Yes, yes, we know, people will keep buying property in London no matter the price, no matter the Brexit, no matter the sheer insanity of it all.
But, there’s a credible bear case to be made that regulatory and tax changes in the buy-to-let market — known colloquially as the ‘evil landlord’ sector — are about to prick what has become a very sizeable bubble.
Last week, Deutsche Bank analysts Oliver Reiff and Markus Scheufler made that case over about 70 pages, arguing that for any rational investor, the economics of buying London property have been hammered. Read more
From Bernstein’s Chirantan Barua and team:
They “wouldn’t be surprised”, btw, to see house prices down 20-30 per cent if Brexit were to happen as sterling falls, volatility increases and people realise it’s a market ripe for a drop. Read more
A chart from Deutsche Bank to soothe the minds of London’s middle-class millennials, whose only shot at owning property in the capital is probably the popping of the housing bubble/unfair destruction of an appropriately-priced market (delete as per your preferences):
From the FT’s Kate Allen this weekend:
Data published last week showed that new housing construction has surged by 19 per cent in the past year to 155,080 new homes. That figure is a quarter higher than previously reported government statistics, which suggested that only 124,520 new homes had been built during the period. The figures for London, where the housing shortage is biting the hardest, show the greatest difference. Last week’s data showed that over 24,000 new homes were created in 2014-15, whereas the communities department’s quarterly statistics show only 18,270.
A few charts from the latest English Housing Survey, out on Wednesday…
The following arrived in our inbox this Tuesday from Hailo, the cabby app which allows you to hail a cab using a mobile:
As of 5pm today you’ll find a free £10 credit applied to your Hailo account which expires at midnight tonight.* Make the most of your evening, stay out late or swap your normal commute with a safe, comfortable and cool cab home. Or why not try our new luxury HailoExec service? Just hit Pick Me Up Here and swipe across to select it. It’s a little post Bank Holiday gift from us to help you enjoy a hassle-free summer with Hailo.
(Disclosure: the author is 27… and renting.)
From the UK Prudential Regulation Authority’s consultation paper on the loan-to-income cap… Read more
Here’s a radical idea to deal with the London house bubble from Rob Perrins, managing director of Berkeley Group, the upmarket housebuilder.
Give London its own interest rate.
Or as he put it:
London is getting self-sustaining now – it doesn’t need the stimulus…It should probably have a higher interest rate than elsewhere in the country.
Which begs the question: are super-city states about to disrupt our current concept of the old fashioned sovereign state? 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.
The latest RICS survey shows that house prices are continuing to boom in the UK.
This is despite the fact that the net balance of surveyors reporting house price gains edged down from 58 per cent in November 2013, which was the highest since 2002, to 56 per cent in December. As Citi’s Michael Saunders notes the overall rate remains very high and consistent with house price gains of at least 10-15 per cent year-on-year, especially since the reading for house price expectations is the highest since 1999.
What’s more interesting, however, is that the boom is no longer as London/South-East centric as it has been. Read more
UK home-builders trying to move ahead of the political wind on foreign investors buying up London property?
In any case, though we missed this on Wednesday it seems part of the Zeitgeist — eleven of them agreed not to sell UK (read: London) new-builds abroad before they go on the domestic market from next year: Read more
Here’s a modest proposal for the prime London property boom: time-travel back and prevent the foundation of the British Empire. Given the post-imperial nature of who seemingly buys.
In the meantime, this is a nice scoop by Sky’s Ed Conway… Read more
Does £450/sq ft really count as ‘prime’ London these days?
We don’t know. But these were some interesting charts from Deutsche Bank nevertheless on Monday, about who’s been buying up London from abroad: 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.
Ever feel like you are slipping behind in the rat race? Well, Londoners now face competition from their homes as well. The average house in the capital is now earning as much as its occupants.
As we noted noted last week, London house prices are rising far faster than in the rest of the UK, up 9.7 per cent over the 12 months to July on ONS figures. Read more
There was just one detail missing from the exquisite tale of the repossessed flat now on offer at London’s most hideous luxurious residence. The owner.
Well — after perusing this “exciting opportunity” to own 988 sq ft of One Hyde Park — note the apartment number… Read more
As Londoners prepare for a two-week-long festival of queuing, mostly in the rain, and getting struck in traffic and on the over-crowded tube trains (otherwise known as the London 2012 Olympics), Goldman Sachs has looked into the economics of the event.
They found that stock markets of recent hosts have outperformed in the year after the Games, local houses prices have tended to rise and that dictators award the most valuable medals. Read more
China is for the first time to give formal backing to moves by British banks to turn the City of London into an offshore trading centre for the renminbi, UK government officials have told the Financial Times. As George Osborne, the chancellor, prepares to hold talks in London with Wang Qishan, the Chinese vice-premier, on Thursday British officials say a joint statement by both countries backing the growth of renminbi trading in London is set to be the centrepiece of their meeting. British banks and financial institutions have for some time been pressing for London to become an offshore trading centre for the Chinese cuurrency. Treasury officials say British banks and financial services institutions increasingly want to trade in the renminbi, seeing this as a rapidly growing market in foreign exchange and bond issuance.
More than 100 people have been arrested by police on charges ranging from theft and burglary to violent disorder after the Tottenham riots spread to other London boroughs in a second night of unrest, the FT reports. The Metropolitan Police deployed officers across the capital to combat what they described as “copycat criminal activity” in Enfield, Islington, and Walthamstow in north London, and Brixton in the south of the city. Police said “small and mobile groups” of youths who have continued to attack police officers and their vehicles. The violence first started in Tottenham, north London, on Saturday when a peaceful vigil for Mark Duggan – a local resident who was shot and killed during a police operation last week – flared into an angry riot in which officers were attacked with petrol bombs and local businesses ransacked.
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
A leading European hedge fund is preparing to build one of London’s most expensive housing developments as global investors scramble to gain a foothold in the capital’s resurgent residential market, the FT reports. In a deal completed over the weekend, Orion Capital Managers acquired an acre of prime residential land in Chelsea. The fund plans to build a £300m ($493m) housing complex on the site, which is bought for £85m. It has planning consent in place for a building designed by Sir Norman Foster’s practice, with six apartments, a duplex penthouse and two detached villas, which are expected to price at between £25m-£35m ($41m-$57m). Knight Frank found the price of London luxury homes recorded their highest rise in July for six months, says Bloomberg, driven by the low pound and an aversion to mainland Europe.
Investing is difficult. Fortunately, there are wise heads willing to share all of their wisdom and experience in exchange for a modest fee.
Anton Kreil, the portfolio manager in the BBC programme that let eight members of the public trade $1m (£620,000) and run their own hedge fund, is now publishing his trading positions in his ‘Global Monthly Report’. Until now Mr Kreil’s report has only been available to friends and high net worth individuals.
We knew that China’s efforts to internationalise the RMB were moving along nicely, but thus far CNH deposits (yuan held offshore in Hong Kong) are still a relatively small part of China’s total deposit base.
But a new paper from RBS notes that as a percentage of Hong Kong deposits, they’re becoming a big deal indeed, and quickly: Read more
Competition for land in London is hitting pre-recession levels, as international investors prepare to inject more than £5bn into the city’s lucrative residential property market, reports the FT. The money, more than £1bn of which has been raised since the start of the year, will target high-end developments and could see the construction of about 10,000 homes in the capital. The wave of interest is driving up land prices, as investors bid aggressively for new sites, say companies operating in the city’s already congested housebuilding market. London’s appeal has grown for investors as its property market has been relatively insulated from pressures felt elsewhere in the UK amid government austerity measures.
Capital & Counties, the UK property group, is in talks with one of Asia’s wealthiest families in Asia to provide funding for the multibillion pound redevelopment of the Earls Court site in west London, one of the city’s largest development schemes and potentially the most valuable, reports the FT. CapCo is in talks about a joint venture with the Kwok family, which controls Hong Kong’s largest listed property developer, Sun Hung Kai Properties. The family has been behind some of HK’s biggest property schemes and is looking to diversify its wealth amid spiralling Asian property values. CapCo is continuing the talks directly with the family.
Geneva will leave London behind and become the world’s most important trading hub for physical energy commodities, including oil, as leading companies relocate dozens of traders to Switzerland, according to industry executives, the FT reports. The transfers threaten the UK capital’s leadership in physical crude and oil products, first established in the late 1980s, and come amid broader financial industry complaints about stiffer regulation, higher taxes and poor transport infrastructure in London. The Geneva Trading and Shipping Association, the industry body, believes the Swiss city now “ties with London as Europe’s number-one oil trading hub”. But oil executives said the balance was turning in the favour of the Swiss city.
Prada is weighing up a listing in Hong Kong in an attempt to tap investor enthusiasm for luxury goods companies in Asia, the FT reports. In a sign of the rising appeal of Hong Kong for foreign companies as a place to list, the Italian luxury goods company is looking at the territory over Milan or London as it believes it might obtain a higher valuation there, say people close to the talks. The group, which has abandoned several attempts at listing in the past decade citing unfavourable market conditions, is expected to decide this year. People familiar with Prada say in a buoyant market, the group could be worth as much as €5bn-€6bn ($7bn-$8.4bn). Meanwhile, the FT adds that Hong Kong is on track for the second year in a row to eclipse its rivals Shanghai, London, and New York as the world’s biggest centre for IPOs.
Things you probably didn’t know about the City of London.
The first in an irregular series starts with Wednesday’s news that the Takeover Panel — the body which polices all mergers & acquisition activity in the UK — has “cold shoulder” powers. Read more
Government of Singapore Investment Corp. is among a handful of cash-rich buyers seeking to buy London’s landmark Grosvenor House Hotel — which carries a £500m price tag — from its current owner RBS, the WSJ reported, citing people familiar with the matter.
The UK’s FTSE 100 barely avoided falling below 5,000 during a sudden plunge on Thursday afternoon, one hour before closing down 1.65 per cent at 5073.13: