Thanks to
By Bill Bonner
Mumbai, India
O, what a tangled web we weave
When first we practice to deceive!
– Sir Walter Scott, ‘Marmion’
“The trouble with today’s financial system,” we told a Bloomberg reporter, “is that it is based on fraud.”
“At the bottom of it is paper money – itself a kind of deception. It pretends to be real money. And it is real money – in the sense that you can use it to buy things. But it is prone to lie. All the feds have to do is to turn on the printing press and it will tell you that you are a lot richer than you really are.
“This sort of flimflam has been going on ever since the end of WWII. The feds systematically increased the amount of paper money... leading people to think they had more purchasing power than they really had. Today, a dollar is worth only about 3% as much as it was 100 years ago.
“But that’s just the beginning of the scam. They also systematically under-priced credit – in the belief that the key to prosperity is consumer credit and spending, rather than saving and production.
“The system has its architects and its operators – all quacks and mountebanks. They pretend that they can manage the currency and manage the economy. Yet they misunderstand the most basic elements of how a real economy works. Wealth does not come from consuming... it comes from producing.
“The managers claim to be able to manipulate the economy so well that they can actually improve its performance... that is, they say they can make the economy perform better than it would on its own... better than it has naturally for the past two thousand years. By eliminating the cyclical downturns, the feds told us that they would we all be richer... and free from the volatility that plagued us theretofore.
“So they fiddle and fake it... improvising... and making it up as they go along. The raise interest rates... and then they reduce them. They introducing more paper money when it suits them and change banking rules as their theories suggest.
“When anything ‘bad’ happens, defined as something they don’t like, they rush to fix it. But what can they fix it with? A little duct tape of monetary policy. A little fiscal baler twine too.
“Their fixes are not completely random or haphazard. They have a bias – towards more credit, more spending, more cash, and more speculation. If they tighten rates one month, they loosen them for two months. If they run a surplus in the federal accounts one year, they run deficits for the next five.
“Gradually, more and more debt, mistakes, bad judgments and cockamamie speculations build up. And then, the authorities are under pressure... running from one crisis to another... providing credit to one zombie... and bailout to another... and raw meat to a third.
“And then suddenly, the discipline and self-restraints that held them back gives way like a frayed old rope. Then the central banks and Treasury authorities are running free... abandoning themselves to the trickery and fraud inherent in their profession. The European Central Bank says it will provide “unlimited liquidity” to those who need it, in order to fend off a debt crisis in the Old World. In the New World, the Bank of Ben Bernanke is already bailing out big banks in North America as well as those of Europe. And everywhere, the feds are ready to support one another... and bankroll the IMF... with more paper money and more credit...
“...all of them desperate to hold the system together.”
And now they link arms – the Fed, the ECB, the EU and the US... and don’t forget Japan and the BOJ. And off they march – right off a cliff.
Friday 3 December 2010
Thursday 2 September 2010
Oh Dear What Can the Matter Be...
House prices fall for second month in August by 0.9%, following the 0.5% the previous month. Well no surprises for us in this 'so called' news.
When Mortgage lending is now so difficult to obtain, the money side demand for housing just had to fall away.
However link this to falling UK Manufacturing and there is surely a real depression here in both housing demand and business. Tie this to the bank's which generally have 'security' on directors main residence and the downward spiral must continue.
When Mortgage lending is now so difficult to obtain, the money side demand for housing just had to fall away.
However link this to falling UK Manufacturing and there is surely a real depression here in both housing demand and business. Tie this to the bank's which generally have 'security' on directors main residence and the downward spiral must continue.
Tuesday 17 August 2010
Mortgage Arrears in the US - UK to Follow
Although mortgage rates have plunged to record lows, falling borrowing costs have failed to revive the US housing market. Indeed, the Washington deliberations, which will centre on what the level of government support for Fannie and Freddie should be, comes amid continuing pain for homeowners.
In the average congressional district, serious mortgage delinquency rates – defined as borrowers more than three months behind on their payments – are 9.4%, compared to 3.3% at the time of the election in 2008, according to a study by Deutsche Bank.
“That pace of deterioration alone should put housing and mortgage finance on most political radars,” said Steven Abrahams, managing director at Deutsche.
The problem remains concentrated in states such as Florida, California and Nevada. More than one in five borrowers (over 20%) are at least three months overdue on their mortgage payments in 23 congressional districts – including 13 in Florida, six in California and two in Nevada.
Will this malaise be found in the UK or is it already here?
In the average congressional district, serious mortgage delinquency rates – defined as borrowers more than three months behind on their payments – are 9.4%, compared to 3.3% at the time of the election in 2008, according to a study by Deutsche Bank.
“That pace of deterioration alone should put housing and mortgage finance on most political radars,” said Steven Abrahams, managing director at Deutsche.
The problem remains concentrated in states such as Florida, California and Nevada. More than one in five borrowers (over 20%) are at least three months overdue on their mortgage payments in 23 congressional districts – including 13 in Florida, six in California and two in Nevada.
Will this malaise be found in the UK or is it already here?
Tuesday 10 August 2010
The Rape of Britain
Article courtesy of Nadeem Walayat
The Bank of England kept UK interests on hold at 0.5% last week as it continues its policy of IGNORING HIGH UK inflation that continues to stand above the Bank of England's 3% upper limit for the purpose of the BoE continuing to funnel tax payer cash onto the balance sheet of bailed out bankrupt banks as illustrated by the most recent banking sector profit announcements, most of which are fictitious as in actual fact the banks are not generating any profits because they continue to only partially write down bad debts.
The only reason why bankrupt banks are announcing profits is so as to allow them to pay their chief officers huge bonuses as a reward for succeeding in conning the tax payers by means of threats of financial armageddon as inept regulators with themselves having one hand in the cookie jar watch on as they intend to return to commercial banking themselves so as to have their turn at getting a piece of the tax payer funded bailout pie.
The ways and means by which these fictitious profits are being achieved are many, such as The Bank of England loaning the banks at 0.5% which they then run along and invest at zero risk in longer dated UK government stock at 3.5% and thus make a 3% risk free profit with the tax payers money, meanwhile the ordinary tax payers who have been saving hard all their working lives are seeing the value of their savings being stolen by means of the stealth inflation tax as banks drunk on central bank cash pay a pittance of less than 2% in interest whilst even the official doctored CPI inflation rages at 3.2%, well above the BOE target of 2%. And not to forget the government adding insult to injury by TAXING the pittance of interest received at 20% for basic rate and 40% for higher rate tax payers.
Similarly borrowers are not receiving anywhere near 0.5% for loans and mortgages as most mortgage borrowers will be lucky to see any rate below 4% with many on rates of as high as 6% which is resulting in huge profit margins for the banks that continue to penalise their customers for their own mistakes.
Where savers and borrowers are concerned Britain would be far better off with a nationalised banking sector that exists purely to service the loans and savings market rather than the bankster elite maximising the amount of money that can be stolen from tax payers, savers and borrowers by means of an officially sanctioned artificial banking system.
The Bank of England kept UK interests on hold at 0.5% last week as it continues its policy of IGNORING HIGH UK inflation that continues to stand above the Bank of England's 3% upper limit for the purpose of the BoE continuing to funnel tax payer cash onto the balance sheet of bailed out bankrupt banks as illustrated by the most recent banking sector profit announcements, most of which are fictitious as in actual fact the banks are not generating any profits because they continue to only partially write down bad debts.
The only reason why bankrupt banks are announcing profits is so as to allow them to pay their chief officers huge bonuses as a reward for succeeding in conning the tax payers by means of threats of financial armageddon as inept regulators with themselves having one hand in the cookie jar watch on as they intend to return to commercial banking themselves so as to have their turn at getting a piece of the tax payer funded bailout pie.
The ways and means by which these fictitious profits are being achieved are many, such as The Bank of England loaning the banks at 0.5% which they then run along and invest at zero risk in longer dated UK government stock at 3.5% and thus make a 3% risk free profit with the tax payers money, meanwhile the ordinary tax payers who have been saving hard all their working lives are seeing the value of their savings being stolen by means of the stealth inflation tax as banks drunk on central bank cash pay a pittance of less than 2% in interest whilst even the official doctored CPI inflation rages at 3.2%, well above the BOE target of 2%. And not to forget the government adding insult to injury by TAXING the pittance of interest received at 20% for basic rate and 40% for higher rate tax payers.
Similarly borrowers are not receiving anywhere near 0.5% for loans and mortgages as most mortgage borrowers will be lucky to see any rate below 4% with many on rates of as high as 6% which is resulting in huge profit margins for the banks that continue to penalise their customers for their own mistakes.
Where savers and borrowers are concerned Britain would be far better off with a nationalised banking sector that exists purely to service the loans and savings market rather than the bankster elite maximising the amount of money that can be stolen from tax payers, savers and borrowers by means of an officially sanctioned artificial banking system.
Tuesday 13 July 2010
Housing Crash for 20 years
At last, at last, the bigger names who comment on the housing market have woken up to the reality of the banking crisis and what it will mean for house prices in the UK.
We have Price Waterhouse, The RICS (Royal Institute of Chartered Surveyors), the Council of Mortgage Lenders and Capital Economics all now becoming very bearish on property. It's about time, we here since 2006 have been sounding warnings.
Now we have worse to come. As house values fall, and they will fall as there is no more "irrational" lending to prop them up, what will the banks do who have used property as collateral for business loans? They will have to call them in or re-finance at terms less attractive. And that means more deflation.
We are entering a period when our standards of living will have to fall. After all our standards of living went up due to the availability of "easy" credit. That credit has gone. BUT, everybody still expects growth, they expect expansion. Well the opposite is going to happen. More banks will fail, many many more bankruptcies will occur.
In the USA delinquent loans over the $1m mark stand at 14% of loans. So at what percentage delinquency do banks fail their solvency tests? And this will come to the UK as well. The Buy to Let Boom will see the buy to let bust. But will it bring down any banks? We will await to see. As there is no chance of a bail out, it would mean a big bank failing. Confidence would then collapse in our entire property based system.
So be warned. Do not jump into property now thinking we are at the bottom. We are still on the way down.
We have Price Waterhouse, The RICS (Royal Institute of Chartered Surveyors), the Council of Mortgage Lenders and Capital Economics all now becoming very bearish on property. It's about time, we here since 2006 have been sounding warnings.
Now we have worse to come. As house values fall, and they will fall as there is no more "irrational" lending to prop them up, what will the banks do who have used property as collateral for business loans? They will have to call them in or re-finance at terms less attractive. And that means more deflation.
We are entering a period when our standards of living will have to fall. After all our standards of living went up due to the availability of "easy" credit. That credit has gone. BUT, everybody still expects growth, they expect expansion. Well the opposite is going to happen. More banks will fail, many many more bankruptcies will occur.
In the USA delinquent loans over the $1m mark stand at 14% of loans. So at what percentage delinquency do banks fail their solvency tests? And this will come to the UK as well. The Buy to Let Boom will see the buy to let bust. But will it bring down any banks? We will await to see. As there is no chance of a bail out, it would mean a big bank failing. Confidence would then collapse in our entire property based system.
So be warned. Do not jump into property now thinking we are at the bottom. We are still on the way down.
Not Much Chance of Bank Funding
Access to finance for businesses remains difficult, says IoD survey
Dated: 13 July 2010
New data released today by the Institute of Directors (IoD) reveals that businesses are still having difficulty accessing finance from their banks despite a fall in decline rates.
Key Findings
From a survey of 899 company directors carried out at the beginning of June 2010 the IoD can reveal the following data:
Applications and decline rates for finance
Security requested against loans
Commenting on the survey results, Miles Templeman, Director-General of the Institute of Directors, said:
“Although there is clear evidence of a drop in decline rates we’re still concerned that access to finance for businesses remains difficult. The survey indicates that some access problems relate to lending criteria becoming more restrictive with regard to the amount of security requested by banks. This raises a question about the functioning of the Government’s Enterprise Finance Guarantee scheme (EFG).
“The IoD would like the Government to clarify the relationship between the state-backed guarantee scheme and bank requirements for personal security. We continue to hear from IoD members who’ve had 75% of a loan underwritten through the EFG but who are still required by their bank to put up personal securities equivalent to over half of the loan value. Of course businesses should have some ‘skin in the game’, but this seems excessive.
“But we remain convinced that the best way to improve access to finance in the longer-term is getting a lot more competition into the banking sector. Only when firms can choose more easily where they can place their business and switch banks will we have a banking sector that is better focussed on the needs of business customers.”
New data released today by the Institute of Directors (IoD) reveals that businesses are still having difficulty accessing finance from their banks despite a fall in decline rates.
Key Findings
- 1 in 3 firms that applied for finance in the time period 1 January 2010 – June 2010 were declined by their bank.
- There is evidence that lending criteria have become more restrictive with regard to the amount of security requested by banks.
From a survey of 899 company directors carried out at the beginning of June 2010 the IoD can reveal the following data:
Applications and decline rates for finance
- 39% of IoD members’ firms applied for finance with a bank (applications include requests for renewals/extensions/new requests for overdrafts and loans) in the time period 1 January 2010 – June 2010.
- Of the 39% of IoD members’ firms which applied for finance in the time period 1 January 2010 – June 2010, 33% had an application for finance declined by a bank.
Security requested against loans
- 37% of IoD members stated that in the period 1 January 2010 – June 2010 they had noticed an increase in the amount of security being requested against any lending that their organisation sought.
Commenting on the survey results, Miles Templeman, Director-General of the Institute of Directors, said:
“Although there is clear evidence of a drop in decline rates we’re still concerned that access to finance for businesses remains difficult. The survey indicates that some access problems relate to lending criteria becoming more restrictive with regard to the amount of security requested by banks. This raises a question about the functioning of the Government’s Enterprise Finance Guarantee scheme (EFG).
“The IoD would like the Government to clarify the relationship between the state-backed guarantee scheme and bank requirements for personal security. We continue to hear from IoD members who’ve had 75% of a loan underwritten through the EFG but who are still required by their bank to put up personal securities equivalent to over half of the loan value. Of course businesses should have some ‘skin in the game’, but this seems excessive.
“But we remain convinced that the best way to improve access to finance in the longer-term is getting a lot more competition into the banking sector. Only when firms can choose more easily where they can place their business and switch banks will we have a banking sector that is better focussed on the needs of business customers.”
Wednesday 7 July 2010
More Poor House Price Data
Fears are growing over the state of the recovery in the housing market after new figures showed property prices have all but stalled.
The average cost of a home edged ahead by just 0.1 per cent to stand at £170,111 during the month, following a rise of 0.5 per cent in May, according to Nationwide Building Society.
The annual rate at which house prices are rising also fell for the second month in a row, dropping to 8.7 per cent, down from a year-on-year rise of 9.8 per cent in May.
The drop reflected the fact that house prices were increasing at a faster pace this time last year.
Nationwide said unless there was a significant pick-up in house price growth during the coming few months, the annual rate of house price inflation was likely to continue to drift lower.
Today's figures add to a raft of gloomy data on the property market, with figures from the Bank of England, released yesterday, showing that the number of mortgages approved for house purchase had remained broadly flat in May, as activity in the housing market failed to pick up.
Earlier this week the Land Registry reported a 0.2 per cent house price fall in England and Wales during May, while property intelligence group Hometrack said prices edged ahead by just 0.1 per cent during June as demand from potential buyers stalled.
Recent surveys have pointed to an increase in the number of homes being put up for sale, but this is failing to be matched by rising numbers of buyers. As a result the mismatch between supply and demand is beginning to ease, reducing the upward pressure on prices.
Howard Archer, chief UK and European economist at IHS Global Insight, said: 'The marginal house price rise in June reported by the Nationwide adds to a recent flurry of soft data on the housing market and further fuels our belief that house prices will struggle to make significant gains over the coming months and may very well be only flat overall through the rest of the year.'
Ed Stansfield, chief property economist at Capital Economics, is more pessimistic.
He said: 'After outstripping income growth for over a year now, house price gains more or less stalled in June.
'The impact of the fiscal squeeze on incomes and confidence is likely to drive house prices back down again over the next 18 months.'
But the slowdown in house price growth is not necessarily a bad thing.
House prices have risen by around 12 per cent since their low point in 2009 but many economists think the pick-up in the housing market has got too far ahead of the recovery in the wider economy.
Martin Gahbauer, Nationwide's chief economist, said: 'Last year house prices increased by more than 10 per cent from the trough and household earnings growth was only about 2 per cent, and it was flat or negative for some households.
'House prices were getting ahead of household earnings and that is not healthy in the long term.'
He expects house prices to 'stagnate' for the rest of the year as the supply of homes on the market continues to increase.
But although the slowdown in house price growth may be good news for the long-term health of the housing market, it is bad news in the short term for housebuilders.
Shares in major housebuilders, including Persimmon and Taylor Wimpey, were down 4 per cent today following the publication of Nationwide's figures.
The average cost of a home edged ahead by just 0.1 per cent to stand at £170,111 during the month, following a rise of 0.5 per cent in May, according to Nationwide Building Society.
The annual rate at which house prices are rising also fell for the second month in a row, dropping to 8.7 per cent, down from a year-on-year rise of 9.8 per cent in May.
The drop reflected the fact that house prices were increasing at a faster pace this time last year.
Nationwide said unless there was a significant pick-up in house price growth during the coming few months, the annual rate of house price inflation was likely to continue to drift lower.
Today's figures add to a raft of gloomy data on the property market, with figures from the Bank of England, released yesterday, showing that the number of mortgages approved for house purchase had remained broadly flat in May, as activity in the housing market failed to pick up.
Earlier this week the Land Registry reported a 0.2 per cent house price fall in England and Wales during May, while property intelligence group Hometrack said prices edged ahead by just 0.1 per cent during June as demand from potential buyers stalled.
Recent surveys have pointed to an increase in the number of homes being put up for sale, but this is failing to be matched by rising numbers of buyers. As a result the mismatch between supply and demand is beginning to ease, reducing the upward pressure on prices.
Howard Archer, chief UK and European economist at IHS Global Insight, said: 'The marginal house price rise in June reported by the Nationwide adds to a recent flurry of soft data on the housing market and further fuels our belief that house prices will struggle to make significant gains over the coming months and may very well be only flat overall through the rest of the year.'
Ed Stansfield, chief property economist at Capital Economics, is more pessimistic.
He said: 'After outstripping income growth for over a year now, house price gains more or less stalled in June.
'The impact of the fiscal squeeze on incomes and confidence is likely to drive house prices back down again over the next 18 months.'
But the slowdown in house price growth is not necessarily a bad thing.
House prices have risen by around 12 per cent since their low point in 2009 but many economists think the pick-up in the housing market has got too far ahead of the recovery in the wider economy.
Martin Gahbauer, Nationwide's chief economist, said: 'Last year house prices increased by more than 10 per cent from the trough and household earnings growth was only about 2 per cent, and it was flat or negative for some households.
'House prices were getting ahead of household earnings and that is not healthy in the long term.'
He expects house prices to 'stagnate' for the rest of the year as the supply of homes on the market continues to increase.
But although the slowdown in house price growth may be good news for the long-term health of the housing market, it is bad news in the short term for housebuilders.
Shares in major housebuilders, including Persimmon and Taylor Wimpey, were down 4 per cent today following the publication of Nationwide's figures.
Tuesday 6 July 2010
Mortgage Lending and Property Values
NATIONWIDE, Britain’s biggest building society, has warned that house prices could drop 5% this year because of the credit crunch.Make that more like 20%!!
It is the first of the big lenders to publicly say values could fall. Its official forecast, and that of rival Halifax, is that prices will be flat this year.
Fionnuala Earley, chief economist at Nationwide, said: “We have always thought there was a risk of falls of up to 5% if the financial unrest carried on for longer than anticipated.” The prediction comes amid widespread fears of a mortgage “famine” as lenders rein in their lending.
Michael Coogan, of the Council of Mortgage Lenders, said: “We have entered a substantially slower phase in the housing market and there will be problems in the mortgage funding markets unless the Bank of England makes new, broader-based attempts to improve levels of liquidity.”The CML is still sticking with its official forecast of 1% house-price growth this year, but it admits privately that it may need to look at the prediction again later in the spring.
Mortgage rationing has so far affected only borrowers with smaller deposits or black marks on their credit files, but brokers said there are signs it is spreading. In the past fortnight, Mortgage Express, part of Bradford & Bingley, suspended all lending through brokers for one week, while Scottish Widows closed its phone lines to brokers. Halifax, Abbey and Lloyds TSB have also restricted deals available via brokers. Small building societies have been hardest hit. Bath pulled all its deals last week except those at its standard variable rate, saying the mortgage market had come to a “standstill”. Cheltenham & Gloucester, meanwhile, has said that borrowers relying on bonuses of more than £100,000 must now be referred to underwriters.
Jane McLelland, 31, of Tunbridge Wells, Kent, was forced to borrow £18,000 from her parents or face punitive rates when she came to remortgage after lenders valued her home at less than she had been expecting. With a mortgage of £198,000, she believed the property to be worth £220,000 and therefore needed to borrow 90% of the value of the property.However, Abbey said the 2-bedroom flat was worth just £200,000, taking her mortgage to 99% of the property value – but it does not offer loans on such high values.
McLelland said: “I bought my home two years ago for £200,000 and it was valued in October at £215,000. I was really disappointed that they downvalued it. Luckily, I had the option of finding more money so that I could reduce my loan to £180,000, or 90% with Abbey.”
Richard Morea of brokers L&C, said: “Surveyors are coming under increasing pressure to tighten their valuations as the property market starts to cool.”Ray Boulger, of John Charcol, a broker, said: “We had one client looking to remortgage with a £111,000 loan who was turned away because she couldn’t verify her address on the electoral roll despite other proof. Her property was worth £227,500 and we didn’t expect any problems, but her lender, Accord, didn’t agree.”
The above examples are becoming endemic in this mixed up market. But what happens when lenders wake up to the fact that valuations (valuations for mortgage purposes that is) are still sliding? The scenario is such that negative equity issues will become noticable. Then some lender will want more security, but if home owners cannot provide it will they want their money back, or at least a part?
If property prices keep falling, and there is NOTHING to stop them doing so (especially as lenders are so much more reluctant to actually lend), then the unshakeable faith we have in the UK, the 'culture' of property as an asset will be put to the test.
It will be bloody, personal bankrupcies will rocket and lenders will collapse. How else do you see it?
It is the first of the big lenders to publicly say values could fall. Its official forecast, and that of rival Halifax, is that prices will be flat this year.
Fionnuala Earley, chief economist at Nationwide, said: “We have always thought there was a risk of falls of up to 5% if the financial unrest carried on for longer than anticipated.” The prediction comes amid widespread fears of a mortgage “famine” as lenders rein in their lending.
Michael Coogan, of the Council of Mortgage Lenders, said: “We have entered a substantially slower phase in the housing market and there will be problems in the mortgage funding markets unless the Bank of England makes new, broader-based attempts to improve levels of liquidity.”The CML is still sticking with its official forecast of 1% house-price growth this year, but it admits privately that it may need to look at the prediction again later in the spring.
Mortgage rationing has so far affected only borrowers with smaller deposits or black marks on their credit files, but brokers said there are signs it is spreading. In the past fortnight, Mortgage Express, part of Bradford & Bingley, suspended all lending through brokers for one week, while Scottish Widows closed its phone lines to brokers. Halifax, Abbey and Lloyds TSB have also restricted deals available via brokers. Small building societies have been hardest hit. Bath pulled all its deals last week except those at its standard variable rate, saying the mortgage market had come to a “standstill”. Cheltenham & Gloucester, meanwhile, has said that borrowers relying on bonuses of more than £100,000 must now be referred to underwriters.
Jane McLelland, 31, of Tunbridge Wells, Kent, was forced to borrow £18,000 from her parents or face punitive rates when she came to remortgage after lenders valued her home at less than she had been expecting. With a mortgage of £198,000, she believed the property to be worth £220,000 and therefore needed to borrow 90% of the value of the property.However, Abbey said the 2-bedroom flat was worth just £200,000, taking her mortgage to 99% of the property value – but it does not offer loans on such high values.
McLelland said: “I bought my home two years ago for £200,000 and it was valued in October at £215,000. I was really disappointed that they downvalued it. Luckily, I had the option of finding more money so that I could reduce my loan to £180,000, or 90% with Abbey.”
Richard Morea of brokers L&C, said: “Surveyors are coming under increasing pressure to tighten their valuations as the property market starts to cool.”Ray Boulger, of John Charcol, a broker, said: “We had one client looking to remortgage with a £111,000 loan who was turned away because she couldn’t verify her address on the electoral roll despite other proof. Her property was worth £227,500 and we didn’t expect any problems, but her lender, Accord, didn’t agree.”
The above examples are becoming endemic in this mixed up market. But what happens when lenders wake up to the fact that valuations (valuations for mortgage purposes that is) are still sliding? The scenario is such that negative equity issues will become noticable. Then some lender will want more security, but if home owners cannot provide it will they want their money back, or at least a part?
If property prices keep falling, and there is NOTHING to stop them doing so (especially as lenders are so much more reluctant to actually lend), then the unshakeable faith we have in the UK, the 'culture' of property as an asset will be put to the test.
It will be bloody, personal bankrupcies will rocket and lenders will collapse. How else do you see it?
Thursday 1 April 2010
UK Property Too Fragile to Consider
Estate agents will tell you London is the key indicator for the rest of the country when it comes to property.
And sure, the capital HAS seen the bulk of price rises in the last year.
But they’re not telling you the true story.
For example, right now the centre of Manchester is a property landmine that could blow in up in our face at any moment... with disastrous repercussions for the rest of the country.
Let me explain why...
Take a walk through Manchester today and it’s awash with empty shells of property... commercial, flats and residential houses... utterly unlettable... many unsaleable.
The Government would never highlight this, but their own figures show...
- Three in every 50 homes across the city are empty...
- 7,179 homes have been empty for six months or more with a total of 13,251 empty homes across the city...
- And the Greater Manchester area has 26,970 homes empty for more than six months
It’s not only Manchester... it’s other major cities too, including Leeds and London. In fact, at last count there were 750,000 empty houses in Britain!
What’s this got to do with you? And what does it mean for UK house prices in 2010?
Here’s the thing...
It shows this ‘recovery’ in the property market hasn’t been caused by a surge in demand OR a shortfall in supply.
Instead, record low interest rates are easing the burden on overextended borrowers... enabling the owners of these ‘empty shells’ to keep ticking over... while seducing more and more buyers into taking the plunge…
But that’s about to change. Drastically.
And for once, we’re not the only ones who think so...
According to Danny Blanchflower, a former member of the UK’s Monetary Policy Committee:
“House prices have risen by about 6%... But the markets are thinly-traded, and that’s pushed up prices... I don’t believe the data and I think prices will fall a lot.”
We believe house prices won’t just fall... they’ll HALVE and take nigh on a decade doing it.
I’m deadly serious.
From peak to bottom, UK residential and commercial property prices could easily fall an eye-watering 50% before they even begin to truly recover.
When property slumps, GET OUT of these stocks
Of course politicians, the media and house sellers like to talk down this idea.
Why? Because that’s what people want to hear! When people’s houses are worth more they feel richer... they’re more likely to spend their money... and vote the ‘right way’ in the polls.
According to one of the UK’s leading estate agencies, Savills, house prices in the UK are set to RISE by 27% up to 2015... and the National Housing Federation agrees, saying the average house price will reach £274,700 over the next three years.
The mainstream media and industry spokesman always love to be optimistic about house prices.
But we’ve seen this happen before...
“House prices to recover next year,” reported TheTimes on 17 November, 1989... But it took another 7 years for UK property to reach rock-bottom.
Interest rates were cut in each and every one of those years and it didn’t make the blindest bit of difference. By 1996 the average home had lost more than 40% of it value!
Home repossessions went into a tailspin... and personal bankruptcies rocketed...
The same thing could happen again in 2010.
And it could blindside over-zealous buyers who were too quick to believe the rosy outlook handed to them by agents, lenders and politicians.
Thing is... it’s not just the price of ‘bricks and mortar’ this deception will crush...
Wednesday 24 March 2010
Comment by Roger Bootle: Budget 2010
"Government needs first and foremost to look to its own failings. Incompetent and bloated government is one of the most serious factors holding the British economy back."
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