Property

James Mackintosh

FT Alphaville today has a nice chart suggesting London house prices are down by more than a quarter in real terms.

Here’s an alternative thought: the quality of measurement of London house prices has collapsed. This chart shows London house prices after inflation as measured by LSL/Acadametrics, the Office for National Statistics, Nationwide, and the Halifax index Alphaville used. I used CPI, rather than the discredited RPI, for most of them, but showed the effects of both RPI and CPI for the Acadametrics series.

London housing indices

Halifax down at the bottom there is clearly out of line with the rest, although Nationwide’s index still shows a hefty real terms loss, of 9 per cent. Read more

James Mackintosh

Americans have been wondering if the housing market is in a double bubble for a little while, since Professor Robert Shiller, co-creator of the Case-Shiller house price indices, raised the danger.

The real action has been in housebuilders, though. Their valuations, based on price to estimated book value, peaked in May above where they stood at the height of the property bubble in 2005/6. Prices look very much like the rebound bubble in the Nasdaq, in the Dow Jones Industrials in the late 1930s and in the Nikkei 225 (although it wasn’t quite so big). This chart shows the Nasdaq and Nikkei time-shifted so the peaks overlap with the 2005 peak in housebuilding shares:

Housebuilders, Nasdaq and Nikkei

I’ve circled the point where the rebound went wrong again: seven to eight years later for both Nasdaq and, less spectacularly, the Nikkei (the Dow’s second depression-era boom-bust came in 1937, also eight years after the original bubble).

More fab charts, including one must-see on why US housing isn’t as affordable as everyone thinks, after the break. Read more

James Mackintosh

Just a quick update for those who love Iceland as a model (a category which unites the unlikely pair of uber-Keynesian Paul Krugman and Conservative eurosceptic Dan Hannan).

After its disastrous banking and property bubble and bust, house prices have been growing strongly again, and are within a whisker of their 2008 highs – in stark contrast to Ireland and Spain. All three (with two different measures of Spanish housing) are shown in this chart, and Iceland’s break from the Irish/Spanish pattern is clear:

House prices Iceland, Ireland, Spain

This, just like the country’s return to economic growth, looks like another justification for Iceland’s decision to refuse to bail out its banks, unlike most of the rest of the world.

Now, I’m no friend of bank bailouts, and would much rather see middle-class bank creditors take losses than taxes rise on the poor to subsidise those creditors.

But things aren’t quite as simple as the housing chart shows. As well as cleaning up its banking system through a gigantic default, in large part on foreigners, Iceland’s krona has collapsed.

When measured in foreign currencies, the people of the island are far poorer than they were, something which really matters for a place which imports virtually everything it needs other than fish and electricity.

One example is the import of cars: for the four years since 2008, the total tonnage of cars (I know, funny measure, but that’s how Iceland provides it) imported is lower than for the single year of 2006. And this isn’t only because of the extremes of the bubble: last year, even as Iceland began to recover and imports picked up, saw fewer cars imported than in any year from 1999 to the collapse.

Adjusting Icelandic house prices into euros, then, allows a fairer comparison with Spain and Ireland’s outcomes (although not a way Icelandic residents will think about it, of course). And it tells quite a different story:

Now, this doesn’t matter to Icelandic homeowners paid in krona. But it does put a bit of a damper on the idea that Iceland is having a strong recovery.

Measuring in krona, even Spanish house prices have started to rise, as you see in this next chart: Read more

In his first term, US president Barack Obama oversaw the second-biggest rise in the stock market of any US president since the second world war. James Mackintosh, investment editor, says his second term hopes of economic recovery rest more on the housing market than equities.

Calm in the eurozone has come at a cost to the havens. James Mackintosh, investment editor, points to the sliding Swiss franc and sterling, and warns the premier haven of choice, London property, could be next.

  Read more

James Mackintosh

The US housing recovery is gathering steam, and bullish economists are hopeful it will give a handy boost to growth, at a time when the US faces more austerity than most of Europe, thanks to the tax hikes agreed in the fiscal cliff compromise.

Credit Suisse has produced a nice chart showing just how big the recovery in housebuilding has been: private housing starts are now running at a higher rate than at the trough of previous recessions all the way back to 1960.

Housing starts since 1960

Source: Credit Suisse

 Read more

James Mackintosh

If you only know one thing about European summits, it should be this: agreements aren’t worth the paper they’re written on. The fact something has been publicly announced, even written down in 4am post-summit communiques, means nothing.

Yet another European summit has been discussing yet another urgent issue, and yet again it is one that was supposed to have been agreed at a previous summit: banking union. The wrangling this time extends as far as the question of whether what was previously agreed is even legal.

Once again the deal was struck in the early hours of the morning, and once again Europe’s leaders hailed it a successRead more

James Mackintosh

Investors in luxury goods producers tend to spend a lot of time following what’s going on in China, for good reason. China’s legions of corrupt officials have a penchant for bling (as well as luxury cars and gambling), and plenty of ability to garner the cash needed for fancy western watches and handbags. Lately they’ve been cutting back, as the slowing economy and rising scrutiny from bloggers and the public makes open diplays of wealth less acceptable.

It might be easier simply to focus on what is going on in the US. Are households finding their share portfolios rising faster than their house prices? Shares are easier to cash in to fund that oh-so-desirable Cartier watch, although most people would have to sell their house to afford a £1.2m handbagRead more

John Authers

As predicted, there is more to say about the London housing market. It is widely known that the buying pressure on prime London properties is coming from overseas. The eurozone crisis and the creation of fortunes by the commodities boom have helped push lots of money into the nicer neighbourhoods of central and west London.

But I had not previously grasped that foreign demand was also driving segments of the market below the true “prime” postcodes, and that that foreign demand is not primarily European or Middle Eastern but rather from Hong Kong, Singapore and Malaysia. That is the strong message from this extraordinary chart from Jones Lang LaSalle, shared by Ed Hammond, our property correspondent, in the latest Note video: Read more

John Authers

Judging by the response to my Monday column, a lot of people are interested in central London property. As that has been followed by news that a London house is on sale with an asking price of more than £100m, in Hampstead, it’s easy to see why. One of many requests was for more granular data.

Thankfully, I can oblige. London, obviously, cannot and should not be treated as one market. In particular, “prime” central London, because of its appeal to international buyers, seems to follow very different dynamics from the rest of the capital. That appeal varies according to area. The following chart, provided by Hometrack, plots every Greater London broad postcode on two scales – their performance since the overall market first peaked five years ago, and their actual price. Read more