August 10, 2013 at 1:42 pm #57742
The new Governor of the Bank of England Mark Carney has issued forward guidance to say that interest rates will remain low for another three years until unemployment which currently stands at 7.9% drops down to 7%.
This kind of suggests that house prices are unlikely to crash in the UK until the year 2016. However, the markets think that he is bluffing and reckon that interest rates in the UK could start to rise as early as 2014. Whatever happens to UK interest rates one thing is certain, do not buy property in Europe until the property crash happens in Britain. The additional rise to house prices as reported by the Halifax recently as a result of funding for lending “help to buy” scheme will almost certainly send the UK property market over the edge of a cliff and into the abyss at or around 2015 resulting in the mother of all property crashes and only once the property market crashes in Britain will you see 50% falls in house prices from todays prices across Europe, particularly in countries like Portugal, Spain, Italy, France, Greece, Turkey, Bulgaria.
Most of the rises in property prices on the Mediterranean in recent years have been due to the fly-to-let, jet-to-let speculators from Britain hoping to make a quick killing on property prices abroad in the mistaken belief that the property market in countries on continental Europe behave the same way as they do in the UK and the rises in house prices in the Mediterranean has for the most part been funded on the back of rising property prices in the UK but once the property crash begins in Britain in around 2015 it will be spectacular and it will result in a massive drop in demand for property in Europe from the UK fly-to-let speculators and this will send property prices in Europe falling by 50% from todays values when the crash occurs in the UK in 2015.
If you own property in countries like Portugal, Spain, Italy, France, Greece, Turkey, Bulgaria you have two years to sell your property before property prices in these countries fall by 50% from todays values when the UK property market crashes in 2015.
If you are thinking of buying a property in Spain wait for property prices in the UK to crash first before buying property in Spain.
August 10, 2013 at 2:34 pm #117873
This is a very crude analysis if there is some logic in the view that unsustainable house prices have to fall. However many houses are owned outright in UK by owners who would not sell and not all areas are overpriced. Indeed much property that is highly priced is owned by foreigners who would not sell. I would say distressed buyers would find some support as Governments do not like distressed families on the streets .nor being housed in expensive bed and breakfast. House prices have fallen a lot in Spain already -I don’t see a great deal of downside now coming -if their economy picks up more likely to be more Spanish buyers. Spanish buyers were priced out by foreign often German and British buyers..There will always be British buyers with cash who do not do their homework -not being arrogant – but don’t see so many Brits buying in Spain anyway because its got a bad reputation now.. I bought my home inUK for £10000 30 years ago and the one before that or £10000 I only ever had a mortgage for 3 years so it does not not bother me how much they fall.A fall would present a fantastic buying opportunity as you would need very little cash to go up market. So how long would a crash last in a global market -I suspect not very long because buyers would come in from abroad and other EU countries.Much will depend upon how much growth we do get in jobs -because the ability to pay mortgages is as important as they are available. The bad thing is that a pre-election price rise in UK will cause a lot of debt and more negative equity that will take more time to pay down. Yes Mark Carney is hired by Osborne to win the election and we are paying -however he did stress price stability is still their mandate if he told porkies about interest rates staying low for 3 years.So I agree a bit -but think you you are exagerating !
August 10, 2013 at 3:11 pm #117874
Welcome to the board, new poster “gordoncampbell” 🙂
August 10, 2013 at 4:10 pm #117875
The UK property market is not going to see a 50% reduction in prices. It may see a reduction locally in London at some point, because prices have consistently risen there over the last few years, but unless there is a huge property boom there won’t be a crash.
August 10, 2013 at 4:33 pm #117876
It’s true that Osborne and the Treasury run the BOE previous Governor and now Carney, currently this is all about the next general election. The danger is another property bubble is forming in parts of the UK and there will be those who may well end up with mortgages they can’t afford (when rates rise) and negative equity.
I agree that for 2 years maybe 3, UK property prices should rise at which point more UK investors may consider buying abroad such as Spain, however most Brits are well aware that current sterling/euro exchange rate is still poor for them. UK investors are now wise to these huge overseas property crashes, buying for lifestyle is different, with transaction costs abroad being so high there’s no quick buck to be made investing.
The fundamentals in the UK are so different to those in Spain, all about supply and demand, and a major crash in UK property is unlikely although UK property is supposedly 25% overpriced anyway.
All UK Governments whether Tory or Labour focus on it’s property market as a driver for prosperity, people go out and spend in the economy if their house price is rising each week. 🙄
August 10, 2013 at 7:18 pm #117877
This house price rise will be a great opportunity for people with homes in UK who want to sell up and live in their Spanish home -but how does one keep the money out of the way of hacienda’s grasping maulers ?Thats of course after you ensure you don’t re-enter Spain until 2nd January of the next tax year This is a subject we have not explored where do you put it ? You could wait for the ‘crash’ and buy a 50% cheaper and better one in Spain -one with a stream with free water where you can fix a pump to generate free non solar electricity – or as a second home for cooler summers- in Galicia maybe. .Maybe put it in a ‘discretionary’ trust in UK -that is one where I think -but not sure you can still get your hands on a bit of your money. Or have it all put in gold /silver bars and coins and hidden in vaults and lockers outside the EU. But who knows if a major crash is unlikely ? They cannot propel upwards regardless of fundamentals forever -if not in two years or three.- indeed if we ran a tight ship like the ECB and did not follow the decadent Democrats in America in thinking we could run an economy on domestic housing forever- what kind of Tory Government is our UK Coalition we would have corrected long ago like the 1990’s. The likely result is a further devaluation of sterling. This is the way we have done it since 1925 when our £ was worth $4 We might have seemingly ever ending property rises in London athe cost of an ever depreciating £. Such is our decadent Democracy.. By then the ECB might have become corrupted -maybe Angela will be unseated by an SDP/Green surprise win -or she still wins and then lets the ECB print to save German exporters. So who can possibly know? But those who like to live in Spain not just 182 days a year may have an opportunity if we can think of clever ways to hang on to our dosh -preferably legally. We had a few warm days this ‘summer’ better than last in UK but its fading in Kent and there is that little nip at night coming back that reminds me to get on with the house maintenance -I am looking forward to the sea bathing again in November in Canaries -you don’t get many days here you can brave it. But I reckon its lovely at Barcelonetta Sitges or even Palamos and those pans of Zarzuela !
August 12, 2013 at 9:35 am #117881
Fuengi (Andrew)Participantgordoncampbell wrote:
Bruno is that you?
August 12, 2013 at 10:36 am #117884
An interesting article in the WSJ on the dangers of engineering a house price boom in the UK
For Treasury chief George Osborne, the inflection point was reached earlier this year. With hopes of an export- and investment-led recovery fading, he reverted to the tried and tested formula of seeking to engineer a house-price boom.
For all the arguments against it, the policy may just work. Western economies are starting to grow again, and London (like New York) has maintained its appeal as an international city in which to live and work. We may see sustained house price rises in London that never need to be re-adjusted. But history is against it – all previous bubbles have ended in crashes.
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