How far will house prices fall [volume 4]
Discussion
http://www.dailymail.co.uk/money/news/article-2326...
(sorry for dailymail link)
If they can artificially boost house prices they think more of middle England will vote for them!
Its all about politics let make people feel rich , this can only end in disaster did they not learn anything from 2007?
I dont think many banks will be happy to lend on the scheme. ]
What happened to Osbournes speech in 2010 about moving us away from a nation of house price speculators?
This is going to further derail the recovery , it may be a short therm boost to the economy but long term it will be disastrous.
Can the government actually do anything more to further prop up a housing bubble , is there any more intervention possible?
The gov dont want to let house prices fall as they will lose politically so will do anything to keep the market buoyant but even worse they are now trying to prop it up.
(sorry for dailymail link)
If they can artificially boost house prices they think more of middle England will vote for them!
Its all about politics let make people feel rich , this can only end in disaster did they not learn anything from 2007?
I dont think many banks will be happy to lend on the scheme. ]
What happened to Osbournes speech in 2010 about moving us away from a nation of house price speculators?
This is going to further derail the recovery , it may be a short therm boost to the economy but long term it will be disastrous.
Can the government actually do anything more to further prop up a housing bubble , is there any more intervention possible?
The gov dont want to let house prices fall as they will lose politically so will do anything to keep the market buoyant but even worse they are now trying to prop it up.
It matter not a jot. The banks will lend because they have a guarantee and less equity to pay out. This idea is just vote bribery plain and simple, the fact the limit is £600k points to that fact. Osbourne will also do as much as he can to offload some more council houses.
Only when interest rates rise or/and we hit another recession will people realise they were part of the bubble. And when that does happen the banks will all have to bailed out again and all those people in these equity schemes will start falling back on the government for their guarantees. And when I say government I actually mean us taxpayer.
Only when interest rates rise or/and we hit another recession will people realise they were part of the bubble. And when that does happen the banks will all have to bailed out again and all those people in these equity schemes will start falling back on the government for their guarantees. And when I say government I actually mean us taxpayer.
Interesting article a couple of days back...
Markets are on a crazy, sugar-fuelled journey
Markets are on a crazy, sugar-fuelled journey
Article said:
by Liam Halligan
The then chief executive of the US banking giant Citigroup was admitting that growing concerns about sub-prime loans could ultimately shatter what we now know was “irrational exuberance” on global financial markets.
“As long as the music is playing, though, you’ve got to get up and dance,” Prince continued. “And we’re still dancing.”
There’s a “we’re still dancing” mood on global markets today, just as there was six years ago in the run-up to what turned out to be the disastrous market meltdown of September 2008.
Rather than the securitisation of recklessly extended commercial credit providing the music, the beat now comes from “quantitative easing”, courtesy of the world’s leading central banks.
The Dow Jones Industrial Average is up 15pc since last September, after the Federal Reserve launched QE3, its third round of money-printing. The eurozone’s Stoxx 50 has soared also, gaining 30pc since July, when European Central Bank (ECB) president Mario Draghi vowed to do “whatever it takes” to save the euro.
The Nikkei 225 has rocketed 44pc since late December, after the election of a new government committed to forcing the Bank of Japan to crank up its QE antics. The UK’s FTSE 100, too, has gained 20pc in six months, riding a wave of Bank of England largesse — and, crucially, the prospect of more to come.
The Western world is yet to stage a meaningful recovery from the sub-prime debacle. The fundamentals remain awful. The eurozone economy, we learnt last week, contracted 0.9pc during the first quarter and has now been shrinking since late 2011 — Europe’s longest post-war recession. The UK is still enduring its slowest recovery since records began. Yet Western stock indices have been setting repeated all-time highs.
As financial markets dance, though, lost in the QE trance music, massive questions now loom. The ECB has expanded its balance sheet 150pc during the five years since the sub-prime collapse. The Fed has overseen a 220pc ballooning of base money.
“Extraordinary measures” on this scale may be unprecedented but both look moderate compared to the Bank of England, which has implemented balance sheet growth of 370pc since the credit crunch began in earnest — the vast majority of it, in a bizarre form of circular financing, being used to buy government bonds.
How will these vast balances be unwound? What will happen to sovereign bond prices once governments stop self-buying? That will truly determine, rather than any “forward guidance”, just how long our central banks can keep interest rates “ultra-low”. And what will the reaction of currently spaced-out Western equity markets be once the sugar rush fades, reality hits and the money-printing ends? What happens when the QE music stops?
Some of us have posed such uncomfortable questions for years now — and been derided for our trouble. In recent weeks, the now vast scale of QE, and its broader collateral damage, have forced such issues into mainstream discourse. Flickering signs of returning Western growth have also brought official recognition that such measures may soon be hard to justify and that, to paraphrase Chuck Prince, things could indeed “get complicated”, when the lights come up and the QE party is over.
Last week, the International Monetary Fund (IMF) acknowledged that, having strayed into “uncharted waters”, central banks will find the QE exit “difficult to control”. The world’s leading economic watchdog recognised, in an official paper, that long-term interest rates could spike as investors demand higher yields to fund cash-strapped governments, with commercial credit risks also rising as higher rates make it harder for borrowers to service loans.
Presenting his final quarterly Inflation Report before his July retirement, the Bank of England Governor, Sir Mervyn King, also warned that post-QE complications mean that rates “may rise faster than current market expectations” of no increase until late 2016. The IMF also nodded to “diminishing returns” in continuing with QE. That states the case rather mildly. QE and the related slashing of interest rates to deeply negative real-terms levels has not only hammered pensioners and other savers but stored up a world of future inflationary pain.
With many large Western banks still moribund, and massive undeclared losses on their balance sheets, QE hasn’t resulted in more growth-generating working capital being extended to credit-worthy firms and households. It’s gone instead into asset markets, bidding up not only shares but also oil and basic foodstuffs on global exchanges.
That’s pleased the City and Wall Street but done serious real world damage. Expensive energy has made Western recovery much tougher, while soaring food costs have led to a wave of unrest across the developing world, arguably sparking the Arab Spring.
And, while we’re at it, QE has also deeply annoyed the governments of powerful Western creditors like China and Brazil. By inflating their currencies, our money-printing has harmed their exports. It’s also debased the dollar, pound and euro, so lowered the real value of what we owe.
That’s a principal reason why the World Trade Organisation is in turmoil, with the increasingly strident emerging powers in open revolt and the world economy suffering the first failure of a multilateral trade negotiation since the 1930s. So, yes, you could say that QE now has “diminishing returns”.
Given the massive regulatory mistakes that had already been made, no one is arguing that central banks shouldn’t have provided extra liquidity in the dark days of early 2009. Had they not, the Western financial system would have collapsed, causing economic and social chaos.
Yet that extra liquidity should have been strictly limited, heavily conditional and used as a buffer, allowing us to flush out the rotten banks, implement root-and-branch reforms and move on.
Instead, QE has become an open-ended life-support mechanism for living-dead “zombie banks”, a mask to cover up financial wrongdoing. It’s also become a comfort blanket for politicians, allowing most of them to delay the really tough fiscal decisions.
Money printing on the scale we’ve seen has gone way, way beyond a necessary palliative and been transformed from legitimate temporary emergency measure into lifestyle choice — the economic equivalent of crack cocaine.
File the IMF’s calibrated hair-splitting nonsense in the historical dustbin and read instead a brave and important speech given last week by Jaime Caruana of the Bank for International Settlements (BIS), an umbrella group for the world’s central banks.
“Monetary policy can buy time to implement the necessary balance sheet repair and structural reforms,” thundered Caruana. “But it cannot substitute for them.” I couldn’t have put it better myself. “After five years of buying time, one has to ask if that time has been — or will be — used wisely.”
Asking aloud if “ever more monetary action” is “really justified”, Caruana observed rightly that ongoing QE “gives borrowers, financial institutions and policymakers an incentive to keep kicking the can down the road”.
Tackling the myth that governments and firms really have been tightening their belts, the BIS boss reported that since the end of 2007, the total public and private debts of the world’s leading economies have risen by more than $30,000bn.
Challenging Western politicians to finally shake out the banks, and impose supply-side reforms, Caruana concluded by asking: “What monetary policy can substitute for balance sheet repair by banks and borrowers … or remove impediments to a worker moving from an overbuilt sector to a more promising one?”
The speech was an onslaught of common sense, a tour de force. So sensible was it, in fact, that it’s destined to be ignored.
[i]Liam Halligan is chief economist at Prosperity Capital Management. The views expressed are his own
[/i]
The then chief executive of the US banking giant Citigroup was admitting that growing concerns about sub-prime loans could ultimately shatter what we now know was “irrational exuberance” on global financial markets.
“As long as the music is playing, though, you’ve got to get up and dance,” Prince continued. “And we’re still dancing.”
There’s a “we’re still dancing” mood on global markets today, just as there was six years ago in the run-up to what turned out to be the disastrous market meltdown of September 2008.
Rather than the securitisation of recklessly extended commercial credit providing the music, the beat now comes from “quantitative easing”, courtesy of the world’s leading central banks.
The Dow Jones Industrial Average is up 15pc since last September, after the Federal Reserve launched QE3, its third round of money-printing. The eurozone’s Stoxx 50 has soared also, gaining 30pc since July, when European Central Bank (ECB) president Mario Draghi vowed to do “whatever it takes” to save the euro.
The Nikkei 225 has rocketed 44pc since late December, after the election of a new government committed to forcing the Bank of Japan to crank up its QE antics. The UK’s FTSE 100, too, has gained 20pc in six months, riding a wave of Bank of England largesse — and, crucially, the prospect of more to come.
The Western world is yet to stage a meaningful recovery from the sub-prime debacle. The fundamentals remain awful. The eurozone economy, we learnt last week, contracted 0.9pc during the first quarter and has now been shrinking since late 2011 — Europe’s longest post-war recession. The UK is still enduring its slowest recovery since records began. Yet Western stock indices have been setting repeated all-time highs.
As financial markets dance, though, lost in the QE trance music, massive questions now loom. The ECB has expanded its balance sheet 150pc during the five years since the sub-prime collapse. The Fed has overseen a 220pc ballooning of base money.
“Extraordinary measures” on this scale may be unprecedented but both look moderate compared to the Bank of England, which has implemented balance sheet growth of 370pc since the credit crunch began in earnest — the vast majority of it, in a bizarre form of circular financing, being used to buy government bonds.
How will these vast balances be unwound? What will happen to sovereign bond prices once governments stop self-buying? That will truly determine, rather than any “forward guidance”, just how long our central banks can keep interest rates “ultra-low”. And what will the reaction of currently spaced-out Western equity markets be once the sugar rush fades, reality hits and the money-printing ends? What happens when the QE music stops?
Some of us have posed such uncomfortable questions for years now — and been derided for our trouble. In recent weeks, the now vast scale of QE, and its broader collateral damage, have forced such issues into mainstream discourse. Flickering signs of returning Western growth have also brought official recognition that such measures may soon be hard to justify and that, to paraphrase Chuck Prince, things could indeed “get complicated”, when the lights come up and the QE party is over.
Last week, the International Monetary Fund (IMF) acknowledged that, having strayed into “uncharted waters”, central banks will find the QE exit “difficult to control”. The world’s leading economic watchdog recognised, in an official paper, that long-term interest rates could spike as investors demand higher yields to fund cash-strapped governments, with commercial credit risks also rising as higher rates make it harder for borrowers to service loans.
Presenting his final quarterly Inflation Report before his July retirement, the Bank of England Governor, Sir Mervyn King, also warned that post-QE complications mean that rates “may rise faster than current market expectations” of no increase until late 2016. The IMF also nodded to “diminishing returns” in continuing with QE. That states the case rather mildly. QE and the related slashing of interest rates to deeply negative real-terms levels has not only hammered pensioners and other savers but stored up a world of future inflationary pain.
With many large Western banks still moribund, and massive undeclared losses on their balance sheets, QE hasn’t resulted in more growth-generating working capital being extended to credit-worthy firms and households. It’s gone instead into asset markets, bidding up not only shares but also oil and basic foodstuffs on global exchanges.
That’s pleased the City and Wall Street but done serious real world damage. Expensive energy has made Western recovery much tougher, while soaring food costs have led to a wave of unrest across the developing world, arguably sparking the Arab Spring.
And, while we’re at it, QE has also deeply annoyed the governments of powerful Western creditors like China and Brazil. By inflating their currencies, our money-printing has harmed their exports. It’s also debased the dollar, pound and euro, so lowered the real value of what we owe.
That’s a principal reason why the World Trade Organisation is in turmoil, with the increasingly strident emerging powers in open revolt and the world economy suffering the first failure of a multilateral trade negotiation since the 1930s. So, yes, you could say that QE now has “diminishing returns”.
Given the massive regulatory mistakes that had already been made, no one is arguing that central banks shouldn’t have provided extra liquidity in the dark days of early 2009. Had they not, the Western financial system would have collapsed, causing economic and social chaos.
Yet that extra liquidity should have been strictly limited, heavily conditional and used as a buffer, allowing us to flush out the rotten banks, implement root-and-branch reforms and move on.
Instead, QE has become an open-ended life-support mechanism for living-dead “zombie banks”, a mask to cover up financial wrongdoing. It’s also become a comfort blanket for politicians, allowing most of them to delay the really tough fiscal decisions.
Money printing on the scale we’ve seen has gone way, way beyond a necessary palliative and been transformed from legitimate temporary emergency measure into lifestyle choice — the economic equivalent of crack cocaine.
File the IMF’s calibrated hair-splitting nonsense in the historical dustbin and read instead a brave and important speech given last week by Jaime Caruana of the Bank for International Settlements (BIS), an umbrella group for the world’s central banks.
“Monetary policy can buy time to implement the necessary balance sheet repair and structural reforms,” thundered Caruana. “But it cannot substitute for them.” I couldn’t have put it better myself. “After five years of buying time, one has to ask if that time has been — or will be — used wisely.”
Asking aloud if “ever more monetary action” is “really justified”, Caruana observed rightly that ongoing QE “gives borrowers, financial institutions and policymakers an incentive to keep kicking the can down the road”.
Tackling the myth that governments and firms really have been tightening their belts, the BIS boss reported that since the end of 2007, the total public and private debts of the world’s leading economies have risen by more than $30,000bn.
Challenging Western politicians to finally shake out the banks, and impose supply-side reforms, Caruana concluded by asking: “What monetary policy can substitute for balance sheet repair by banks and borrowers … or remove impediments to a worker moving from an overbuilt sector to a more promising one?”
The speech was an onslaught of common sense, a tour de force. So sensible was it, in fact, that it’s destined to be ignored.
[i]Liam Halligan is chief economist at Prosperity Capital Management. The views expressed are his own
[/i]
anonymous said:
[redacted]
Very obviously an ex-rental.Is it fair to assume that (particularly for large/expensive houses) most buyers either want a fully "done" house or a cheap project that they can put their own stamp on, and consequently houses like this that fall between two stools are the ones that struggle to sell?
excel monkey said:
Is it fair to assume that (particularly for large/expensive houses) most buyers either want a fully "done" house or a cheap project that they can put their own stamp on, and consequently houses like this that fall between two stools are the ones that struggle to sell?
Or need to be priced keenly.I bought my house at a ridiculously low price because it fell right into that trap; ex-rental in perfectly livable condition, but because so much had been done slightly too hastily or cheaply with the rental market in mind it was never going to attract either the "turnkey showhome" or the "blank canvas" crowd.
It seems insane to me that priced realistically such a house can go for less than the total refurbishment projects, but the evidence suggests the lure of somewhere in need of immediate gutting, rewiring, replumbing and other remedial works is just that strong. (And that's before taking into account that in my experience, amateur property developers tend to run out of steam and/or money well short of that "done" ideal, ending up with exactly the same kind of livable-with-cut-corners compromise they turned their noses up at in the first place.)
Still, not going to complain too loudly all the time that's working in my favour...
Likewise. Our place was an ex rental. Last decorated in the 90's and lot's bodges/workarounds but totally livable and nothing offensive.
We heard that it had last been on the market 18 months before at 50% more than we paid. Yes, it's beige and rag rolled and artexed but it's a large house with a good garden, good plot and good layout.
No good to the flippers, no good to the developers, no good to the shiney new brigade. The owner took a pragmatic view on value and wanted to sell to a family as well, everyone else round here is retired.
We heard that it had last been on the market 18 months before at 50% more than we paid. Yes, it's beige and rag rolled and artexed but it's a large house with a good garden, good plot and good layout.
No good to the flippers, no good to the developers, no good to the shiney new brigade. The owner took a pragmatic view on value and wanted to sell to a family as well, everyone else round here is retired.
Its not often I read an article summarising pretty much my sentiments on the housing market. Merry Somerset goes some way with this article though George Osborne's property bubble will lead to disaster!
Trouble is, as Merryn rightly points out, it's the government, they can do what they like.
Trouble is, as Merryn rightly points out, it's the government, they can do what they like.
Pork said:
Its not often I read an article summarising pretty much my sentiments on the housing market. Merry Somerset goes some way with this article though George Osborne's property bubble will lead to disaster!
Trouble is, as Merryn rightly points out, it's the government, they can do what they like.
A fantastic article. Trouble is, as Merryn rightly points out, it's the government, they can do what they like.
sugerbear said:
Pork said:
Its not often I read an article summarising pretty much my sentiments on the housing market. Merry Somerset goes some way with this article though George Osborne's property bubble will lead to disaster!
Trouble is, as Merryn rightly points out, it's the government, they can do what they like.
A fantastic article. Trouble is, as Merryn rightly points out, it's the government, they can do what they like.
Cant remember wehre I read it think it was the FT, but with all this quantitate easing and really low interest rates is uncharted territory and the question was that if bond buyers would continue to buy government debt t such low returns and that over the next few years governments may have to raise interest rates and return on government debts so that there will be an appetite for it in the market.
I've read these threads with interest. Living in the South East, it's refreshing to hear from people that aren't convinced that property is the best investment that one can make.
I would be grateful if any PHers would care to share their opinions on buying what will hopefully be a long term family home. The Mrs and I will be looking to do so soon and we're fortunate that we can afford a bit more space than we need, but I'm not sure that's the way to go (the extra space, that is, we will buy something).
As I alluded to above, people we know are almost entirely of the opinion that one should stretch to buy as much house as they can. When I look at the total cost of having a 25 year mortgage rather than aiming to repay early, even if rates stay low-ish it's not clear cut to me. That's notwithstanding the additional costs and extra work of having more space.
That said, I wonder if wages will start increasing during the mortgage term due to general inflation and as such it's worth taking on the bigger debt now, on the basis the 'cost' of the repayment will fall in real terms to us over the years, due to inflation.
So - long term, house to live in - any words of wisdom (please!)? What would you do?
I would be grateful if any PHers would care to share their opinions on buying what will hopefully be a long term family home. The Mrs and I will be looking to do so soon and we're fortunate that we can afford a bit more space than we need, but I'm not sure that's the way to go (the extra space, that is, we will buy something).
As I alluded to above, people we know are almost entirely of the opinion that one should stretch to buy as much house as they can. When I look at the total cost of having a 25 year mortgage rather than aiming to repay early, even if rates stay low-ish it's not clear cut to me. That's notwithstanding the additional costs and extra work of having more space.
That said, I wonder if wages will start increasing during the mortgage term due to general inflation and as such it's worth taking on the bigger debt now, on the basis the 'cost' of the repayment will fall in real terms to us over the years, due to inflation.
So - long term, house to live in - any words of wisdom (please!)? What would you do?
Edited by S50B32 on Saturday 25th May 15:13
Pork said:
Its not often I read an article summarising pretty much my sentiments on the housing market. Merry Somerset goes some way with this article though George Osborne's property bubble will lead to disaster!
Trouble is, as Merryn rightly points out, it's the government, they can do what they like.
Merryn Somerset Webb is editor in chief of MoneyWeek. The journal that gave us this gem; The End of Britain Financial journalism's answer to Heavens Gate.Trouble is, as Merryn rightly points out, it's the government, they can do what they like.
If you are viewing it as a home and not an investment and you are not likely to move on then go for it. We just moved from a 3/4 bed to a 4/5 bed in the same area. Moving cost us £25k in costs/fees this time. So buy twice and pay two sets of fees.
You will move into a smaller place, get it how you want it. Have kids then want a bigger place. Start with the bigger place if you can afford it. Make sure it is right for your future needs though. I read an article about people who went open plan when buying as a couple. Now they have kids the walls are going back in as it's not a practical arrangement for a family home.
You will move into a smaller place, get it how you want it. Have kids then want a bigger place. Start with the bigger place if you can afford it. Make sure it is right for your future needs though. I read an article about people who went open plan when buying as a couple. Now they have kids the walls are going back in as it's not a practical arrangement for a family home.
Thanks Bullett, Aston.
Notwithstanding the personal decision between physical comfort (more space) and financial comfort (paid of quicker / more discretionary spending), my current feeling (with no qualification whatsoever) on prices is for a gradual increase down the line in part due to inflation. I don't think consumer bank rates will get so bad as to have a serious effect but I will prepare for the eventuality to be safe.
Notwithstanding the personal decision between physical comfort (more space) and financial comfort (paid of quicker / more discretionary spending), my current feeling (with no qualification whatsoever) on prices is for a gradual increase down the line in part due to inflation. I don't think consumer bank rates will get so bad as to have a serious effect but I will prepare for the eventuality to be safe.
anonymous said:
[redacted]
Decent size, but I hate that 'rendered with ice cream wafers' look, and the all garage frontage.No idea on price, other than it's out of my bracket.
FWIW none of the crazy, over-priced places with pools in our village have sold. A lot of cheaper (more sensibly priced too perhaps) palces have though.
I have been in Singapore for 2 years ... dont really know what stuff sells for round there ... only a wild guess based on what things sold for in leafy south bucks about 2 years ago .
..am typing this from a 3 bed condo , overlooking a flyover [but 'nice' area ]
asking price $3.5m + 0.6m stamp duty = $4m+
... that's $2000+ psf
[and I don't own it ... ]
Cobham seems cheap
..am typing this from a 3 bed condo , overlooking a flyover [but 'nice' area ]
asking price $3.5m + 0.6m stamp duty = $4m+
... that's $2000+ psf[and I don't own it ... ]
Cobham seems cheap
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