Older readers may remember the property boom which engulfed Tokyo from about 1986 to 1991. The apocryphal statistic was that land under the Imperial Palace was worth about as much as the state of California.
The bursting of that bubble — as well as one in the stock market fuelled by loose monetary policy, financial speculation, corporate cross-holding and dodgy accounting — was followed by the Japanese economic stagnation that persists to this day.
What many readers may not realise, however, is that housing in parts of London is now more expensive than for Tokyo at the peak of that boom. Read more
Or London’s Green Belt, at any rate. For the uninitiated it is the giant girdle of farmland that forces the UK metropolis to maintain the figure it had in its twenties — the 1920s.
So here’s a suggestion that isn’t actually that radical: nationalise bits of it and build on them. Read more
Could the tide be turning? This, from Kinleigh Folkard & Hayward’s latest Spring report suggests something is going on:
In the sales market, parts of London are still attracting high numbers of overseas buyers, encouraged by the perceived financial and political security of the London market as an investment choice, along with its education, business environment, health and leisure provision. The lack of supply, which has been a key feature of the market in recent years is starting to ease as vendors become more confident about market conditions. In March, Rightmove reported an 8.7% increase in properties marketed across the country compared to the same period the previous year.
Goldman Sachs has had a look attempts to lean against house price cycles by central banks, in 20 OECD countries from 1990 to 2012, to see what effect they have had.
More on that below, but first a striking chart of post-Great Recession house price trends (from the first quarter of 2009 to now):
So, mortgages are more affordable because interest rates are low, right? Pick your chart provider and timespan of choice, but it is a well worn argument in favour of higher house prices: afford bigger mortgage, buy
bigger more expensive house.
Not so fast. There is a case to be made that basing the analysis on the size of the initial payment is a form of mass delusion.
You see, the logic of affordability has its roots in the 1970s, but it is the reverse effect of something most people will have to fish out of the intellectual dustbin where the Taylor Rule and other inflation related analysis now molder: money illusion. Read more
We’ve had a look at the relationship between London houses and their occupants before. But a line from “leading economic forecaster” Harry Dent in a interview with the Guardian made us want to go and check out the stats:
“We’ve had bubbles throughout our time – oil, gold, stocks. But China is the biggest bubble in modern history. It’s 30% overbuilt in everything and has huge over-investment. The housing market is valued at 28 to 35 times income in the major cities. London, by way of contrast, is 15 times”.
That sounds like a lot, and it turns out that Greater London overall isn’t quite that expensive. But if you want to go area by area, what is clear is that some parts of the capital are priced well beyond the incomes of most people who live there. Read more
So, we may have been a little distracted by the boom in estate agents, dark inventory, and London houses earning more than their occupants to see what was really going on.
In fact, London is in the grip of a terrible and deep housing bust that has only just begun to turn. Greater London house prices, adjusted for inflation, are fully 27 per cent below their peak in the summer of 2007.
Congratulations Professor Shiller (and Profs Fama and Hansen)!
Let’s celebrate with a quick return to the property market, where he who would not be bullish made his name, in the popular imagination at least. Read more
So, everyone has their knickers in a twist about the UK’s ‘Help to Buy’ scheme. Is it overall good? Is it bad? Does it make sense? Are there risks? Will it help anyone in the south? Anyone in London?
All this in the context of cries of “it’s only perpetuating the global property ponzi game!!” Read more
Some hurried back-covering from Britain’s Financial Policy Committee, which last met on September 18…
In the United Kingdom, the continued recovery of the banking sector had been associated with a further easing in credit conditions. Against that backdrop, the recovery in the housing market appeared to have gained momentum and to be broadening.
It’s been a long time coming, but Geneva property owners desperate to sell are finally beginning to slash prices after a summer season characterised by a bitter standoff between buyers and sellers.
Transactions throughout the period were few and far between as bid-ask spreads widened dramatically, especially in the SF3m plus market range. Read more
Buy UK property, we suspect.
When it comes to money laundering, the estate agency sector in the UK is regulated by the Office of Fair Trading. Here’s the guidance that Britain’s 7,000 plus agents are supposed to adhere to. Click to read: Read more
Time for some property porn.
It comes from the 2013 Demographia International Housing Affordability Survey – a piece of work often quoted by bubble hunters and rubbished by the property bulls who babble on about flawed methodology. Read more
Most finance ministers would give their right arm to be in the same position as Sigbjørn Johnsen, their Norwegian counterpart. But even very rich countries have problems…
What it boils down to is that Norway has lots of things lots of people want. Namely oil, currency and houses. The result is a growing property bubble alongside a fast appreciating currency, which the central bank is struggling to control due to a catch-22 associated with hiking interest rates — (higher rates help to curb the property boom but only exacerbate the currency appreciation problem). Read more
And why Norway’s property market is still looking ever so slightly peaky.
First, some charts courtesy of Alan Ruskin at Deutsche Bank which point to those countries which maybe haven’t seen the end of their house-price pains. The first chart shows the pain already taken: Read more
As Monday’s Lex notes regarding the US stock bounce has a sting in the tail
Don’t look now but amid the negative news on everything from the shambles in Europe, America’s debt wranglings or worries over China, the good old US of A seems to be stringing together a nice run of positive data… Read more
As FT Alphaville and others have duly noted, the search for the ultimate safe haven alternative is on.
RBS now points to one possible alternative, London luxury-home prices. Read more
Beijing’s efforts to cool the country’s sizzling residential property market are finally beginning to work after a year of moral suasion and threats to local governments, banks and developers, writes the FT. For some, including China’s cash-strapped local authorities, they may be working too well. The average transaction price for land sales across the country fell 32 per cent in April from a month earlier and has dropped 51 per cent since the start of the year, according to government data published by Credit Suisse. FT Alphaville notes that the supply of Chinese housing is also increasing, while the central goernment moved on Tuesday to shore up its local finances with a bailout of municipal debt worth up to $463bn.
The US housing double-dip — it’s official:
Data through March 2011, released today by Standard & Poor’s for its S&P/Case-Shiller1 Home Price Indices, the leading measure of U.S. home prices, show that the U.S. National Home Price Index declined by 4.2% in the first quarter of 2011, after having fallen 3.6% in the fourth quarter of 2010. The National Index hit a new recession low with the first quarter’s data and posted an annual decline of 5.1% versus the first quarter of 2010. Nationally, home prices are back to their mid-2002 levels. Read more
Douse your double-dip fears, house prices are actually going up.
At least that’s the contention by Citi analysts in a note published on Friday. Read more
Another day, another piece of gloomy data from the UK economy.
This time it’s real estate. Read more
Here’s a convenient continuation of the rising-European-rates-meets-real-estate theme.
Standard & Poor’s reckon “fresh headwinds are gaining force in Europe’s real estate markets” due to rising interest rates (or at least, expectations of them) in a report out on Wednesday. Read more
The “Further further readings” post usually runs in the late afternoon US time, but in this case you can file it under “we forgot to hit publish”. Doh! Or consider it a Tokyo special. Either way, sorry about this.
For the commute home, where you always pass your Irish stress tests,
Ouch, nearly everywhere.
The Case-Shiller house price numbers are out for December — and as always, they show a three monthly average (in this case for October, November and December) with a two month lag. Read more
Here’s something the US market may have missed on Monday.
It’s the battle of the housing data providers — with CoreLogic challenging the National Association of Realtors on their recent home sales figures. Read more
Inflation in (simplified) Chinese is 通 货膨胀.
Standard Chartered are back with another ‘wisdom of China’s online crowds‘ piece, or a look at Chinese consumer trends through internet searches. There’s a difference this year though. Instead of just using Google Trends, StanChart have made use of a new search trends-analyser, the Baidu Index (BI). Baidu has a has an 80 per cent share of the search market amongst China’s online population of 300m, according to StanChart, and the bank says it’s the first to use the BI to gauge China trends. Read more
David Rosenberg’s gone all cartoony.
The Gluskin Sheff analyst seems to have given up on on words and is instead using charts — and Loony Tunes — to illustrate his (very salient) points. Read more
Non-performing loans — those defaulted or nearly-defaulted loans — have naturally grabbed headlines during the US housing crisis. In fact, they tend to be a focus for nearly every bond or bank investor in gauging investment risk. What though of their current counterparts, asks FT Alphaville? Laurie Goodman over at Amherst Securities makes the case this week, that the market is significantly underestimating the default probabilities of loans made to borrowers who have been paying on time — in other words current loans. Read more
US house prices fell for the third month running in September as the residential real estate market continues to suffer from persistent unemployment and high rates of foreclosure, the FT reports. Separately, US consumer confidence climbed to its highest level in five months in November on hopes that the labour market is beginning to improve. Prices fell by 0.8 per cent on a seasonally adjusted basis from August to September, according to the S&P/Case-Shiller home price index. That was worse than economists expected and left prices up by a modest 0.6 per cent from the same month a year ago. Nineteen of the 20 big US cities that S&P tracks recorded monthly declines, with prices in Washington DC remaining flat. Tampa, Phoenix, Minneapolis and Cleveland suffered the biggest falls. Meanwhile Reuters reports that the Senate Banking Committe is to hold a hearing today concerning mortgage foreclosures, to examine whether they pose a risk to the overall economy or are an isolated problem.
A top-read story on Bloomberg this Thursday morning?
One that combines the words ‘foreclosed homes’ with ‘Spain’ and ‘tripled’ : Read more