The insanity of European property markets

Quote from LeeD:

Where the British goivenrment intervenes in property market is interest rates. If the BoE rate was raised to 2005 level, a typical monthly mortgage paiment would double. This would be a massive hit for people who resently baught a home they can barely afford as it is.

UK Government also holds majority steak in 2 largest mortgage lenders in the country. This gives the Government plenty of control over the conditions of repossessions (like people who are half a year back on their mortgage may be given a payment holiday instead of a repossession order).

Onother interesting point is the appreciation of the property market as a whole makes about 60% of GDP between 1970 and 2010. Given most homes change hands from time to time this hints that a huge part of consumer spending over this period was financed via property appreciation. (People either sold tehir houses at a premium or remortgaged to "take equity" out of a home.)
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Yes interest rates affect things, but rates can hardly go lower, so there is no real scope to pump up prices there. In fact, government actions at the moment are if anything hostile to property prices, because the politicians are cutting spending and about to cut it even more brutally.

Not collecting debts will simply mean the loss occurs in the banks rather than the public. The banks are not exactly financially sound, so giving payment holidays will just make them more likely to go bust. And they still have to repossess eventually - delaying just means they will get a lower price in 1, 2 or 3 years, and have to finance the cash shortfall in the meantime, it's a bear point not a bull point if the banks hold on to defaulted property.

The UK being so exposed to property is exactly why I think the pound is a short.
 
Quote from SymTrader:

Property prices in Asia, including Australia, are also way too high and will likely collapse. But when? Throughout Asia, there are lots of people with money to invest. They are uncomfortable holding case because they see the competitive devaluation going on and they worry about eventual inflation. Gold is an option for the more adventurous who can live with the volatility that comes with a relatively small market. So the vast majority are either going into the stock market or into property. High net worth Asians are buying property all over the world not just in Asia and they together with the wealthy in the west are propping up property prices. If you are risk averse and you distrust currencies, then property is probably what you will be most comfortable with and this is what is keeping prices up in my opinion. And I expect prices to stay high until the current currency mess is sorted out and people are once again willing to hold cash.
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Asia and Australia, for the moment at least, have economies that are rolling along ok. And only Australia (and maybe a tiny fraction of China) is a true bubble, places like HK have only just recovered back to their highs from 13 years ago. The EU has economies that are on the brink of collapse. Big difference.
 
Quote from m22au:

As you know, if you combine (short EUR/USD) with (long gold/USD) you get (long gold/EUR).

gold/EUR has been doing nicely, up from 950 EUR on the day of QE2 to 1,032 EUR recently.
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With gold's poor performance in the face of further Korean tensions today and the last couple of days, I have to say that gold looks like it could trade down in the next week or two. Maybe $1300 or 1275, a moderate correction. So I am hedging my gold with some short futures. In case I'm wrong, I have a buy back stop a little above the recent highs.
 
Quote from LeeD:

I read a while back about Greece manipulating their debt numbers via swaps that moved debt off balance sheet but nothing about Spain. Can you link the report please if it's still available?
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Found the one I was thinking of, bear in mind this is old 'news'.
http://www.zerohedge.com/sites/default/files/Spanish_GDP_report.pdf

I dont have much knowledge to Spain, but there are some things here I think looks strange. Unemployment tanking while rising GDP?

Also, IMF estimates for Spain in 2011 and 2012 looks kinda funny.
http://www.imf.org/external/pubs/ft...PC,NGDPPC,NGDPDPC,PPPGDP,PPPPC,PPPSH&grp=0&a=

Other reads i find interesting:
S&P
http://www.eleconomista.es/imag/_v2/documentos/construction_sector_s&p.pdf
Dagong:
http://www.dagongcredit.com/dagongweb/uf/Sovereign Credit Rating Report of 50 Countries in 2010.pdf
Spiegel ("photo" gallery):
http://www.spiegel.de/fotostrecke/fotostrecke-54629.html
 
Quote from Alexandre:

some more color on Spain and what banks are doing to avoid taking the losses on their real estate exposure...

banks in Spain are currently offering people that cannot pay their mortgage to repossess their house but keep them as tenant and get them to pay a rent according to what they can afford.

For instance, an homeowner in Spain that bought a house for 1 million euros, facing monthly mortgage interest payments only of 5000 euros per month, with an initial down payment of 10% or 100,000, can put back the home to the banks and agree with the bank to pay them a rent of 3000 euros per month.

The banks end up with a property whose real value must be around 600,000 euros and a liability of 900,000 euros funded on the market at a cost maybe of 4000 euros per month for which it earns 3000 euros per month.

Fantastic trade isn't it?
Banks in Spain are losing on every front but are so stuffed with real exposure that the first one to pull the trigger will start a catastrophe.

in the meantime, short Spanish banks with big real estate exposure, it's a no brainer

Eventually, they will need to face the truth and real estate prices will find their true equilibrium
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Haven't heard about this in Spain, do you have a link/source? Thanks

[What I've read about is banks taking possession of developers' unsold properties and renting them out with a purchase option (i.e. have a 5-year window in which the tenant can decide to purchase the property and have the money paid in rent deducted from the property price). This was common in the 90's too.]
 
Quote from syrre:

I dont have much knowledge to Spain, but there are some things here I think looks strange. Unemployment tanking while rising GDP?
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I guess you mean "employment" tanking :)

Isn't that the case in the US as well? Record corporate profits while workers take it in the... ahem, chin?
 
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