be proven right did it?


http://www.mindfulmoney.co.uk/wp/shaun-richards/uk-consumer-inflation-is...

 

So there you have it! According to the official UK data on housing costs there is nothing to see here. The Bank of England can go back to sleep.

Tue, 06/17/2014 - 11:07 | 4865076 BeetleBailey
BeetleBailey's picture

...or, TALK LIKE TOTAL MORONS AND "THREATEN" TO RAISE INTEREST RATES....

that outghta be fun....

not....gonna....happen....

Mid NY morning the 17th....THE FUCKING PLUNGE PROTECTION TEAM IS GOD DAMN ALL HANDS ON DECK THIS MORNING.....JESUS H. RIGGED CASINO MOTHERFUCKER....

Tue, 06/17/2014 - 11:01 | 4865045 NMFP
NMFP's picture

This time next year Rodney, we'll be millionaires!

Tue, 06/17/2014 - 11:06 | 4865067 XAU XAG
XAU XAG's picture

This time next year Rodney, we'll be millionaires!

 

 

And if a loaf of bread costs...£1million?

Tue, 06/17/2014 - 11:02 | 4865049 orangegeek
orangegeek's picture

choke the masses until they riot

Tue, 06/17/2014 - 11:02 | 4865050 falak pema
falak pema's picture

No inflation in the real economy which ruins the people as all investment in classical instruments like life insurance are getting maimed.

But the inflation is in the financialized FIRE asset economy. That was the whole point of Reaganomics.

Let her rip! Oligarchs forever! 

Tue, 06/17/2014 - 11:06 | 4865062 Peter Pan
Peter Pan's picture

The Brits have always felt that a man's home is his castle.

Now it appears that the cost of that home is also approaching that of a castle.

 

Tue, 06/17/2014 - 11:18 | 4865127 RadioactiveRant
RadioactiveRant's picture

All the castles have been converted into 20m2 "luxury" flats.

Tue, 06/17/2014 - 11:08 | 4865084 starman
starman's picture

10 15 30 year lease options for housing and cars! RECOVERY!

Tue, 06/17/2014 - 11:17 | 4865121 RadioactiveRant
RadioactiveRant's picture

Whats the Old Lady to do? House price inflation at 9.9% and consumer prices at 1.5% and falling.

  • Bump interest rates up to squash house prices, and risk collateral damage to the banks AND cause a deflationary spiral in retail prices.
  • Take interest rates lower/negative to hit mandated CPI target AND stoke house prices even further into the stratosphere.
Tue, 06/17/2014 - 11:23 | 4865154 XAU XAG
XAU XAG's picture

@RadioactiveRant

This old lady does not believe the 1.5% CPI

Try 8-10%

Tue, 06/17/2014 - 11:19 | 4865133 Nue
Nue's picture

Double Double Toil and Trouble. Middle classes toil and housing prices bubble.

Tue, 06/17/2014 - 11:21 | 4865145 Yen Cross
Yen Cross's picture

  A full 75% of the UK GDP is "service derived". I'll bet the majority of that 75% is financial services based. The minute these ponzi markets start to selloff so goes the GB GDP and housing boom. (and rate increases? lol)

   I think cable is very close to or has put in the high for 2014. It's been in an uptrend for exactly (1) year this month. Look at the weekly chart and you'll get a better idea of how overbought it is.

Tue, 06/17/2014 - 11:30 | 4865183 SheepDog-One
SheepDog-One's picture

I just had a guy at work bragging over his new $500 phone, I told him it must be nice having that kind of extra cash laying around....he said its no big deal as they just took out a big HELOC to pay for it and all their other new toys....I just walked away.

Tue, 06/17/2014 - 11:32 | 4865189 SheepDog-One
SheepDog-One's picture

.

Tue, 06/17/2014 - 11:37 | 4865219 robertocarlos
robertocarlos's picture

All housing in Canada is up 7% YoY. Average is now $410-420 ish K. Mom's basement is looking better every year. I'll never escape, I mean leave.

Tue, 06/17/2014 - 11:39 | 4865227 Mediocritas
Mediocritas's picture

London's bubble IS the Chinese bubble; interspersed amongst the living, a whole new ghost city is appearing right before our eyes and it ain't just London.

Tue, 06/17/2014 - 11:59 | 4865345 junction
junction's picture

Meanwhile, in the real world, MSN Money website has a story on how American businesses are slashing worker health insurance policies.  Particularly enlightening is the fact that only about a quarter of workers can pay out of pocket health insurance expense of over $5,000.  Health insurance coverage dwindling, defined pensions for private industry employers pretty much wiped out and corporate taxes collected about 20% of the take from Social Security taxes (SS taxes target the middle-class).  Corporate profits are rocketing up, as wages are frozen and employee benefits virtually wiped out.  Lookee here, Obama's secretary of education is a cheering section for the elimination of teacher tenure in California, based on a court decision that used bogus economic research.  What a world!  

http://money.msn.com/health-and-life-insurance/article.aspx?post=5bab3b2...

Tue, 06/17/2014 - 11:59 | 4865346 Inthemix96
Inthemix96's picture

Without trying to upset any any of my Londonistan based friends here, I was down their two years ago for work related shenanigans.

Its a fucking filthy dirty, rat, and forgiener infested shit hole.  According to some reports, and a cockney mate of mine 'Up North', its now 56% 'Not Of This Country', and me mate reckons he wont even go down for family reunions no more.

Have at it my friends, you have to SEE it, to BELIVE it.

;-)

Tue, 06/17/2014 - 12:15 | 4865423 venturen
venturen's picture

rehypothetication baby! Pretend money to the moon!!! just like the Cow jumping....then it is over the moon to oblivion! 

Tue, 06/17/2014 - 12:20 | 4865448 GoldenDonuts
GoldenDonuts's picture

Isn't the London housing bubble is a suburb of the Chinese housing bubble?

Tue, 06/17/2014 - 12:58 | 4865586 Last of the Mid...
Last of the Middle Class's picture

sounds like it is going to be getting damn cold in europe this winter in more ways than one.

Tue, 06/17/2014 - 17:08 | 4866763 goldhedge
goldhedge's picture

We welcome the Ukrainian "middle class" to flock to Old London Town.

 

NOT

 

 

Tue, 06/17/2014 - 22:24 | 4867682 Fevr
Fevr's picture

Mark Carney (Governor of the Bank of England) is some sort of housing bubble magician I tell ya. Did a wonderful job with Canada's while he was Governor of the Bank of Canada, and he's doing a first rate In England as well. Gold Star Mr. Carney!

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