London house-purchase volume falls off a cliff


#1

Originally published at: http://boingboing.net/2017/08/01/schadenhousingfreude.html


#2

Is your real estate investment not performing well enough? Call John Burns.


#3

man, Putin & Co. are gonna be pissed!

Well they still have their guy in the White House, so maybe a little war in the Middle East can prop up the price of oil for a bit until the cost of solar/wind is so low they can’t help but invest. Well, first I’m guessing a bloody war in Korea that we stumble into due to some ‘joking’ tweets.

So if Trumputin makes a joke about nuking country XYZ does the military have to take that as a direct order?
Asking for a friend.


#4

I have a stack of tulip bulb futures, if anyone is interested?


#5

But that liquidity depends on the firm belief that there will be more buyers in the future,

Complete twaddle.

It depends on their being the same number of buyers as sellers for each property.

The real problems are.

QE - the state manipulating interest rates down. Monthly costs stay the same, but prices inflate.

Stamp duty - taxation that comes out of income that is already taxed on the purchase price.

Islington isn’t cheap. You could end up paying £153,750 just to move house. That’s out of taxed income - 60% for those earning enough to pay for these sorts of property.

So they won’t sell, they won’t move.

As it stands in the UK 34% of taxes goes on the state’s debts.


#6

When bubbles pop, there is usually that brief period of time when sales plummet but prices have yet to significantly decline. I call these the Wylie E. Coyote moment, after the moment in the Road runner cartoons when he is feeling around for the ground before he realizes that he is in for the long fall.


#7

Greed is a powerful force in our lives and in the world.


#8

I can’t wait until it’s finally proven beyond a shadow of a doubt that all the endless horseshite about government action being the sole cause of inflation is thrown out the window along with all its believers, preferably from the top floor of Grenfell Towers.

Housing costs, food costs, and energy costs are what drive inflation, and actions by private industry are solely responsible. The endless hand-wringing over taxes, interest rates (which only cause inflation by the actions of private lenders and borrowers) is just a distraction from the real problem of the 1% parasite class existing.


#9

I’m ready any time to throw a libertarian or any of those Von Mises shills out my window just to check if the Invisible Hand will slow down their fall.


#10

Violence eh! Kill people who disagree with your politiics


#11

So your claim is that government’s do not manipulate interest rates? Really?

They don’t tax transactions? Really?


#12

Bubble, Bubble, Bubble…


#13

that liquidity depends on the firm belief that there will be more buyers in the future

Another way to think about this: “you would have to be a fool to believe that X is worth $Y…but I’m no fool, I’m just buying this to sell it for even more money to an even bigger fool later”…except this “bigger fool” theory has a flaw, there is a biggest fool, and nothing you can do makes sure it isn’t you when you decide to buy in.


#14

Since the 2009 financial collapse - the Fed and the ECB have pumped close to $13 trillion into the system, and there is no inflation anywhere. Since there is very little growth in the stock market, those with money have been putting it into real estate - it is not just London, but there is a huge exodus of money from China (thanks to the rule of law on property- we can thank Puritan revolution for that) to Australia, US coastal cities, and Vancouver and Toronto, (Vancouver being the tip of the spear). Even if prices drop, it is still safer. Of course all this makes it difficult for local buyers and renters as they get squeezed with high rents and prices. Something like 13.5% of sales (usually at the high end) in Vancouver were to foreign buyers, and when last year BC imposed a 15% foreign buyer’s tax it slowed things down for a few months, but then continued (still a 9.5% increase in a year) At the same time foreign buyers shifted to Toronto until Ontario implemented a similar tax.


#15

I live on the first floor, so i seriously doubt they are gonna die from the fall.
I will die of laughter from them not being slowed down by the Invisible hand, however. =)


#16

Sorry, but no, there IS a real estate bubble in London. Nice dance but I’ve seen better.


#18

If we take the UK QE is called the APF. Asset Purchase Facility. You can for a change get the accounts.

They have used it all to buy Gilts - the UK equivalent of Treasuries. Simple reason, no one else was lending money to the state, and the state changed the requirements on banks to hold more gilts or stop lending.

End result, interest rates plummet for those allowed to borrow, and property goes up.

The china exodus of cash. Why would people be getting their cash out?

https://mises.org/blog/china-keynesian-monster is one explaination. My view is that its a complete bubble based off very high saving rates - The man in the street in Beijing is worried and a huge debt problem. How else do you build without massive debts? Turns out they are buying a safe haven. When it goes wrong in China they have an out.

You have missed off migration. If you have net inward migration, the migrants have to live some where and that drives up the cost. In London that’s not the super rich, its the economic refugees from the EU that’s the driver. Why else do you think the UK voted for Brexit?

As I sit here, I’m in the EU, not in the UK. You have whole villages where 90% of the population are on welfare. The EU’s 7% of the world’s population, 57% of its welfare spending. Plus government debts completely out of control. Governments owe more than their borrowing. They owe people pensions for their past payments in. Typically 10 times as large as their borrowing.

Take the bit about sales falling off. What happens to prices when supply is curtailed?

SO your other question. Why no big inflation? Really? What’s happened to house prices?

Your complaint about Vancover, Toronto is that there has been massive house price inflation.


#19

I remember reading somewhere that a 20% cost for criminals to launder money was the norm for uncomplicated funds.

So - these guys can have the housing value drop 20% an still come out ahead.


#20

The long term bond market is not at all worried about govt. debt.

The UK had far larger debt to gdp ratio after the Napoleonic wars - did England to bankrupt? no they outgrew it,
just as the US has grown from a GDP of 11 trillion to 15trillion in only the last 10 years or so (btw wall st and corporate US had no problem going to the gov’t cap in hand for bailouts while clutching Friedman and Hayek in the other - the most interesting scene is Greenspan addressing congress that his entire life belief system was wrong - that markets would fix themselves - see PBS Frontline the Warning (where they Brooksley Born warned about a systemic collapse just before LTCM tanked)

Though the US may complain about high tax rates they you can check the OECD figures they are not that high at all - and the government share of tax intake from the corporate sector declined from 20% in the 70s to around 2% now. Just pay the taxes.


#21

House sales have also hit a wall in Toronto and Vancouver, thanks to new laws taxing foreign homeowners who don’t live in the houses they buy. Thankfully we bought our house (which we will live in until one of us dies) before the bubble had gotten as inflated as it is now. I feel bad for mock the poor fools who bought into the market when prices were going up 30% a year who are now wondering what the hell happened.