Bubbles are sure fun. Everyone gets rich. Party like it's 1999.
Then BAM, the cold hard swat of reality hits you upside the head.
"What were we thinking?"
Well, here in London, where a (my) one bedroom flat goes for over $1,000,000 (worthless US dollars), yet you can rent for a fraction of ownership cost, the massive speculation (aka "housing ladder") will now be coming to an end as interest rates rise yet again.
Meanwhile, real people in real parts of England are going to now head for the foreclosure and bankruptcy lines, as home loans here are of the adjustable type, so everyone had their mortgage payments go up yet again.
You want to see massive housing speculation end horrifically? Check back on England in a couple of years.
How ironic that I got to live in two of the biggest bubble cities in the world in the past few years - Phoenix and London. Maybe I should move to Shanghai next?
Bank of England Unexpectedly Raises Interest Rates
The Bank of England unexpectedly raised its benchmark interest rate by a quarter-point, the third increase since August, saying inflation may accelerate from the fastest pace in a decade.
The nine-member Monetary Policy Committee lifted the repurchase rate to a five-year high of 5.25 percent today, surprising all of the 52 economists in a Bloomberg survey. Risks of faster inflation ``now appear more to the upside,'' the bank said in a statement. The pound rose and bonds fell.
The decision ``will result in stagnation and prevent existing homeowners from moving up the ladder,'' said Philip Davies, chief executive of house-builder Linden Homes. ``Consumer confidence will be dented by this latest rise, implying the continuation of an upward trend in interest rates into 2007.''
January 13, 2007
Bank of England kicks the UK housing ladder; massive UK housing ponzi scheme will now begin to collapse
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18 comments:
Gotta love the 50 clueless analysts
It's OK if interest rates go up an itsy bitsy .25%.
Why!
Because housing will keep right up with it since housing NEVER goes down.
They went up 1/2 point here in the past few WEEKS
The BOE is trying to stop the wild speculation and I'm not sure how many rises it'll take, especially since a lot of places are being scooped up by foreigners (saudis, russians, etc) with oil cash
Meanwhile, anyone who works for a living here, or young adults, can't afford a home
What good is a society if people can't aspire to buy a home?
Amazing how shamelessly the UK gubbermint is screwing the people with bad financial advice.
a 25% increase HOLY SH...o wait it's 0.25%?
The way you numbnuts are treating this news you'd think it was 25%.
How's that $1 trillion dump by China going so far? How's that gold price doing, getting near $1000 yet? Any signs of the 70% price clips in Miami condos?
What good is a society if people can't aspire to buy a home?
Buying's for losers. Anyone on HP will tell you that. Why I know a guy wh has a 2 bed/2bath (inlcuding hot water) for $725 a month. He'd be stupid to buy a house.
Most ARMs are tied to LIBOR rates, so this is also a kick in the crotch of US homedebtors. there's nothing the Fed can do about this except try to inflate away the debts of the FB's (of which they are the biggest). Pay off debts with worthless dollars. The downside is, after the economic tsunami, nobody will let us borrow money again. That means no more welfare state, no more superpower, no more worthless women's or ethnic studies degrees. We will be like a third world country while China takes over the world.
At that point, we can go ahead and sell the West Coast to the Asians before the Mexicans take over. We will end up losing it, so we might as well make a few trillion off it. Things were good while they lasted.
Kieth
you are dreaming if you think that the home market will be allowed to collapse
IT is Gordon Browns only real achievement, and he will do anything to keep the bubble alive
The banks are so afraid of an inquiry into their large profits and small amount of tax paid, that they will keep making the loans.
It is cheaper for them to take a loan loss (tax deductible as well), than to have regulation increased, tax increased and credit laws tightened.
If young people cannot afford a home, they need to change career or emigrate.
Russians/Arabs are buying the top properties, so how does this increase the home costs everywhere else?
The BOE is independent. Gordon Brown will try to demonize them as they ruin his leadership
Who was that that said, "All we have to do is kick the door in and the whole rotten structure will collapse"?
In an exponential situation (like we are in with money growth) where money doubles every year, the year before you are totally fucked, you think you are only half fucked and that everything is ok.
That's where we are now. No one expects that totally fucked will soon arrive because they know we are only half fucked right now and it's business as usual.
I should write for South Park.
Good news!
Another sub-prime lender bites the dust.
http://bloomberg.com/apps/news?pid=20601109&sid=a7zn9LSjFDMI&refer=home
I'm short on several of these so it's good news to see these doors kicked in and the whole rotten structure collapsing.
Nice.
If the UK has a bigger bubble than the states ( which it does ) then why is the pound so strong???
Plus, labour sold all the gold.
New Zealand is an island too.
Hmmm...
Ahhh, tsk tsk... Homedebtors will no longer be able to move up the debt ladder to ever-increasing amounts of debt..so sad...
UK doesn't have a $9,000,000,000,000 govt deficit, and a $400,000,000,000 and growing annual trade deficit on top of their personal debt.
>>Who was that that said, "All we have to do is kick the door in and the whole rotten structure will collapse"?
That was Hitler on the invasion of the USSR - it didn't turn out so good.
Marky Mark
Cities with the biggest bubbles? Check Madrid and Barcelona in Spain...
Check this out...
http://www.bloomberg.com/apps/news?pid=20601087&sid=aycONkUcCcSY&refer=worldwide
"London is the most expensive city in the world for prime real estate, CB Richard Ellis Group Inc. said in September. Prices in neighborhoods such as Chelsea and Hampstead averaged $2,244 a square foot in the second quarter. The same space for Manhattan homes -- on Fifth Avenue, Park Avenue and Madison Avenue near Central Park -- cost about $1,870 a square foot."
Fellows... England's screwed. There's no way that Central Park West or 5th Ave (below 90th St) is cheaper than London's prime w/o the region being in a completely unsustainable bubblicious holding pattern with the spread being outside of the prime locales.
Fellows, let me tell you... a century ago, the Rockefellers and the Morgans were living in those NYC neighborhoods. Those guys were even richer (with inflation adjustments) than today's Bill Gates. Those NYC posh regions are today occupied by the Murdochs, the Turners, the Kravis's, newly minted rich actors/actresses, pop divas like Britney Spears, trust fund babies of the former robber barons, along with the usual crowd of international multi-millionaires and billionaires. Now, despite that fact, the average apartment in NY goes for a million dollars and NYC is the rest home for the world's idle rich.
How's London suppose to be more expensive than that? And please don't use the Soviets and the Saudis as an excuse because there really aren't that many of them. What's happened is that the RE speculation has a life of its own with the richest owning Chelsea and then the others, outbidding one another for the rest. I believe what we're witnessing is a downtown Tokyo/1989 redux for the British Isles with London as its epicenter.
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