Credit deflation and the reflation cycle to come.

[Yellow_Reduced_Sticker]

On 24/06/2018 at 15:58, DurhamBorn said:

Nice to see this on the housebuilders.

http://www.dailymail.co.uk/money/news/article-5877685/Down-3-6bn-TWO-WEEKS-roof-falls-housebuilders.html

DB, NICE Find!

 

Gordon Bennett ...Countrywide Estate Agents crashed over the last couple of days by a WHOOPING 40%!

 

Foxtons has broken support of 66p NOW 58p....wot be long before its a Penny lol

 

This article CHEERED me up no end! The way I'm reading it - its very similar to late 1989/90 SE... with kite flying property there is always vendors in denial so it starts slow and then reality dawns when PANIC sets in and the market CRASHES!

 

Then post crash they'll have TV programs about the sheeple buying off plan hoping for ZERO IR etc...AND you'll have years where NO bugger will buy cos their shit scared of getting their fingers BURNT!

 

Thats when us GOOD folks move in!

[Democorruptcy]

10 minutes ago, Admiral Pepe said:

interactive Investor is the broker but the scheme is with BW SIPP LLP who I beleive are one of the big pension providers.

 

Ok thanks.

[harp]

Where's WICAO (wish I could afford one)? Has he made it over from the dark side?

[sancho panza]

Shaun Richards on the Chinese housing bubble.Stats in bold that are underlined tell us the story.

Alos an excellent point that developers hoping to BTL if they can't sell,can't achieve a rent anywhere near the value they need with yields near 1.5% and their bonds carrying 7% coupons

Worth noting as well that China did a lot of the heavy lifting globally in terms of stimulus post 2008

https://notayesmanseconomics.wordpress.com/2018/06/26/the-china-housing-crisis-builds-up-steam/

'The China housing crisis builds up steam

Posted on June 26, 2018

 

Actually they have missed something that Will Ripley of CNN did not.

China’s benchmark Shanghai Composite slid into bear market territory Tues, closing down more than 20% below its January high. Chinese stocks have come under pressure in recent weeks from concerns over the strength of the country’s economic growth & an emerging trade war w/ the US.

Of course the definition of a bear market is somewhat arbitrary and Chine’s stock market does tend to veer from boom to bust. But in  these times of easy monetary policy central bankers place a high emphasis on asset prices. This will be reinforced by the falls in the share price of developers as it reminds of the housing market and debt issues.

The Housing Market

Over the weekend the South China Morning Post offered an eye-catching view from Christopher Balding.

Real estate is the driver of the Chinese economy. By some estimates, it accounts (directly and indirectly) for as much as 30 per cent of gross domestic product.

At first I was not sure about his definition of a bubble.

Despite reforms in recent years, there’s little question that Chinese real estate is in bubble territory. From June 2015 through the end of last year, the 100 City Price Index, published by SouFun Holdings, rose 31 per cent to nearly US$202 per square foot.

However suddenly it looks very bubbilicious.

That’s 38 per cent higher than the median price per square foot in the United States, where per-capita income is more than 700 per cent higher than in China. Not surprisingly, this has put home ownership out of reach for most Chinese.

More than out of reach you would think as it must be multiples of out of reach. Also countries way beyond China’s borders face the issue below.

 Politically, homeowners have come to expect their property values to rise continually in a one-way bet;

 

Or to put it more formally.

Wages in China simply aren’t high enough to keep up with the credit fuelled rise in asset prices, and thus developers can’t earn a reasonable rate of return by renting out units.

In terms of the numbers the circle seems to be something of a rectangle.

 In big cities, such as Beijing and Shanghai, yields are hovering around 1.5 per cent (compared to an average of about 3 per cent in the US and 4 per cent in Canada). ……Worse, developers are heavily weighted down with debt, much of it short-term. Many are paying out 7 to 8 per cent bond yields, with debt-to-equity ratios of around 380 per cent.

So the circus requires house price rises of at least 6% per annum to keep the show on the road. But wait there is more and something which to western eyes seems rather extraordinary.

Typically, renters borrow from banks to make an upfront, one-time payment to developers that covers, say, five years.

A rental mortgage is a little mind-boggling. Perhaps though we should have a sweep stake for predict how long it is before we get those in the UK?! Also it is a case of the familiar establishment response to trouble which is to give that poor battered can another kick.

The upfront payment from the bank to the developer provides some short-term cash-flow relief. But otherwise, all it does is delay debt repayments attached to the unit and shrink the loss on unsold inventory.

On a deeper level I wonder how many ( well paid) jobs rely on can kicking and relate to operations which are unviable in profit/loss or balance sheet terms but generate cash for now. How many banks for example or shale oil?

At this stage it all looks rather like the cartoon characters which have to run ever harder just to stand still.

 New starts and land purchases have grown strongly through the first five months of 2018. Investment in residential real estate is up 14 per cent and development loans are up 21 per cent. Far from reducing leverage, banks are jumping back into the speculative bubble: Mortgage growth is now at 20 per cent.'

'

[A_P]

40 minutes ago, harp said:

Where's WICAO (wish I could afford one)? Has he made it over from the dark side?

From what I could tell he's opened pandoras box and got lost in the Brexit thread. Hopefully he will come over. Was a big inspiration for me and gave me the focus I needed.

[StrugglingMillennial]

2 hours ago, Yellow_Reduced_Sticker said:

DB, NICE Find!

 

Gordon Bennett ...Countrywide Estate Agents crashed over the last couple of days by a WHOOPING 40%!

 

Foxtons has broken support of 66p NOW 58p....wot be long before its a Penny lol

 

This article CHEERED me up no end! The way I'm reading it - its very similar to late 1989/90 SE... with kite flying property there is always vendors in denial so it starts slow and then reality dawns when PANIC sets in and the market CRASHES!

 

Then post crash they'll have TV programs about the sheeple buying off plan hoping for ZERO IR etc...AND you'll have years where NO bugger will buy cos their shit scared of getting their fingers BURNT!

 

Thats when us GOOD folks move in!

Lets hope it works out that way pal, we have waited long enough 🤞

[Talking Monkey]

Looks like there will be one hell of a crunch in China , can't be long now

[azzuri82]

Thanks for all the advice re: SIPPS and IFAs/transfers - I think I've just been saved a world of pain by your comment/s.

 

[Option5]

10 hours ago, sancho panza said:

At this stage it all looks rather like the cartoon characters which have to run ever harder just to stand still.

More like Wile E. Coyote.

[Barnsey]

1 hour ago, Talking Monkey said:

Looks like there will be one hell of a crunch in China , can't be long now

Another August 2015 or worse?

[DurhamBorn]

12 hours ago, Democorruptcy said:

AFAIK if the pot is over £30k you are forced to pay for regulated advice.

http://thepensionreviewservice.com/db-pension-transfer-30000-advice-limit/

I was trying to do this myself earlier in the year and all the IFA's wanted to charge about 3% and then manage the money themselves. If you tell them you want to transfer to HL they won't like it. Then if they advise against it, HL won't accept it. I've read a press article about someone trying several times and paying several fees for nothing. I gave up because I ran out of time. My advice would be to find an IFA first, then ask for a transfer valuation because mine only lasted 3 months.

 

I'd be interested to know which firm accepted the transfer knowing you hadn't paid for advice. Is it a firm managing it themselves?

I have a final salary pension that also has a £28k money purchase part.I wanted to transfer the £28k bit into my SIPP.However HL said i needed advice because i can use the £28k part as the tax free lump sum so as to not lower the final salary part (about £55 a week at 56).The advice would be £400 and then i bet they would say dont move.The point is i would of been able to remove it from the SIPP tax free anyway as at 56 id pull out £14k a year (25% tax free bit and my tax allowance),so their advice is rubbish,and every other FA (including my cousin).Like my cousin said though for every 1 like me who understands the way to do this,999 dont,so the advice will always be no.It would be so bad,but the choice of funds i have where it is is cash,bond,UK equity,World equity (50% US).

Iv 8 years to wait before i can take it and kick the pension in and its sat in cash at the moment.

[Democorruptcy]

29 minutes ago, DurhamBorn said:

I have a final salary pension that also has a £28k money purchase part.I wanted to transfer the £28k bit into my SIPP.However HL said i needed advice because i can use the £28k part as the tax free lump sum so as to not lower the final salary part (about £55 a week at 56).The advice would be £400 and then i bet they would say dont move.The point is i would of been able to remove it from the SIPP tax free anyway as at 56 id pull out £14k a year (25% tax free bit and my tax allowance),so their advice is rubbish,and every other FA (including my cousin).Like my cousin said though for every 1 like me who understands the way to do this,999 dont,so the advice will always be no.It would be so bad,but the choice of funds i have where it is is cash,bond,UK equity,World equity (50% US).

Iv 8 years to wait before i can take it and kick the pension in and its sat in cash at the moment.

Ask AJ Bell instead of HL. They would accept it, even if the advice is against it.

[Yellow_Reduced_Sticker]

10 hours ago, StrugglingMillennial said:

Lets hope it works out that way pal, we have waited long enough 🤞

 

I was concerned about this HPC not happening (for 5 minutes) when a poster posted a link about recent Poole HPI - however i think you have some increases in these type coastal areas as folks are retiring there and have cash to spend...

 

I've looked where i want to buy SE (surrey berkshire border) AND prices are same as last year or down a bit like 5%...i'm seeing a LOT of reduced prices but only by 5 to 10% at the mo...pity the houses are not being reduced like my Tescos Yellow Reduced Sticker's ...LIKE 80% OFF!

 

But hey we may well GET 80% OFF houses in SE by 2025!

[TheCountOfNowhere]

2 hours ago, Yellow_Reduced_Sticker said:

 

I was concerned about this HPC not happening (for 5 minutes) when a poster posted a link about recent Poole HPI - however i think you have some increases in these type coastal areas as folks are retiring there and have cash to spend...

 

I've looked where i want to buy SE (surrey berkshire border) AND prices are same as last year or down a bit like 5%...i'm seeing a LOT of reduced prices but only by 5 to 10% at the mo...pity the houses are not being reduced like my Tescos Yellow Reduced Sticker's ...LIKE 80% OFF!

 

But hey we may well GET 80% OFF houses in SE by 2025!

Thought those costal towns where suffering House Price Crash level falls, not HPI ?

 

You didnt read the EA articel instead of the So-Called BBC one ?

[Green Devil]

2 hours ago, Yellow_Reduced_Sticker said:

 

I was concerned about this HPC not happening (for 5 minutes) when a poster posted a link about recent Poole HPI - however i think you have some increases in these type coastal areas as folks are retiring there and have cash to spend...

 

I've looked where i want to buy SE (surrey berkshire border) AND prices are same as last year or down a bit like 5%...i'm seeing a LOT of reduced prices but only by 5 to 10% at the mo...pity the houses are not being reduced like my Tescos Yellow Reduced Sticker's ...LIKE 80% OFF!

 

But hey we may well GET 80% OFF houses in SE by 2025!

 

5 minutes ago, TheCountOfNowhere said:

Thought those costal towns where suffering House Price Crash level falls, not HPI ?

 

You didnt read the EA articel instead of the So-Called BBC one ?

I would be surprised there were any falls in coastal/retirement areas. The rest of the country is such an over populated basket case, that these areas are seeing a large influx of british white who have had enough of city life. And corresponding HPI. And i cant blame them to be honest.

[TheCountOfNowhere]

1 hour ago, Green Devil said:

 

I would be surprised there were any falls in coastal/retirement areas. The rest of the country is such an over populated basket case, that these areas are seeing a large influx of british white who have had enough of city life. And corresponding HPI. And i cant blame them to be honest.

Did you miss this beauty

 

https://www.bbc.co.uk/news/business-44575400

 

House prices tumble in seaside hot spots

 

In the boating haven of Salcombe in South Devon, prices have fallen 8.2%, according to the Halifax.

And in Sandbanks in Dorset, renowned for being the UK's most expensive resort, prices are down 5.6%.

[Lavalas]

Not that relevant to a possible deflationary collapse though really.

[Yellow_Reduced_Sticker]

1 hour ago, Lavalas said:

Not that relevant to a possible deflationary collapse though really.

...WHY?

[Yellow_Reduced_Sticker]

3 hours ago, TheCountOfNowhere said:

Thought those costal towns where suffering House Price Crash level falls, not HPI ?

 

You didnt read the EA articel instead of the So-Called BBC one ?

***

 [ http://www.bournemouthecho.co.uk/news/16310458.Average_Poole_house_price_now___317k_after_four_per_cent_boost_in_April/

How about beimg up 8.3 percent in a year ]

***

Count I was referring to the post above, the article is from the: DAILY ECHO

 

Though that link you posted about the boating haven of Salcombe in South Devon prices heading south... CHEERED me up AGAIN!

[Thorn]

1 hour ago, Lavalas said:

Not that relevant to a possible deflationary collapse though really.

I think this is though- I think that today marks a bit of a passing and a change because Foxtons is at 50 going down and Infrastrata just hit 50 going up.

Come on the reflation.  

[Yellow_Reduced_Sticker]

The John Lewis Partnership, which owns John Lewis and Waitrose, announced on Wednesday that it expects profits to be almost completely WIPED OUT this year.

 

LOOKING Good folks!

https://uk.yahoo.com/finance/news/waitrose-stores-closing-where-110100031.html

[No Duff (troll)]

59 minutes ago, Yellow_Reduced_Sticker said:

The John Lewis Partnership, which owns John Lewis and Waitrose, announced on Wednesday that it expects profits to be almost completely WIPED OUT this year.

 

LOOKING Good folks!

https://uk.yahoo.com/finance/news/waitrose-stores-closing-where-110100031.html

That's why you have "partners" rather than "employees".  Pays dividends, or rather not in this case!

Closing a few tiddler stores, wow.  Aldi taking over Camden.  Sign of times - Aldi= Waitrose Essentials++ but without the price or feeling of inferiority at checkout.

Lots of comments about excessive prices.  What can they do?

[Lavalas]

1 hour ago, Thorn said:

I think this is though- I think that today marks a bit of a passing and a change because Foxtons is at 50 going down and Infrastrata just hit 50 going up.

Come on the reflation.  

Personally thought there’s better places than a macro thread to be discussing the price of a house in Salcombe but if that’s what people come for then all cool.

[A_P]

I shop in Waitrose, purely becuase I live 30 seconds away and get all the yellow sticker stuff. They have been taking the piss the last two years with price creep. Recently they've started reducing packet sizes too, eg a new range of sausages that come in a 4 pack instead of 6 or 8. The free coffees are no longer free from the cafe and it's interesting to see the cafe is now dead. The boomers would be queuing up to get their free coffee and would buy an expensive slice of toast or crossiant, less so now.

[TheCountOfNowhere]

2 hours ago, Yellow_Reduced_Sticker said:

***

 [ http://www.bournemouthecho.co.uk/news/16310458.Average_Poole_house_price_now___317k_after_four_per_cent_boost_in_April/

How about beimg up 8.3 percent in a year ]

***

Count I was referring to the post above, the article is from the: DAILY ECHO

 

Though that link you posted about the boating haven of Salcombe in South Devon prices heading south... CHEERED me up AGAIN!

Simeone's lying, I can guess who.