Some interestinig data points, isn’t there a poster here remodeling a house or something who’s all bullish on this market?
“The bubble may already have burst” for the most expensive homes, Barber said. Now, “36 percent of all properties currently on the market across prime central London are being marketed at a lower price than they were originally listed at, with the average reduction in price being 8.5 percent…
UBS Group AG last month said London was the second-least affordable of 15 urban centers studied, trailing only Hong Kong. The U.K. capital risks a “substantial price correction should the fundamentals for estate investment deteriorate,” according to the report.”
Interesting read from bbg, would have liked to hear some more on this. Interesting to see NYC so low on the bubble index with some of the ridiculous prices apartments/condos are going for that I have seen
The decrease is attributed to a single policy change - the increase in stamp duty. So perhaps this decline will not precipitate or presage further price declines.
Of course, I don’t know how global factors, like declines in EM asset values, might affect foreign buying. Maybe the market is in fact oversaturated.
On a side note, I’ve spent many hours this year building models on NY apartments. I was surprised to find the market to be uniformly priced according to size, features, location and other factors. I found no outstanding deals or clear inefficiencies. Perhaps my analysis was incomplete. However, my impression was that this reflects a highly developed real estate industry with very standardized and comparable apartment units. This says nothing about *overall* pricing in NY real estate though.
It’s still cheap if you consider all of NYC - Bronx, Queens, crappy parts of Brooklyn, etc. Certain areas, such as in Manhattan, are priced quite dramatically - if not at the level of London or Tokyo yet.
Very true. Saw the price of the apt I used to live in Queens had other units selling for ~150k. Although that for a studio is pretty small. Manhattan prices are nuts though. Parts of Brooklyn/LIC/Astoria prices are rising ridiculously as well. I got priced out of Astoria and had to move further into queens they didnt even have STUDIOS for under 1800. IN QUEENS!
I agree to a certain extent that valuations are stretched. But I disagree that there is about to be a turn. Let alone one that will blow the market. London has never fallen over and I cant see it happening in the next 10yrs given how many homes we’re building here.
I mean that the BoE will start to raise the base rate soon. So the gap between london property yields and the sovereign bond yield is likely to decrease over time.
I think you’re correct in that London is one of the most prime locations in the world. Probably one of the top five. So it is unlikely to see an enormous crash. Just that I can’t see much capital upside from here on say a 5 year view. Still, you should still get around a 4%-5% income yield. With inflation at zero, that’s no so bad I guess. Better relative value out there though I think.
That fact is not a good reasoning point. In the U.S., there was a large oversupply of homes before the crash. Every Tom, Dick, & Harry with hammer started a company and tried to cash in. There were so many “spec” homes out there that sat empty for a long time.
Listening to Pokhim is a surreal experience, like time traveling back to 2006, a simpler time when we were all about to be rich and Timberlake had just graced us with SexyBack. I was still dating my HS sweetheart, thought $25/hr was a lot of money, had been legally drinking for about a year and had never sat in a cubicle. It’s kind of comforting in a way.
Pokhim, tell us more about these sweet, sweet prices that always go up. Remember to say that thing about investing in land because they aren’t making any more of it, that one’s my favorite.
^ Pokhim’s bullish view is widely held in London, the market barely even had a dip in '08 and has risen sharply since then. Very few people in London can comprehend the fact that house prices could go down. The UK ditched Christianity and adopted home ownership as its new religion a long time ago. The country is obssessed with property.
Over 50% of properties bought in the capital are bought by cash buyers, there’s a huge influx of foreign buyers from the middle east, russia et al bumping up prices. ex council houses (i don’t know what you’d call them here, Housing Projects?) in sh!tty apartment blocks in central(ish) of London can easily go for figures over £1m. Nobody can get a foot on the ladder, rent is eye watering high. When i was trying to find a tenant in London (in not particularly desirable place) the desparation of people coming to see the place was just staggering.
Pokhim is right about the “number of houses we’re building” comment but the issue is that they’re not building enough, there’s not nearly enough of a supply of housing.
Of course, prices can’t go up forever and it will go horribly wrong at some point but in my view, there’s still a way to go yet.
People have been saying there isn’t any capital upside for the past 20yrs… But prices have never come down. I’m not say that past is a predector of future but I struggle to see any argument for prices falling dramatically enough for me to lose any equity.
Also, I don’t get 3-5% yeilds… I take 7% yields on income and whatever on capital gains.