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House prices could fall by a third if there is a no deal Brexit, warns Bank of England


sancho panza

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sancho panza

Instead of worrying about Brexit he should get the house in order and get the gubbermint to

1) stop banks leveraging up to the point they need taxpayer hand outs to survive

2) separate retail/investment banking a la Glass Steagall.

3) find an inflation measure that actually measures the cost of living ie includes the cost of housing

4) find a measure of national output that doesn't include made up figures like 'imputed rents' (currently 12% UK GDP)

5) stop the Westminster class leveraging up and giving our kids the rather clunky 300% national debt to GDP bill (that's what you get when you include the off balance sheet obligations and stop including made up figures in your GDP calcs)

6) use stress tests that actually place some stress on the system-6% IR's it ain't.

 

 

http://www.propertyindustryeye.com/house-prices-could-fall-by-a-third-if-there-is-a-no-deal-brexit-warns-bank-of-england/

'The Governor of the Bank of England has warned that in the event of a no deal Brexit, property prices could plummet by a third.

Mark Carney told the Today programme on Friday that the Bank of England had run recent stress tests in the scenario of a no deal Brexit.

As well as house price falls, interest rates would rise to 4% and unemployment would go up to 4% in a full-scale recession.

Asked whether a no deal Brexit would be a disaster, Carney said it would be very undesirable.

His warning led to a fall in the value of the pound.'

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One of the reasons i voted to leave was the fact i was promised a HPC and higher interest rates by these lying cunts.

I expect a no deal will see more printing of sorts, more TFS esq schemes and dropping interest rates, so quite the opposite to a HPC will happen.

Besides dropping by a third will mean they are at a similar level to when this incompetent wanker sadly came to the country and 2013 prices were at mega bubble levels.

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1 hour ago, sancho panza said:

3) find an inflation measure that actually measures the cost of living ie includes the cost of housing

 

My worry is they will start using the price of houses when the price starts falling ... as a reason to keep rates lower.

I am seeing a lot of houses get updated  on RM today at reduced prices ... still fucken bonkers prices that arent even worth biding on but its a start.

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Democorruptcy

How does this compute with the Mansion house speech and the governbankment handing over £1.2bn now and up to £5bn that the BoE can leverage 150x up to £750bn lending? A 0.68% fall in any asset means it's in the red. What leverage were Northen Rock using before they went bust?

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Where was the Bank of England when governments were introducing policies that led to the 'price of something you actually need and takes up a massive proportion of salary' doubled?  

Why are they worried about 'price of something you actually need and takes up a massive proportion of salary' going down -- surely a good thing.

Why aren't they apologising about their historical mistreatment of the interest rate environment, by focusing on the headline inflation figure rather than trying to separate out the effects of imported inflation (which they can't do anything about, other than through influencing exchange rates) and home-produced inflation (which they could but which was masked by massive deflation in imported goods), and asset price inflation (that they've steadfastly refused to worry about*).

[* while prices were going up.]

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Only a third? That's a shame. So project fear used the house prices falling before the ref. I wonder if this time, it's because they know house prices will likely fall by a third because of what's already baked in. Now they are just preparing the gen pop with an easy reason/excuse? Easier to blame us plebs for choosing Brexit than own up/explain the real reasons.

 

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3 hours ago, Admiral Pepe said:

Only a third? That's a shame. So project fear used the house prices falling before the ref. I wonder if this time, it's because they know house prices will likely fall by a third because of what's already baked in. Now they are just preparing the gen pop with an easy reason/excuse? Easier to blame us plebs for choosing Brexit than own up/explain the real reasons.

 

It is 'a third' because that's the sweet-spot that's at the low end of completely horrific but a smidgen higher than completely unbelievable la-la-la I'm not listening for property investors.

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10 hours ago, sancho panza said:

Instead of worrying about Brexit he should get the house in order and get the gubbermint to

1) stop banks leveraging up to the point they need taxpayer hand outs to survive

2) separate retail/investment banking a la Glass Steagall.

3) find an inflation measure that actually measures the cost of living ie includes the cost of housing

4) find a measure of national output that doesn't include made up figures like 'imputed rents' (currently 12% UK GDP)

5) stop the Westminster class leveraging up and giving our kids the rather clunky 300% national debt to GDP bill (that's what you get when you include the off balance sheet obligations and stop including made up figures in your GDP calcs)

6) use stress tests that actually place some stress on the system-6% IR's it ain't.

 

 

http://www.propertyindustryeye.com/house-prices-could-fall-by-a-third-if-there-is-a-no-deal-brexit-warns-bank-of-england/

'The Governor of the Bank of England has warned that in the event of a no deal Brexit, property prices could plummet by a third.

Mark Carney told the Today programme on Friday that the Bank of England had run recent stress tests in the scenario of a no deal Brexit.

As well as house price falls, interest rates would rise to 4% and unemployment would go up to 4% in a full-scale recession.

Asked whether a no deal Brexit would be a disaster, Carney said it would be very undesirable.

His warning led to a fall in the value of the pound.'

if ours go up so will theres ,i doubt spain,greece and italy will be chuffed what with there unemployment rates

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3 hours ago, Noallegiance said:

Attacking the high house price and lending issues on multiple fronts today:

https://www.bbc.co.uk/news/business-44992836

Shock horror - issues with home equity release.

 

From the article "At least one firm assumes house prices will rise 4.25% a year. If they don't, firms face losses - or even bailouts."

Why is that a given these days? Makes my blood boil

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Noallegiance
58 minutes ago, Admiral Pepe said:

 

From the article "At least one firm assumes house prices will rise 4.25% a year. If they don't, firms face losses - or even bailouts."

Why is that a given these days? Makes my blood boil

Yes, my normally barely detectable blood pressure rose dramatically throughout the whole article.

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Democorruptcy
10 hours ago, Noallegiance said:

Attacking the high house price and lending issues on multiple fronts today:

https://www.bbc.co.uk/news/business-44992836

Shock horror - issues with home equity release.

That's a thinly disguised equity release advert, making out it's so great a deal for the people that do it, the financial sector could make huge losses.

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Chewing Grass

If the So-Called BBC is dishing out financial advice, which it does with its puff programming then at some point they should be subjected to a class action and sued out of existence.

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Chewing Grass
On 06/08/2018 at 18:40, Castlevania said:

It should be pointed out that Carney was simply referring to the Bank of England stress tests which tested such a scenario for the tests in 2017.

I think they’re understating how much houses could fall, in a severe recession. A lot more than by a third.

https://www.bankofengland.co.uk/news/2017/march/2017-stress-test-scenarios-explained

According to Investopedia we have really been in a recession since 2007.

'Interest rates rarely increase during a recession. Actually, the opposite tends to happen; as the economy contracts, interest rates fall in tandem.'

So we are fucked anyway as we have had our heads in a big bucket of builders sand for the last 10 years or more.

https://www.investopedia.com/ask/answers/102015/do-interest-rates-increase-during-recession.asp

 

 

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1 hour ago, Chewing Grass said:

If the So-Called BBC is dishing out financial advice, which it does with its puff programming then at some point they should be subjected to a class action and sued out of existence.

just bang the license fees up to pay for the case costs.. call it "auntie's pleb tax" or somesuch

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Lightscribe
7 hours ago, Chewing Grass said:

If the So-Called BBC is dishing out financial advice, which it does with its puff programming then at some point they should be subjected to a class action and sued out of existence.

It’s a boomer organisation, holding on to dear life chugging out liberal, boomer-stroking propaganda yet claims to be impartial. The younger generation will see to the demise of it in years to come.

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Caravan Monster

Food / energy / whatever necessities of life prices to fall = good

Housing costs to fall also = good (except for landlords and down sizing boomers hoping to profit from the current historically abnormal economic circumstances)

Still amazes me how even now people getting screwed over by the current normal, such as those trapped in interest only mortgages or renters, can't get their heads around this despite handing over a large proportion of their income for housing. Another plus for brexit even if we are too stupid to understand it :S

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7 hours ago, Sideysid said:

It’s a boomer organisation, holding on to dear life chugging out liberal, boomer-stroking propaganda yet claims to be impartial. The younger generation will see to the demise of it in years to come.

The reason it managed to continue with the status quo last time the licence issue came up was because Cameron and the neoliberals were needing a propaganda channel to push their side of the argument in the referendum. 

Close to £200 a year for that shite is surreal, we need FOx News esq channels to balance the globalist/neoliberal agenda of C4, BBC and Sky

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8 hours ago, Sideysid said:

It’s a boomer organisation, holding on to dear life chugging out liberal, boomer-stroking propaganda yet claims to be impartial. The younger generation will see to the demise of it in years to come.

Us young'uns will fix all the problems created and abetted by the boomers.

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sancho panza
16 hours ago, Chewing Grass said:

According to Investopedia we have really been in a recession since 2007.

'Interest rates rarely increase during a recession. Actually, the opposite tends to happen; as the economy contracts, interest rates fall in tandem.'

So we are fucked anyway as we have had our heads in a big bucket of builders sand for the last 10 years or more.

https://www.investopedia.com/ask/answers/102015/do-interest-rates-increase-during-recession.asp

 

 

In terms of per capita incomes, and let's be frank, to measure wealth, we should be dividing total income by the number dependent on it,then we likely haven't left recession.

GDP figures should be taken lightly anyway,.

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sancho panza

I've posted this before I think.Fascinating to read.

 

https://www.icis.com/blogs/chemicals-and-the-economy/2018/07/london-house-prices-slip-as-supply-demand-balances-change/

image.png.53312080e7deec466b46c5dc34366b8a.png

London house prices are “falling at the fastest rate in almost a decade” according to major property lender, Nationwide.  And almost 40% of new-build sales were to bulk buyers at discounts of up to 30%, according of researchers, Molior As the CEO of builders Crest Nicholson told the Financial Times:

 “We did this sale because we knew we would otherwise have unsold built stock.”

They probably made a wise decision to take their profit and sell now.  There are currently 68,000 units under construction in London, and nearly half of them are unsold.  Slower moving builders will likely find themselves having to take losses in order to find a buyer.

London is a series of villages and the issues are different across the city:

Nine Elms, SW London.  This $15bn (US$20bn) transformation has been ‘an accident waiting to happen‘ for some time.  It plans to build 20000 new homes in 39 developments at prices of up to £2200/sq ft.  Yet 2/3rds of London buyers can only afford homes costing up to $450/sq ft – thus 43% of apartments for sale have already cut their price.

West End, Central London.  This is the top end of the market, and was one of the first areas to see a decline.  As buying agent Henry Pryor notes:

“Very few people want to buy or sell property in the few months leading up to our monumental political divorce from Europe next March, which is why 50% of homes on the market in Belgravia and Mayfair have been on the market for over a year. Yet there are people who have to sell, whether it be because of divorce, debt or death, so if you have money to spend I can’t remember a time since the credit crunch in 2007 when you could get a better deal.”

NW London.  Foreign buyers flooded into this area as financial services boomed.  Rising bonuses meant many didn’t need a mortgage and could afford to pay £1m – £2.5m in cash.  But now, many banks are activating contingency plans to move some of their highly paid staff out of London ahead of Brexit.  Thus Pryor reports buying a property recently for £1.7m, which had been on the market for £2.25m just 2 years ago.

W London.  Also popular with foreign buyers, even areas such as Kew (with its world-famous Royal Botanic Gardens) have seen a dramatic sales volume decline.  In Kew itself, volume is down 40% over the past 2 years.  And, of course, volume always leads prices – up or down.  Over half of the homes now on sale have cut prices by at least 5% – 10%, and the pace of decline seems to be rising.  One home has cut its offer price by 17.5% since March.

Outer London.  This is the one area bucking the trend, due to the support provided by the government’s ‘Help to Buy’ programme.  This provides state-backed loans for up to £600k with a deposit of just 5%.  As Molior comment, this is “the only game in town” for individual purchasers, given that prices in central London are out of reach for new buyers.

House-prices2.png

The key issue is highlighted in the charts above – affordability:

  • The first chart shows how prices were very cyclical till 2000, due to interest rate changes.  They doubled between 1983 – 1989, for example, and then almost halved by 1993.  In turn, the ratio of prices to average earnings fluctuated between 4x – 6x
  • But interest rates have been relatively low over the past 20 years, and new factors instead drove home prices
  • The second chart shows the impact in terms of first-time buyer affordability and mortgage payments.  Payments were 40% of take-home pay until 1998, but then rose steadily to above 100% during the Subprime Bubble.  After a brief downturn, the Quantitative Easing (QE) bubble then took them back over 100% in 2016

The paradigm shift was driven by policy changes after the 2000 dot-com crash.  As in the USA, the Bank of England decided to support house prices via lower interest rates to avoid a downturn, and then doubled down on the policy after the financial crash – despite the Governor’s warning in 2007 that:

“We knew that we had pushed consumption up to levels that could not possibly be sustained in the medium and longer term. But for the time being if we had not done that the UK economy would have gone into recession… That pushed up house prices and increased household debt. That problem has been a legacy to my successors; they have to sort it out.”

  • The 2000 stock market collapse and subprime’s low interest rates led many to see property as safer than shares.  They created the buy-to-let trend and decided property would instead become their pension pot for the future
  • The 2008 financial crisis, and upheavals in the Middle East, Russia, and parts of the Eurozone led many foreign buyers to join the buying trend, seeing London property as a “safe place” in a more uncertain investment world
  • Asian buyers also flooded in to buy new property “off-plan”.  As I noted in 2015, agents were describing the Nine Elms development as: ” ‘Singapore-on-Thames’. Buying off-plan was the ultimate option play for a lot of the buyers [who are] Asian. You only need to put down 10% and then see how the market goes. A lot of buyers are effectively taking a financial position rather than buying a property”

But now all these factors are unraveling, leaving prices to be set by local supply/demand factors again.  Recent governments have taken away the tax incentives behind buy-to-let, and have raised taxes for foreign buyers.  As the top chart shows, this leave prices looking very exposed:

  • They averaged 4.8x earnings from 1971 – 2000, but have since averaged 8.7x and are currently 11.8x
  • Based on average London earnings of £39.5k, a return to the 4.8x ratio would leave prices at £190k
  • That compares with actual average prices of £468k today

And, of course, there is the issue of exchange rates.  Older house-owners will remember that the Bank of England would regularly have to raise interest rates to protect the value of the pound.  In 1992, they rose to 15% at the height of the ERM crisis.  But policy since then has been entirely in the other direction.

Nobody knows whether what will happen next to the value of the pound.  But if interest rates do become more volatile again, as in 1971-2000, cyclicality might also return to the London housing market.

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