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Another Bubble Bursts: Ultra Luxury London Home Prices Tumble 12%

Tyler Durden's picture




 

In mid-September, when we looked at the Australian housing market, we said that in the aftermath of Beijing's crack down on capital controls following its August currency devaluation, that "new Chinese 'regulations' may just kill Australia's golden goose of 'weath creation' as Aussie's largest trade partner sees its economy collapse." More:

While the Aussies themselves proclaimed a "war on cash," it appears, as AFR reports, that Chinese purchases of Australian property have dropped significantly in the past month, according to agents, as buyers struggle to shift money out of the country following Beijing's move to tighten capital controls. With Chinese banks now limiting any overseas transfer to USD50,000 - in an effort to control capital outflows - and with China dominating the Aussie housing market, one agent exclaimed, "it has affected 70 to 80 per cent of current transactions and some have already been suspended."

The results were immediate: "the tighter rules in China come as Sydney recorded its lowest auction clearance rate for the year this past weekend, while Melbourne has now recorded two weekends below the same time last year, according to Corelogic RP Data."

Two months later, the sudden withdrawal of Chinese hot and laundered money has just popped another housing bubble: perhaps the biggest one of all. London.

Citing Richard Barber, a director at broker W.A. Ellis LLP, a unit of Jones Lang LaSalle Inc., Bloomberg reports that prices of homes valued at 5 million pounds ($7.6 million) or more fell 11.5% on a per square foot basis from the third quarter of 2014. Bloomberg is eager to assign the plunge on "the government’s stamp duty sales tax", however that has been around for a while and only after the Chinese devaluation was there such a sudden drop in prices.

What changed? Why China's far more aggressive crackdown on the exporting of hot money, of course. Just like in Australia.

The result has been sharp and acute: sales volumes across all homes in the best parts of central London dropped 14%, the realtor said on Thursday.

“The bubble may already have burst” for the most expensive homes, Barber said. Now, "36 percent of all properties currently on the market across prime central London are being marketed at a lower price than they were originally listed at, with the average reduction in price being 8.5 percent."

According to the W.A. Ellis report, values across all homes in London’s best central districts rose 1.4 percent during the third quarter to 1,832 pounds a square foot, which means that the one segment most impacted was the one which also happens to be most desirable to offshore (read Chinese "all cash") clients. 

Neither the London housing bubble nor its sudden pop should come as a surprise to central bankers, either in the UK or in China. After all it is their easy money policies, and the creation of tens of trillions in excess deposits in banks via the reserve pathway (deposits which had to be parked in "safe" jurisdictions such as Swiss bank accounts until recently or in London/NY/SF/Vancouver real estate, that caused this.

Sadly, and as usual feigning ignorance for the consequences of their actions, instead of finally admitting they are at fault, these same central bankers decided to take the easy way out and simply blame the market itself.

Case in point BOE chief economist Andrew Haldane, who said on Thursday that the British housing market is "broken."

According to him, Britain needed to build around 200,000 new homes a year, and that its failure to build much more than half that, largely due to a lack of new public housing, had caused prices to rocket. "The UK housing market is broken," he said at a meeting hosted by Britain's Trades Union Congress. "There is a chronic and accumulated imbalance between demand and supply, and it is that which is sending skyward - and has sent skyward - house prices."

So a "broken market" leading to skyward prices due to lack of public housing (read even more debt creation and misallocation) - not a single word about price indescriminate foreign buyers benefitting from years of ZIRP and China's 300 debt/GDP, not a single word about why private-sector builders are not building houses in the first place (after all if the demand was there, the private sector would have supplied the good).

Just... "broken."

Sure - it's easier to blame the market for being broken - and always in the passive voice - than taking responsibility for being the one whose policies broke it.

And now, with the luxury bubbles in Australia and London popped and soon to be in tatters, we sit back and wait to see how long before it crosses the Atlantic, and such real abominations of the second housing bubble as Million Dollar Listing, can finally meet the fate of Wall Street Warriors.

 

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Thu, 11/12/2015 - 23:04 | 6785063 Bunga Bunga
Bunga Bunga's picture

BTFD!

Thu, 11/12/2015 - 23:06 | 6785065 Deathrips
Deathrips's picture

My realtor says this is bullish....

 

 

sooo....yeah...there.

 

RIPS

Thu, 11/12/2015 - 23:15 | 6785086 Hugh G Rection
Hugh G Rection's picture

If only these properties had asbestos fireproofing.  The owners could just go to the dermatolgist and wait for Jewish lightning to strike.

Investigate 9/11 bitches

 

Fri, 11/13/2015 - 02:59 | 6785494 wintermute
wintermute's picture

What's with this "tumble"? That's rolling over, maybe even like a tumbleweed. Weird in the context of prices.

London house prices are falling if they are not rising or unchanging.

Fri, 11/13/2015 - 05:54 | 6785652 TahoeBilly2012
TahoeBilly2012's picture

Do those little boys come with the new house? Perfect for that ogre Brit crowd.

Fri, 11/13/2015 - 08:33 | 6785806 CheapBastard
CheapBastard's picture

" Better buy now before the houses drop another 15% !"

 

"Don't miss out on this once in a lifetime Deal! "

Thu, 11/12/2015 - 23:16 | 6785094 Tonald J Drump
Tonald J Drump's picture

yawn.  12% ain't no tumble.  Wake me up when they're down 40% .   Good night.

Fri, 11/13/2015 - 05:39 | 6785641 HolyfieldsOtherEar
HolyfieldsOtherEar's picture

It's ZHspeak. A 2% increase in the price of gold is always "soaring." A barely noticeable currency depreciation is a "knockdown." And so on.

Fri, 11/13/2015 - 12:50 | 6786792 Christophe2
Christophe2's picture

I get tired of the terrible graphs, personally: they are nearly ALWAYS zoomed in to the max to make it seem like a 2% move is a massive 40% swing.

Fri, 11/13/2015 - 08:38 | 6785816 MalteseFalcon
MalteseFalcon's picture

12% = tumble

40% = SPLAT!

Thu, 11/12/2015 - 23:12 | 6785081 Carpenter1
Carpenter1's picture

That pic looks more like a traveling circus.

 

"Hey Marge! They got one of them there midget types!"

Thu, 11/12/2015 - 23:08 | 6785071 FiatFapper
FiatFapper's picture

Never fear, the filthy cunts will now target the octo/nona-genarians.

Older borrowers may be offered mortgages into their 80s and 90s

Fri, 11/13/2015 - 00:03 | 6785220 arrowrod
arrowrod's picture

My mortgage is paid off when I'm 105.  If I live that long...

Fri, 11/13/2015 - 00:09 | 6785240 Peanut Butter E...
Peanut Butter Engineer's picture

Yeah right, did you forgot about your landlord rent?? You will have to pay estate tax for all eternity if you get to live that long.

Fri, 11/13/2015 - 06:14 | 6785666 Chia-Pet
Chia-Pet's picture

Then you can do a reverse re-fi and really cash out when you're 135. Awesome.

Thu, 11/12/2015 - 23:15 | 6785088 dsty
dsty's picture

swishy photo

broke back mountain mortgage

Thu, 11/12/2015 - 23:25 | 6785112 herkomilchen
herkomilchen's picture

The smile of the guy on the right is really creeping me.

Fri, 11/13/2015 - 00:06 | 6785227 chopd livr
chopd livr's picture

short guy has same smile. both have unsmiling eyes. yep. creepy as shit.

Fri, 11/13/2015 - 09:20 | 6785952 Arnold
Arnold's picture

Hey, somebody thought that was a good picture.

Thu, 11/12/2015 - 23:15 | 6785089 hungrydweller
hungrydweller's picture

Yaaaaaawwwwnnnn.  Call back when they've fallen 75%.

Thu, 11/12/2015 - 23:33 | 6785138 AUD
AUD's picture

Fags?

Thu, 11/12/2015 - 23:38 | 6785153 Skateboarder
Skateboarder's picture

Pansy posterboys for posh pretenses.

Fri, 11/13/2015 - 08:36 | 6785811 CheapBastard
CheapBastard's picture

" Rainbow Realtors"

 

May I suggest the Chaps pink silk tie in a paisley, Sir?

Fri, 11/13/2015 - 09:26 | 6785980 Arnold
Arnold's picture

Left to Right

Werespaun, vampire, and the evil that created them, are seldom homosexual.

 

Thu, 11/12/2015 - 23:44 | 6785166 tommylicious
tommylicious's picture

FUCK YOU, MAYFAIR AND KENSINGTON!!!!!!!!!!!                 BASTARDS!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

Thu, 11/12/2015 - 23:54 | 6785189 Peconic Bay
Peconic Bay's picture

Here is a data point from the bubble capital of the world, San Francisco.  We have recently read on Zero Hedge about the down rounds of financing and writeoffs by Fidelity of their investments in Snap Chat and Zenefits and the underwhelming IPO valuation of Square.  In the last couple of nights out to dinner the restaurants are markedly un-full.  If you put your ear to the rail, you can hear it. The bubble is bursting.  This is going to be a major tech deflation.

Best to all,

Peconic Bay

Fri, 11/13/2015 - 00:05 | 6785225 arrowrod
arrowrod's picture

Not in Silicon Valley.

Fri, 11/13/2015 - 00:09 | 6785237 hungrydweller
hungrydweller's picture

First to rise, last to fall.

Fri, 11/13/2015 - 09:48 | 6786061 herkomilchen
herkomilchen's picture

First to rise, first to fall.

Fri, 11/13/2015 - 09:13 | 6785931 CarpetShag
Fri, 11/13/2015 - 00:14 | 6785257 Money Boo Boo
Money Boo Boo's picture

Folks

ZH was calling a major Chinese real estate crash in 2014, nothing but crickets. HH even endorsed the crash and still owes me a bottle of scotch because as we all know the world didn't fold under a sea of red............

Fri, 11/13/2015 - 00:23 | 6785282 Calculus99
Calculus99's picture

You can't lose money with properdeeeeeee!

Sadly a whole generation has grown up thinking it never goes down (in the UK).

Sadly most of a whole generation can't work out the implications of the exponential....

Trees don't grow to the Moon for a reason, houses can't continue to rise at 10% an annum for 30-40 years and then continue at 10% for the next 30-40. 

Fri, 11/13/2015 - 00:49 | 6785328 Anopheles
Anopheles's picture

How soon they forget, or rather ignore.   It's what happened to house prices in the US pre 2008.  

I remember that people were getting negative equity mortgages, where the payments didn't even cover the interest on the loan.   They counted on continuously rising house values to cover the gap. 

Fri, 11/13/2015 - 01:01 | 6785351 Lord Ariok
Lord Ariok's picture

Those loans were meant for Doctors and Lawyers to Qualify for a bigger house knowing that thier income would increase aswell. They were pushed on all the would be flippers trying to get rich being real estate moguls with NINA and SISA loans no income no asset or stated income stated assets but had the credit scores. The Liar loans if you will.

Fri, 11/13/2015 - 08:38 | 6785817 CheapBastard
CheapBastard's picture

I don't see doctors and lawyers salaries increasing. Quite the opposite.

Fri, 11/13/2015 - 01:49 | 6785418 Phoenix901210
Phoenix901210's picture

Sure - it's easier to blame the market for being broken - and always in the passive voice - than taking responsibility for being the one whose policies broke it.

Great line!

Fri, 11/13/2015 - 01:51 | 6785420 Phoenix901210
Phoenix901210's picture

A lot of laundry money in London. Will those folks see their infestments reduced to ashes?

Fri, 11/13/2015 - 01:56 | 6785425 Phoenix901210
Phoenix901210's picture

Perhaps a lot of this is due to the collapse of 'drug money' coming out of ISIS and a few other places. (As well as liquidity problem effecting corporate bonds in other article!)

Fri, 11/13/2015 - 02:00 | 6785433 biggestbrothero...
biggestbrotherofthemall@yahoo.com's picture

Sick alright

 

ZIRP means that stocks are overvalued, no real growth in companies, no yeild and declining populations in developed countries so the ONLY way to get rent is real estate.

 

So All that money has piled into real estate GAZILLIONS of it particularly in the places the Chinese crony (ie friends of the totalitarain CCP who print money and launder it off shore)like to launder.

But it cant go on.

1. Because at this rate of Capital Flight the CCP will go through its remaining 3.5 T US T bills in under 5 years. All that miracle 10 years in the making rebalanced in 5!

2. So they will try to slow it

3. This means they will not open their markets or get reserve currency status.

4. This means that mega real estate bubbles will lose their hot air

5. Real estate in Sydney, Vancouver, San Francisco, LA, New York and London will take a massive hit because all though free world govs are ignorant to the real figures, the CHinese have been the only real support these markets have had.

 

so its gonna pop, and pop bad. And then the Fed at 0.025% is all outta ammo.

Welcome to teh world where the financial market is bigger than the real economy..

 

Fri, 11/13/2015 - 03:34 | 6785547 RadioactiveRant
RadioactiveRant's picture

This could be the incredibly bad for the UK:

1. The current account which has a 5% deficit is flattered by foreign investment, much of this real estate.

2. If it feeds through to the mortgaged housing stock the banks are screwed and the biggest HSBC also has exposure to the Chinese mess. Will international markets continue to buy into the British stability pitch if the gov has to bail out the banks AGAIN?

Fri, 11/13/2015 - 05:24 | 6785634 HowdyDoody
HowdyDoody's picture

I'm sure George Soros is waiting in the wings.

 

Fri, 11/13/2015 - 03:59 | 6785572 Panic Mode
Panic Mode's picture

Christ. Don't you want to punch those punts in the picture??

Fri, 11/13/2015 - 06:32 | 6785681 TheGuru
TheGuru's picture

I am just waiting until they become Free, THEN I might take one....Forcefully, It will be fun.

Fri, 11/13/2015 - 06:43 | 6785686 the not so migh...
the not so mighty maximiza's picture

why can't it be 50%..;(

Fri, 11/13/2015 - 08:48 | 6785839 ricky663
ricky663's picture

"values across all homes in London’s best central districts rose 1.4 percent during the third quarter to 1,832 pounds a square foot"

What do you get for that? A place to hang your hat, yes. But you also get years of indentured servitude... to the banks, taxman, local government, insurance companies, etc. etc. The payments don't even end when you die, as they take more via "estate taxes!"

About 3 years ago we built 2 nice duplexes on a tropical island in S. Thailand for about 19.3 GBP/Sq Ft., all in. What did we get for that? Brand new construction and landscaping. No more payments (paid off), no taxes (they don't bother to send a bill), no insurance (not required by Thai law), and we get rent income if we choose to rent them out.

When you are in the western "system" you don't realize how you are enslaved to it. We are glad to have escaped it.

Looking at the pic, above, of metrosexual realtors takes me back.

Q: How do you tell when a realtor* is lying? A: When he starts talking!

* substitute politician, lawyer, car salesman

Fri, 11/13/2015 - 09:10 | 6785923 CarpetShag
CarpetShag's picture

12% price decrease in a market that is overvalued by at least 500%? That is a droplet of piss in a steam bath.

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