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22 December 2009

18 December 2009

12 April 2009

Be Patient and wait before buying a house.....

Housebuyers may have to wait a year for better market conditions, say economists

David Budworth


Homeowners hoping for a revival in the housing market could have to wait at least another year, economists have warned, as rising unemployment, a squeeze on household finances and problems in the mortgage market continue to exert pressure on prices.
Economists have cautioned that it is too early to say that the market, which has already fallen about 20 per cent, has turned a corner. Most are sticking to forecasts of a 25 to 35 per cent drop in prices from top to bottom. They think monthly mortgage approvals must double to 70,000-80,000 before prices can stabilise or start to rise.
A barrier to that scenario is the continued shortage of good mortgage deals, especially for first-time buyers. At present, homebuyers with a deposit of less than 40 per cent are excluded from the most competitive deals, while good loans for those with a deposit of 10 per cent or less have all but vanished in recent months.
Easter traditionally marks the peak time for house sales and before this year's holiday there have been tentative signs that the property market is awakening. Nationwide Building Society said house prices rose 0.9 per cent last month, the first increase since 2007. A separate, closely watched survey from the Bank of England showed mortgage approvals jumped 20 per cent in February to 37,937, the highest level since May 2008.

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Adding to the more positive mood, the Halifax index for the first quarter of this year showed the smallest quarter-on-quarter fall in prices since the first quarter of last year. Meanwhile the Royal Institution of Chartered Surveyors (RICS) said that interest from potential buyers rose for the fourth month in a row during February.
But Howard Archer, chief UK and European economist at IHS Global Insight, thinks house prices will not bottom out until mid-2010, by which point they will be 15 per cent lower, at mid-2003 levels.
He said: “Housing market activity is still very low by long-term norms and any pick up in activity over the coming months is likely to be gradual and fitful. Soaring unemployment, muted wage growth and unwillingness of many people to commit to buying a house when they are fearful are likely to continue to weigh the market down.”
Jeremy Leaf, of RICS, said: “Potential buyers continue to come through estate agency doors but without mortgage finance, transaction levels are likely to remain close to all time lows. Worryingly, the lengthy process of obtaining a mortgage, even for those with big deposits, is contributing towards the blockage in the market.”
That could begin to change after HSBC unveiled a 4.99 per cent deal for borrowers with a 10 per cent deposit. A survey from the Bank of England showed that banks and building societies expected to lend more to homebuyers over the next three months. However, this has yet to be seen.
There is evidence that cash buyers have started dipping their toes back in the market. This perhaps explains why new buyer enquiries have been strongest in London and the South East, areas popular with the sort of wealthy buyer with money to spend. Cash sales now account for 40 per cent of transactions as some older, richer buyers turn to property as a more lucrative alternative to low-paying deposit accounts.
However, the critical state of the economy, which is expected to remain in recession until next year, means that even buyers who are convinced that property is cheap are treading warily. Unemployment recently hit 2 million, and some analysts think it could climb to 3.3 million next year, the highest level since official records began in the 1970s.
Household budgets also remained under pressure as food prices have continued to rise. Even though housing affordability is improving it it still not back to the levels at the bottom of the last downturn.
Roger Bootle of Capital Economics said: “There is little evidence that the rise in buyer interest is feeding into sales activity. House prices will fall further.”

Green Shoots ~ not even a Glimmer!

April 10, 2009
Don't be fooled by 'green shoots' in housing market
There is still some way to go before house prices stabilise and we are a very long way from a recovery
Andrew Ellson


Facts, Mark Twain once observed, are stubborn things. But statistics, he noted, are more pliable. It is with this caution that we should observe the latest data on the housing market.
Last week Nationwide reported that house prices rose by 0.9 per cent in March. The Bank of England, meanwhile, said that mortgage approvals jumped 19 per cent in February. Some commentators, including the Centre for Economics and Business Research, interpreted these statistics as evidence that the housing market is near the bottom. The same commentators even put a positive spin on separate figures from the Halifax showing that prices actually fell 1.9 per cent on the month - an annualised rate of 25 per cent - by arguing that at least the pace of decline was slowing.
The truth, sadly, is that we still have some way to go before house prices stabilise and we are a very long way from a recovery.
Apart from the folly of looking at a single month's statistics in isolation, it should be noted that the Nationwide and Halifax measures are no longer as reliable because the volume of home sales has fallen so much. Neither lender will reveal exactly how many customers their figures are based on, but the Land Registry reports that property transactions are down about 60 per cent on their long-term average, suggesting that the sample size of both surveys has reduced significantly. As any statistician will tell, you, the lower the sample size, the greater the chance of error.


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Given that the customer base of each lender is also geographically skewed - with the Halifax traditionally lending more in the North and Nationwide in the South - the figures are far from a reliable indicator of what is happening in any one town. Perhaps a better reflection of the state of the housing market are the figures from Hometrack that show that vendors are receiving an average of only 88 per cent of asking prices and that it takes a record three months to sell a home.
Nor should anyone be fooled into thinking that a recovery is imminent because of what appears to be a large increase in lending. The total number of mortgage approvals may have risen by 19 per cent in February, to 37,937, but this was from a low of 31,791 and is still 44 per cent down on a year ago and 67 per cent down on the year before that. Lending still needs to increase substantially before there is a positive impact on house prices, and that is before rising unemployment is taken into account.
That is not to say that there are no positive signs. As we report on page 74, a number of banks, including HSBC, Abbey and RBS, have slowly started loosening their lending criteria by reducing the size of deposits needed to qualify for loans. Though these developments reflect lenders' growing confidence in the housing market, they should be viewed in perspective. With the notable exception of the HSBC deal, the rates remain prohibitively high and first-time buyers would still need to raise an average deposit of more than £15,000. Even the HSBC deal has a series of tough conditions attached that make the loan more attractive to higher earners. The bank knows that these borrowers are better placed to cope if house prices fall farther, so the deal is hardly a huge vote of confidence in the housing market.
Buyers must still beware.
Pension savers can ill-afford another blow
Would you accept a cut in your employer's pension contributions to save your job? The answer, most likely, is yes. Sadly, increasing numbers of workers could soon face such a demand as companies try to cut costs as the recession bites.
Employees of Aon, the insurer, became the first to suffer this fate when the company cut contributions by half this week. The move was doubly significant because Aon is the UK's leading pensions consultant, advising other big companies.
But as lower employer contributions are equivalent to a pay cut, nobody should accept this lightly. Reducing pension benefits ought to be a last resort, taken only to save a business from going bust. Employees who find that cuts are unavoidable would be wise to try to make up the shortfall by increasing personal contributions, not least because stock markets are now exteremely low by historic standards.
There is little that the Government can do to stop companies from such action. However, with saving for retirement facing this new assault, now would be entirely the wrong time to cut tax relief on pension contributions, as some believe may happen in the Budget. Pension saving needs more support, not less.

10 March 2009

Take it Seriously!!!!!!!!!

Taking a Depression Seriously

By DAVID BROOKS
Published: March 9, 2009


The Democratic response to the economic crisis has its problems, but let’s face it, the current Republican response is totally misguided. The House minority leader, John Boehner, has called for a federal spending freeze for the rest of the year. In other words, after a decade of profligacy, the Republicans have decided to demand a rigid fiscal straitjacket at the one moment in the past 70 years when it is completely inappropriate.


David Brooks

The G.O.P. leaders have adopted a posture that allows the Democrats to make all the proposals while all the Republicans can say is “no.” They’ve apparently decided that it’s easier to repeat the familiar talking points than actually think through a response to the extraordinary crisis at hand.
If the Republicans wanted to do the country some good, they’d embrace an entirely different approach.
First, they’d take the current economic crisis more seriously than the Democrats. The Obama budget projects that the recession will be mild this year and the economy will come surging back in 2010. Democrats apparently think that dealing with the crisis is a part-time job, which leaves the afternoons free to work on long-range plans to reform education, health care, energy and a dozen smaller things. Democrats are counting on a quick recovery to help pay for these long-term projects.
Republicans could point out that this crisis is not just an opportunity to do other things. It’s a bloomin’ emergency. Robert Barro of Harvard estimates that there is a 30 percent chance of a depression. Warren Buffett says economic activity “has fallen off a cliff” and is not coming back soon.
Stock market declines are destroying $23 trillion in wealth, according to Lawrence Lindsey. Auto production is down by two-thirds since 2005. In China, 20 million migrant laborers have lost their jobs. Investment in developing countries has dropped from $929 billion in 2007 to $165 billion this year. Pension systems are fragile. Household balance sheets are still a wreck.
Republicans could argue that it’s Nero-esque for Democrats to be plotting extensive renovations when the house is on fire. They could point out that history will judge this president harshly if he’s off chasing distant visions while the markets see a void where his banking policy should be.
Second, Republicans could admit that they don’t know what the future holds, and they’re not going to try to make long-range plans based on assumptions that will be obsolete by summer. Unlike the Democrats, they’re not for making trillions of dollars in long-term spending commitments until they know where things stand.
Instead, they’re going to focus obsessively on restoring equilibrium first, and they’re going to understand that there is a sharp distinction between crisis policy-making and noncrisis policy-making. In times like these, you’d do things you would never do normally. When it’s over, we can go back to our regularly scheduled debates.
Third, Republicans could offer the public a realistic appraisal of the health of capitalism. Global capitalism is an innovative force, they could argue, but we have been reminded of its shortcomings. When exogenous forces like the rise of China and a flood of easy money hit the global marketplace, they can throw the entire system of out of whack, leading to a cascade of imbalances: higher debt, a grossly enlarged financial sector and unsustainable bubbles.
If the free market party doesn’t offer the public an honest appraisal of capitalism’s weaknesses, the public will never trust it to address them. Power will inevitably slide over to those who believe this crisis is a repudiation of global capitalism as a whole.
Fourth, Republicans could get out in front of this crisis for once. That would mean being out front with ideas to support the wealth-creating parts of the economy rather than merely propping up the fading parts. That would mean supporting President Obama’s plan for global stimulus coordination, because right now most of the world is free-riding off our expenditures. That would mean eliminating all this populist talk about letting Citigroup fail, because a cascade of insolvency would inevitably lead to full-scale nationalization. It would mean coming up with a bold banking plan, rather than just whining about whatever the Democrats have on offer.
Finally, Republicans could make it clear that that the emergency has to be followed by an era of balance. This crisis was fueled by financial decadence, and public debt could be 80 percent of G.D.P. by the time it’s over. Republicans should be the party of restoring fiscal balance — whatever it takes — not trillion-dollar deficits as far as the eye can see.
If Republicans were to treat this like a genuine emergency, with initiative-grabbing approaches, they may not get their plans enacted, but voters would at least give them another look. Do I expect them to shift course in this manner? Not really.

Spain's depressed!!!

Clear signs of global depression: Spanish minister
Tue Mar 10, 2009 6:45am EDT

MADRID (Reuters) - There are clear signs of a global economic depression , Spanish Industry Minister Miguel Sebastian said on Tuesday.
The global financial crisis has caused a generalized fall in economic confidence, industrial production, trade and led to job destruction, Sebastian said in a speech to Spain's Congress.
"These factors are unmistakable symptoms of a global depression that demands a combined and coordinated response by all countries," Sebastian said.
(Reporting by Andrew Hay; Editing by Victoria Main)

UK housing trends ~ Down, Down, Down......

House Price Reports

UK house prices continue to crash at an alarming pace

Well that was short lived, no sooner had the "green shoots of recovery" appeared last month (in relation to house price growth) then the true overall trend re-emerges, downwards...
House prices have fallen 17.7% year on year and approx. 20% from their peak - in September 2007. It's also useful analysing the 'swing' from positive to negative; from 15% positive to 17.7% negative has taken twenty months, this is unprecedented during the (circa) twenty five years of house price data collation.

With falls now accelerating it's more important than ever that first time buyers remain increasingly vigilant ensuring they buy at future 2010 prices; perhaps negotiating a discount of 15% off the asking and or valuation price in order to insulate themselves from further falls.


Martin Ellis;
"The average UK house price declined by 2.3% in February. This monthly decrease more than offset January's 2.0% increase. Prices in the three months to February compared to the previous quarter, which provides a better indicator of the underlying trend, were 3.6% lower...
Whilst market activity remains at very low levels, there are some tentative signs that activity may be beginning to stabilise. The house price to earnings ratio - a key measure of housing affordability - has fallen to its lowest level for six years.

Continuing pressures on incomes, rising unemployment and the negative impact of the dislocation of the financial markets on the availability of mortgage finance are, however, likely to mean that 2009 will be another difficult year for the housing market."

LLOYDS BANKING GROUP HOUSE PRICE INDEX
Ket Statistics
February 2009 (seasonally adjusted)
Annual change
-17.7%
Monthly change
-2.3%
Average Price
£160,237
.
Key facts
House prices declined by 2.3% in February. This fall more than offset January's 2.0% increase (revised from 1.9%). Historically, house prices have not moved in the same direction month after month even during a pronounced downturn. For example, prices fell for seven successive months in 1989 but subsequently increased in three of the first ten months in 1990 even though the overall trend in prices was downwards.

Prices in the three months to February compared to the previous three months - an indicator of the underlying trend - were 3.6% lower. This is slightly below the quarterly rate of decline of 5-6% recorded consistently between June 2008 and January 2009.

House prices in February were 17.7% lower on an annual basis. The annual rate of change (measured by the average for the latest three months against the same period a year earlier) fell from 17.2% in January to 17.7%. The UK average price has returned close to the level in August 2004 (£159,799).

-The house price to earnings ratio - a key affordability measure - is at its lowest for six years. The house price to average earnings ratio has declined from a peak of 5.84 in July 2007 to an estimated 4.42 in February 2009; a fall of 24%. The ratio is at its lowest level for six years (February 2003: 4.41). The long-term average is 4.0.

-Tentative signs of a stabilisation in activity albeit at a very low level. Bank of England industry-wide figures show that the number of mortgages approved to finance house purchase was unchanged between December 2008 and January 2009. Approvals in January, at a seasonally adjusted 31,000, were also identical to the monthly average recorded in the second half of 2008.More details about UK house prices continue to crash at an alarming pace (opens a new window)

No recovery in GLOBAL housing markets

Speedy recovery in global housing markets unlikely

The collapse of the world’s housing markets is still accelerating according to the Global Property Guide’s latest survey with only Germany and Switzerland achieving a positive momentum in 2008.


Many house-price falls during 2008 were extremely severe. Countries with house price falls of over 10 percent were Latvia (Riga), 37 percent), Lithuania (Vilnius), 27 percent, the US, 20 percent, the UK, 18 percent, Iceland,16 percent, Ireland, 12 percent, and the Ukraine (Kiev),12 percent. (All figures inflation-adjusted).


During the final quarter (Q4) of 2008, the downward price momentum significantly accelerated, as compared to Q3, suggesting that the situation is deteriorating.


The Baltic countries of Latvia and Lithuania suffered the hardest price falls both in nominal and real terms. In Riga, Latvia, the average price of standard-type apartments plunged 37 percent during 2008. Prices have been going down in Latvia since late 2007, after a remarkable increase of about 70 percent in 2006.

The most alarming decline took place in the 4th quarter, when prices declined by 15 percent, the steepest quarterly drop in real terms in any country.

These price falls were triggered by increased interest rates, and by the tightened credit rules which Latvia imposed in 2007.


In the US, the centre of the global financial crisis, 2008 house prices fell 20 percent according to the Case-Shiller house price index, which emphasises urban areas. OFHEO and FHFB figures, which are associated with Fannie Mae and Freddie Mac loans and have somewhat lost credibility, suggest a smaller decline of 6 percent and 3 percent respectively, during 2008.


The US government recently approved a $ 787 billion economic stimulus package, of which $275 billion will be allocated to rescue the ailing housing market.

Canada has been much less affected than the US.
Both Australia and New Zealand saw house price declines during 2008, of 7 percent and 8 percent respectively.


Housing markets in Asia have not been insulated. Singapore’s private residential prices dropped 9 percent during 2008, in sharp contrast to the 26 percent price increase of experienced during 2007.

Hong Kong has been badly hit by the crisis. During the last quarter, Hong Kong experienced a severe decline in prices of 14 percent.
In Makati, Philippines, prime 3-bedroom condominium prices fell by 2 percent during 2008, after an 11 percent price rise during 2007.
Japan recorded modest Tokyo condominium price rises of 1.2 percent during 2008.
In Shanghai, China, house price rises slowed to 5 percent y-o-y by the end of 2008, after peaking at 30 percent y-o-y to May 2008. However Shanghai is likely to be somewhat exceptional and Xinhua News Agency reported house prices declines in 70 major cities during 2008.


In Dubai, UAE, despite the bleak global picture, saw surprisingly large dwelling price rises of 41 percent during 2008. However during the year’s final quarter, prices fell by 8 percent in nominal terms. This downturn is attributable to strongly tightening lending criteria, an increase in interest rates, multiple layoffs, and alarm among buyers.

History suggests that in a crash, housing markets take many years from peak year to full recovery. In view of this and of the pessimistic IMF forecast for the global economy, no real recovery is likely in the global housing markets this year.

The Global Property Guide - www.globalpropertyguide.com -is an on-line property research house, specialising in analyzing residential property valuations around the world.

05 February 2009

Why the Bank of England's latest rate cut is a big mistake - MoneyWeek

Big.....Big......Big.........Mistake!!

Why the Bank of England's latest rate cut is a big mistake - MoneyWeek

Why house prices may fall another 38% - This is Money Blog

I'm interested in this article because it comes from a relatively conservative viewpoint.

Why house prices may fall another 38% - This is Money Blog

BBC NEWS | Business | UK reduces interest rates to 1%

Unprecedented moves.....What an economic mistake this is!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!11

BBC NEWS Business UK reduces interest rates to 1%

01 February 2009

Olduvai Theory: Sliding Towards a Post-Industrial Stone Age, by Richard Duncan

Olduvai Theory: Sliding Towards a Post-Industrial Stone Age, by Richard Duncan
Newsweek's Clift Bemoans Media Sexism Against Hillary, and Even Palin

By Tim Graham (Bio Archive)January 31, 2009 - 22:02 ET


A Commemorative Inaugural Edition of Newsweek arrived at the office in the mail this week, and it included a column by Eleanor Clift titled "Suffrage, Hillary Style" which touted Hillary Clinton’s "18 million cracks in the glass ceiling" and sang the same old song about how sexism is still more acceptable than racism:
Hillary’s campaign illustrates how far we’ve come and how far we haven’t come. The tone and tenor of the debate around Hillary, and around Sarah Palin, was far more personal and mocking than toward their male counterparts. Maybe the material was richer, but there was no attempt to dance around gender issues the way there is with race. As a society, we still condone sexism; we view it as a part of nature, a given that isn’t worth bothering our pretty heads about.
Bringing Palin in for sympathatic treatment on sexism is a little strange for Eleanor, since this is how she greeted the choice on The McLaughlin Group last year:
This is not a serious choice. It makes it look like a made for TV movie. If the media reaction is anything, it's been literally laughter in many places across news....In very, very many newsrooms.
Clift complained that the media clearly favored Obama over Hillary when she was "equally serious," but she didn’t ponder whether Hillary was equally smooth or equally appealing:
Older women whose lives and careers were constrained by sexism felt disrespected by a media captivated by a serious black candidate in a way they weren’t by the prospect of an equally serious woman contending for the job. Younger women who haven’t experienced as much sexism wondered why their mothers thought it was such a big deal;’ if not Hillary, there’ll be someone else.
Earlier, she illustrated the generation gap among women Clift knows: "A Hillary campaign worker who objected to a Hillary nutcracker with its stainless-steel thighs was chided by her own grown daughters for not having a sense of humor. "
Clift began by recounting the American history that recalls Obama reaching the White House before a woman:
The fact that she lost out to a black man recalls the hurt felt by the early suffragists when the 15th Amendment passed after the Civil War extended the vote to freed black males. Women were told it was "the Negro’s hour," and they should step aside. Allowing former slaves to vote while denying educated women the same right enraged suffrage leaders and divided the movement between those who accepted the disparity and those who raged against their second-class status. The rift last for 20 years, with bitterness far more deep-seated than the hard feelings exhibited by Hillary’s hardiest campaign supporters.
—Tim Graham is Director of Media Analysis at the Media Research Center

Happy New Year ~ Not in Ireland!

Best to ignore the cheerleaders for the property sector
By Proinsias O'Mahony Saturday January 31st, 2009

Proinsias O’Mahony doesn’t share the optimistic assertions of some in the property business about recovery in the housing market

HAPPY new year? Not really. The banks are at death’s door. Unemployment is rocketing. Cuts much more severe than those proposed in the recent budget are inevitable. The recession is deepening, with fears that Ireland is on the verge of a so-called ‘lost decade’ growing increasingly realistic.

We’re up the creek. Auctioneers and developers, however, have a different vision for 2009, one where ever more affordable homes will be snapped up by a willing populace.

After all, construction firms cannot cut prices further as they are “down to their bottom line” on prices, according to one builder recently. Indeed, those who are “stupidly waiting” for prices to fall further should cop themselves on and realise that prices are bottoming. This stupidity has been disappointing developers for some time now. In August, property tycoon Derek Quinlan noted that first-time buyers must be given the confidence to buy as “negative media commentary force them to sit and wait, believing that prices have not yet bottomed out”. Impartial ‘experts’ have been beating this drum for some time now.

Tom Parlon, former minister and now Director General of the Irish Construction Industry Federation, warned last March that “there’s not much more scope for further cuts” and that “now is the time to buy, there is real value out there”.

Politicians, too, are puzzled by this ignorant penny-pinching. “If I was to give advice to people, I would say, go out and buy some property now”, said Galway TD Frank Fahy last May. Frank has a pretty extensive property portfolio, as does his Fianna Fáil colleague Donie Cassidy. Donie, perhaps better known for his masterful management of Foster and Allen and other show-band giants than his political accomplishments, said last April that there was “unbelievable” value in the marketplace, something he would remind us all of in 12 or 18 months “when prices have again increased by 25% or 30%”.

That didn’t quite pan out. A mule could have told you that Donie was in la-la land but he wasn’t the only one. “The time to buy is now”, said estate agent Pearse Wyse last April, warning that the “great value” didn’t “mean people can dilly dally.” “It makes little sense to hold off making a purchasing decision”, said another in summer 2007, when the bubble had already burst. “There is no better investment than Irish property at present”, said high-profile estate agent Ken McDonald in the same year, going on to ask why “we allow scaremongers and doomsayers with unfounded pessimism and unbridled negativity” to talk down the economy. Never mind, said Ken: “the Irish love affair with property will continue undaunted despite the knockers.” Hmmm. Of course, this love affair was encouraged by good old Bertie, our dearly departed Taoiseach.


“The boom is getting boomier”, he said in 2006. “We should have an examination into why so many people got it so wrong”, adding that people “should have bought last year.”

By April 2007, he was predicting a “soft landing”.

By July, he asked why those who sit on the sidelines “cribbing and moaning” don’t “commit suicide”.

Two months later, we were told that there “is no place for politically motivated attempts to talk down the economy and the achievements of our people across all sectors.” What a crock. It’s one thing to have to listen to such garbage from those in the property sector.

It’s another thing entirely when the leaders of our country were encouraging one of the greatest housing bubbles in history, a bubble whose bursting has plunged Ireland into a crisis of incalculable proportions.

Ahern is famously pally with developers, whose one-dimensional thinking seems to have informed government policy. Take Bertie’s buddy Sean Dunne, who said just last month that he was “prudent” when he splashed out almost $600 million for a 5 acre site in Ballsbridge at the height of the boom. In 2006, Dunne lashed out at the economists who had “mistakenly forecast the end of the housing and property boom in Ireland” for the last six years. This deluded bunch of “hyenas”, those “harbingers of doom and gloom”, included the Economist magazine, the IMF and the OECD. “The hyenas have stopped laughing…each and every one of them was wrong.”


They weren't wrong though – just early. David McWilliams, who had been warning for years that the housing bubble couldn’t last, likes to use the analogy of a doctor who advises a patient to change his lifestyle. Smoking 20 fags a day, the patient ups it to 40 as the years pass. After all, the doctor’s been warning him for years and nothing’s happened. By 2007, our patient is puffing on cigars aplenty and downing a daily bottle of whiskey into the bargain. Why not? Sure he’d been hearing the same old warnings for the best part of a decade… It was obvious that a serious property bust was a question of ‘when’, not ‘if’, just as it was obvious to decent economists that a financial crisis would likely be triggered by this bust. Study after study has confirmed as much. 2007 was full of guff about a soft landing even though studies of international housing bubbles show that there has never been such a thing. Bubbles are followed by crashes just as day is followed by night. The global financial crisis hit the headlines in 2007, creating a perfect storm for Ireland in the process. And yet, politicians and regulators appear to have been taken unawares. When UCD economist Morgan Kelly published a study showing that house prices typically fall by between 40-60 percent in a crash, he was dismissed as a scaremonger (it’s now very likely that Irish falls will be even greater). Also dismissed were his comparisons with Finland, which saw unemployment rocket from 3 to 20 percent and house prices halve in the aftermath of its housing crash in the early 1990s.


It wasn’t rocket science. Between 2000 and 2006, house prices doubled relative to income and rents. Construction accounted for nearly a fifth of our economy (the international norm is just 5 percent). First-time buyers became priced out of the market so banks invented 110 percent mortgages to be paid back over a forty-year period. The signs of an unsustainable bubble were everywhere. And yet, politicians trumpeted that the fundamentals were sound. What were they smoking? Other countries, of course, also had their fair share of paid housing cheerleaders. Take David Lereah, former chief economist with America’s National Association of Realtors. Lereah, author of the 2005 bestseller, Why the Housing Boom Will Not Bust and How You Can Profit From It, used to routinely trot out wildly bullish forecasts that mirrored the hallucinatory abominations of his Irish counterparts. He left his job in 2007. Was he wrong to be so bullish, he was asked recently? “I worked for an association promoting housing, and it was my job to represent their interests”, he admitted. “I put a positive spin on it. It was easy to do during boom times, harder when times weren’t good”. And now? “I’m pretty bearish and have been for the past year and a half. Home prices will continue to drop.”


Kudos for his new-found honesty, if nothing else. There are many David Lereahs in Ireland. Developers, estate agents, dizzy television presenters with their own property agendas, economists working for the banks – the same old clowns will trot out the same old claptrap, rabbiting on about ‘value’ and the dangers of waiting too long and how a bottom is near and how it’s a great time to buy. It’s not a great time to buy. It’s a great time to wait. Property remains over-priced by any conventional valuation yardstick, some places more than others (West Cork comes to mind). Property crashes play out over a period of many years, partly because sellers become anchored to old prices that are no longer relevant. There’s also a large element of wishful thinking involved – a recent US study found that people expected prices in their locality to fall but believed that their own house would appreciate in value or stay the same. The facts are, however, that house prices do not rise in real terms (after inflation) in the long run.


Countless international studies confirm this. A couple of booms aside, real house prices were flat or falling most of the time in the US in the 20th century. Booms occur periodically before prices revert to their historical mean. The bigger the bubble, the bigger the bust. We’ll still have to put up with the cheerleaders, however, even as the market deflates. Morgan Kelly puts it well. “We can start looking forward to estate agents telling us that the worst is over, a necessary correction to an overheated market has taken place, there has never been a better time to buy, and so on until most of them go out of business.”

24 January 2009

Oh to live in Japan......



From The Times
January 24, 2009

Taro Aso gives Japanese £100 each to spend way out of recession ................
For £200, a couple could have a sparkling day at the Yunessan spa

Leo Lewis, Asia Business Correspondent


With Japanese exports plunging and companies retrenching, the fate of the world’s second-biggest economy may now lie in an electronic cigarette, a ripe musk melon or a bag of dumplings shaped like the Prime Minister’s face.

Government efforts to stimulate the economy and insulate it from the ravages of recession have failed. The pace and scale of decline, say economists, has proved too big for the country’s creaking, deadlocked political system to cope with and deep recession is now a certainty.

But Taro Aso, the increasingly reviled Prime Minister, believes that he has hit upon a scheme that will solve the crisis in an orgy of consumer spending.

The move, which he has described as “the best economic measure of all”, involves a handout of at least 12,000 yen (£100) to every citizen over the age of 18. The prospect of the windfall has unleashed a national wave of speculation about how the money might best be spent, and the eccentric world of Japanese retail is pushing hard to attract the cash.

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Among the more extreme recommendations on how to spend the money is to applaud Mr Aso’s plan by buying a gift box of Aso-themed goods: Y12,000 would buy a magnificent spread including a coffee mug, dumplings, shopping bag, tummy-warmer and dog-sized T-shirt bearing his image.

The notoriously pricey Japanese fruit industry is also vying to be among the winners of an overnight sense of opulence. The price of a much prized Shi-zuoka Crown – the self-declared king of musk melons – has suddenly been brought down from Y30,000 to a convenient Y12,000.

The service sector, too, has a number of seasonal opportunities: taking advantage of a discount travel coupon, a couple could enjoy the romantic and antiageing effects of a day at the chocolate and wine baths of Yunessan, buy a souvenir and expect little change from Y24,000.

The same sum would also pay for a family to spend the night in sleeping bags on the floor of the Enoshima Aquarium on the outskirts of Tokyo. The presence of hundreds of rippling squid in their tanks offers purportedly healing effects – a Y24,000 necessity.

Meanwhile, offerings from the often imaginative world of Japanese electronics that fit the bill include a cigarette which glows and emits grapefruit steam into the user’s mouth.
The scheme, however, has plenty of doubters. Richard Jerram, the chief Japan economist at Macquarie Securities, believes that it is doomed to failure and is a sure sign that the Japanese Government “just does not understand how staggeringly the world has changed”.
The problem, says Naomi Fink, a strategist at Tokyo Mitsubishi, is not that the Japanese do not have cash, but that they are too scared to spend it. Japanese households are already sitting on cash savings estimated at Y778 trillion (£6.5 trillion).

Have your say
The truth is that, as a nation, Japanese people are undoubtedly some of the most frugal in the entire world. + They set a great example to the rest of the world in terms of their industrious nature and sense of patriotism. Mr. Aso will be perceived as being a kind man - who would argue that point?
NDG, Tokyo, Japan

Have your say

There's no new motor to drive the economy | Matthew Parris - Times Online

There's no new motor to drive the economy Matthew Parris - Times Online

19 January 2009

TheSpec.com - Business - House prices, sales plunge across Canada

TheSpec.com - Business - House prices, sales plunge across Canada

Should Banks be lending at all????????

Should banks be lending to house buyers?January 19th, 2009 by Peter King
Should the UK government really be encouraging households to borrow money to buy houses in the current climate? And should it be encouraging banks to lend to them as part of the latest bailout package?

Clearly there is considerable pent up demand for housing and this will grow over time. But a responsible government would surely be telling first-time buyers and others to put off their purchases. What is the sense in taking out a mortgage to pay for an asset that is declining in value by 15% a year?

And instead of exhorting the banks to offer cheap finance so households can saddle themselves with negative equity, the government should be congratulating them for their entirely rational behaviour of limiting their exposure to the housing market.
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Gordon Porridge........

January 19, 2009
What Gordon Brown and Richard Nixon have in common
Just after the Premiere of Frost/Nixon I reflected on the similarity between Tony Blair and David Frost that must have made it easier for Michael Sheen to play both characters.
Now the author of the play, Peter Morgan (who also wrote The Deal about the so-called Granita Pact), has noted the shared easy charm of these two characters.
Fascinatingly he made this comparison as part of a discussion of the shared characteristics of Richard Nixon and Gordon Brown (another likeness I have remarked upon):
They are people who are hard to like, people who have complicated emotional inner landscapes, and somehow have had trouble accessing them.
"People will hate me for saying this, but there are emotional similarities between Gordon Brown and Richard Nixon. Gordon Brown finds it hard to be liked and yet he's a brilliant man. But people don't warm to him, they don't like him.
Posted by Daniel Finkelstein on January 19, 2009 at 01:40 PM in Gordon Brown

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Its funny but I was beginning to think there is a physical resemblance now too. Brown's jowls and that fake smile are increasingly Nixonesque.
Posted by: Simon 19 Jan 2009 13:55:30
The similarity, for me, is that Dr James Gordon Brown, like the late Richard M. Nixon, is a bare-faced liar.
Posted by: Keith Darby 19 Jan 2009 14:06:56

Documentary # 3 - Casino Capitalism

Worth spending time on this view.......

Market Skeptics: *****Hyperinflation will begin in China and it will destroy the dollar*****

Market Skeptics: *****Hyperinflation will begin in China and it will destroy the dollar*****

RBS suffers biggest loss in UK history - Telegraph

RBS suffers biggest loss in UK history - Telegraph

Warning that house prices may fall by 80% - The Irish Times - Tue, Jan 13, 2009

Warning that house prices may fall by 80% - The Irish Times - Tue, Jan 13, 2009

06 January 2009

House prices 2009 ~ 2012

UK House Price Crash and Depression Forecast 2007 to 2012

In conclusion, the sum of the above analysis suggests that house prices having fallen by 19% are about half way to the lows, and therefore suggest that house prices will decline by 38% from the August 2007 peak. The housing market trend is clearly currently in the panic stage as we are witnessing near unprecedented house price falls at the rate of more than 16% per annum, far beyond that of the 1990's bear market. This rate of decline is not sustainable, and I am expecting this phase of the housing bear market to come to an end during the second half of 2009. However my expectation is that following the crash the market will enter a period of depression spanning several years after the market puts in a nominal price low and then embarks upon a weak up trend as the below graph illustrates.

Risks to the Forecast

The prime risk to the nominal house price forecast is the currency crash induced inflation, as earlier analysis suggested that house price falls can be brought to a halt by a significant currency devaluation, which has already taken place to the tune of 30%. This will mask the real terms house price falls that will make itself evident in the protracted housing market depression where house prices are not able to keep pace with inflation and therefore continue to erode in real-terms.
My next newsletter will aim to forecast the major trends for financial markets during 2009. To receive this on the date of publication subscribe to my always free newsletter.


By Nadeem Walayathttp://www.marketoracle.co.uk

02 January 2009

UK Biggest hose price drop in History....

Biggest house price drop on record

House prices plunged by 16.2% during 2008 in the biggest drop for a calendar year on record, Halifax said.
Last year's price plummet, which came after the average value of a property in the UK fell 2.2% in December, was the biggest year-on-year fall since the Halifax began recording data in 1983.
Britain's biggest mortgage lender said the typical price of a property now stands at £159,896 - back to August 2004 levels.
The drop in annual house price inflation measures prices in the previous three months compared with the same period a year ago. But if house prices in December are compared with prices in December 2007, the fall is even more dramatic at 18.9%.
And Halifax warned that the property market will come under further pressure in 2009 as the financial crisis continues to restrict lending in the UK.
Bank of England figures on Friday revealed that just 27,000 mortgages were approved for new house purchases during November, which was a new record low.The Bank also said in its credit report that banks and building societies plan to cut back further on lending as the economic outlook worsens.
However, the Halifax offered hope that the downturn in the property market could be limited as housing affordability improves. The lender said the house price to earnings ratio - a key affordability measure - had declined to its lowest level for more than five-and-a-half years.
First-time buyers (FTBs) may also be in line for some relief, with the proportion of local authorities where housing is affordable for FTBs more than trebling in 2008, according to the Halifax.
Economist Howard Archer of IHS Global Insight cautioned that, despite the interest rate falls and property price reduction, the outlook for the housing market remained "bleak". He predicted house prices to fall by a further 15% on the Halifax measure in 2009.
This would see property prices plummet by 32% in nominal terms from their August 2007 peak of £199,612 to stand at £135,912 at the end of this year, he said. House price falls would then ease at the start of 2010 and flatten out in the latter months of the year, added Mr Archer.
Copyright (c) Press Association Ltd. 2009, All Rights Reserved.

01 January 2009

Good Bye to 2008......

2008: An Extraordinarily Long Year

2008 is rapidly winding down. If it seems like it's been a long year, it's because it has been.Tick tock ... tick: Extra second added to 2008

Those eager to put 2008 behind them will have to hold their good-byes for just a moment this New Year's Eve.The world's official timekeepers have added a "leap second" to the last day of the year on Wednesday, to help match clocks to the Earth's slowing spin on its axis, which takes place at ever-changing rates affected by tides and other factors.The U.S. Naval Observatory, keeper of the Pentagon's master clock, said it would add the extra second on Wednesday in coordination with the world's atomic clocks at 23 hours, 59 minutes and 59 seconds Coordinated Universal Time, or UTC.That corresponds to 6:59:59 p.m. EST (23:59:59 GMT), when an extra second will tick by -- the 24th to be added to UTC since 1972, when the practice began.The first leap second was introduced into UTC on June 30, 1972. The last was added on December 31, 2005.Five Themes For 2009Please take more than an extra second to ponder

Five Themes You Need to Know for 2009.
Before we get to 2009, first, think back to a year ago. Deflation was barely on the radar of mainstream economists and financial media. Most viewed it as an impossibility, focusing instead on what was supposed to be the resurrection of the commodities bull market.Even today, while paying deflation minor lip service here and there, the vast majority of economists and financial media are ill-prepared for just how severe this ongoing deflationary credit contraction and debt unwind is going to be.Consequently, if there is one theme that stands above all else in 2009, it will be this: The despair that unfolds as the point of recognition emphasizes the "de-" in deflation. The fat is in the fire.....2. Putting the "De-" In DeflationAs declining risk appetites manifest in nearly everything in 2009, from our collective views on financial risk to our tastes in culture, music, film and fashion, we will see a focus on declines, destruction and devaluation. Perhaps nowhere will this be more obvious than in the disintegration of large-scale social networks into smaller, more focused and intimate groups.While peak social mood helped propel the movement toward increasingly open social networking platforms and large scale interactions, the rush to disassociate from the crowd will inevitably manifest as a reduction in broad network exposure and a preference for close-knit, tighter communities. Beneficiaries of this movement will be families, small groups and, to an extent, neighborhoods....5. Markets: Gold Declines, Dollar Rises, Interest Rates Hover at Unimaginable LowsI recently covered in the article, "Bear Markets Ain't Over 'Til They're Over," the reasons why I believe probabilities favor dramatic new stock market lows in 2009, but what about the other asset classes, gold, currencies and bonds?It is no secret that in a deflationary debt unwind all asset classes suffer absolute declines. In a relative sense some asset classes may fare better than others, but the problem remains that you can't spend negative relative outperformance.As for commodities and precious metals, look for 2009 to begin optimistically with commodities retracing some of their disastrous declines this year. Gold is also in the late stages of another attempt at cracking the $1,000 level. Unfortunately, the purpose of deflationary debt unwinds is to crush the spirits (and speculative juices) of all who attempt to participate in financial markets. The point of recognition for this deflationary debt unwind will culminate in another wave of intense selling pressure as the last speculators standing give up.There has been no shortage of top callers in the bond market of late. From a technical standpoint bonds certainly begin the year with the rubber band stretched painfully to the upside. But do not underestimate the power of deflationary forces to keep a floor under bond prices as interest rates hover at lows that, as recently as a year ago, seemed unimaginable.So there you have it. Only 366 days until 2010. That's the good news. When all is said and done, perhaps the best thing that will be said of 2009 is that it only lasted a year. Kevin Depew is always a great read. I encourage you to read the above article in entirety. There's three more points well worth reading. You may even wish to consider bookmarking him. I have.However, I would be remiss if I did not point out the following: 2009 will be one day and an additional second shorter than 2008. We can all be thankful for that.

Mike "Mish" Shedlockhttp://globaleconomicanalysis.blogspot.com

Bad in Wales

Slump is worst since 1930s - veteran estate agent

Jan 1 2009

by Nick Machin, South Wales Echo

THE current economic slump will be worse than the Great Depression of the 1930s, a South Wales estate agent has warned.
And Saul Magrill should know – because he was there.
Mr Magrill, 94, thought to be Britain’s oldest working estate agent, is shocked at the downturn in the housing market.
He blamed the banks for being “greedy” and spenders for lacking self-discipline.
Mr Magrill started work as a property consultant when he was just 17 in 1931, at the height of the pre-war economic downturn.
But Mr Magrill, who works one day a week for the Chris John Estate Agents in Pontcanna, Cardiff, as a consultant, says that was nothing compared to what Britain is going through now.
He said: “It’s much, much worse now than it was in the 1920s or 1930s.
“I started work when I was 17 in 1931 during the height of the Depression.
“But I have to say that I think 2009 will be much worse than 1931 because people don’t know the old-fashioned rules of budgeting.”
Mr Magrill said property prices had been too high for years and a slump was only a matter of time.
“I’ve been saying for a long time that the bubble had to burst. People were taking out mortgages more than 10 times their annual salary – which they just couldn’t afford.
“In the 1930s people mainly rented property anyway, which was more affordable than it is today, so there wasn’t this risk of lots of people losing their homes and having negative equity. The banks have been deviant. They have been very greedy.”
Mr Magrill added that people today would find it harder to adjust to budgeting.
“In the 1930s it was always hard and everyone struggled so you would stick together,” he said.
“But now people are buying things on credit they can’t afford and are being encouraged to by retailers.
“There was never that option or temptation in the 1930s – you had to make do with what you had.”

Gordo gets this one right!!!!

Brown warns 2009 'won't be easy' ~ True Gordo and you're to BLAME!!

pa.press.net

Gordon Brown has warned the country that 2009 "won't be easy" as it faces up to the economic crisis.

In the Prime Minister's traditional New Year message, he insisted that Britain would pull through - but admitted the challenge was "enormous". He wrote: "This coming year won't be easy, but I am determined that this government will be the rock of stability and fairness on which the British people can depend."

"The scale of the challenges we face is matched by the strength of my optimism that the British people can and will rise to meet them. Because we're not a do nothing people and we've always risen to every challenge. We can meet the security challenge, the environmental challenge and the enormous economic challenge."

Amid widespread pessimism about 2009, the premier sought to strike an optimistic note at the start of what will be a make-or-break year for the Labour government. The prospects for a fourth consecutive term in office are likely to turn on the eventual length and extent of Britain's first recession since the early 1990s.

But Mr Brown insisted the British people, and the Government, had demonstrated their ability to get through similar challenges in the past. He said the task for 2009 was to "build tomorrow", with jobs for the digital age and the green agenda, new transport and communications infrastructure and enhanced skills.

Working together with Britain's world partners, he said, such actions would ensure the UK would "hit the ground running" after the downturn. He wrote: "Today the issues may be difference, more complex, more global. And yet the qualities that are needed to meet them have been demonstrated in abundance by the British people before."

The Prime Minister also set out his ambition to see a new economic philosophy replace the "unbridled free market dogma" which has been discredited by the financial crisis, "I want 2009 to be the year when the dawn of a new progressive era breaks across the world," he said.
That would mean governments investing through economic lows and offering "real help" to families and businesses when they were most in need. In a swipe at the Tories, the Prime Minister insisted failure to act would lead to a worse downturn and a weaker economy in the future.

He portrayed the Government's response to the autumn banking crisis - such as the recapitalisation of high street banks - as a "decisive" strategy to quell people's fears. He said: "The scale and speed of the global financial crisis was, at times, almost overwhelming. I know that people felt bewildered, confused and sometimes frightened. That is why the response had to be swift and decisive."
Insisting that his "guiding principle" was the wellbeing of British families and businesses, he added: "What keeps me up at night, and gets me up in the morning, are the hopes and aspirations of the British people."

And the Good news for Drinkers

Pub chain slashes beer prices...........What????? Tell me that again!!!!!!!!!!

Pub chain slashes beer prices.....Yes.....it's true!!!!!!!!!
pa.press.net

Leading pub chain JD Wetherspoon is to slash prices on some drinks and food, offering a pint of beer for less than £1, down to 1989 prices, the company revealed.

The company, which operates 713 pubs across the UK, said the price reductions on some beer, bottled lager, wine and spirits will run "indefinitely".

A number of meals will also be offered at £2.99, said the firm, which opened 20 new pubs in the last few months of 2008, creating hundreds of new jobs, despite the economic downturn.

Wetherspoon's chief executive John Hutson said: "People enjoy going to the pub. However, we appreciate that the economic downturn means that they now have to be more careful with their money.

"We believe that our new food and drink prices will allow people to enjoy a visit to a Wetherspoon pub without it costing them too much.

"Unlike most sales that start in January, our offers will not be ending within days, but will run indefinitely."

Greene King IPA will be cut to 99p a pint, as will a bottle of San Miguel, the company announced.

New Year Newish Problems.....Welcome to 2oo9

1,600+ retailers expected to go bust in 2009

REUTERS

January 01 2009

LONDON (Reuters) - The downturn in consumer spending will drive over 1,600 retailers out of business in 2009, triggering thousands of job losses and leaving more than one in ten shops empty, a report said Thursday.
Market researchers Experian said trading conditions for survivors would be the worst for at least 30 years and there would be knock-on effects at suppliers, manufacturers and service providers.
"There is no doubt that the impact on retail will resonate through the entire economy," said Jonathan de Mello, Director of Retail Consultancy at Experian.
Retailers are slashing prices as indebted shoppers curb spending amid rising unemployment, sliding house prices and fears of a deep recession.
Experian said big discounts had lured some consumers back into stores, with shopper numbers leaping 12.8 percent in the last week of December. But that was not enough to prevent a 3.1 percent drop in footfall for the month as a whole.
"The last minute surge in shoppers came as a relief to retailers but for most it was not nearly enough," de Mello said.
"The boost in numbers was driven by massive unprecedented discounting all at the expense of retailer margins."
Some retailers have not survived, with sweets-to-DVDs chain Woolworths and furniture group MFI falling into administration, a form of creditor protection, in the run-up to Christmas and several smaller companies following suit in recent days.
Experian said 1,137 non-food retailers went out of business in the year ended December, up 21.2 percent on the year, and forecast 440 more would become insolvent over the next four months and the total for 2009 as a whole would be about 1,400.
Some 194 food retailers failed in 2008, up 10.9 percent, and Experian predicted that number would rise to about 230 in 2009.
"The collapses we've seen so far are just the tip of the iceberg," de Mello said.
"At the moment there is too much space in the market and not enough demand. Many retailers are either making no margin or losing money. We anticipate that January will be the toughest for 30 years."
Experian said the vacancy level on shopping streets was around 7 percent, but with a flurry of businesses recently going into administration that would rise to about 10 percent -- "a figure which is likely to increase as more retailers go into administration in January."
"This large scale retail business failure is expected to have a significant impact on high street returns, affecting everything from investors' yields on rents to revenues to local authorities," it said.
"This is not to forget the devastating impact on people's jobs and livelihoods," de Mello. "Britain is still a nation of shop keepers and the retail sector is one of the UK's largest employers."
(Reporting by Mark Potter; Editing by Mike Nesbit)