financial news

The FINANCIAL SOUTHFIELDS TIMES

'THE PINK BITS'

HOUSE PRICES SET TO RETURN TO SENSIBLE LEVELS

REPOSSESSIONS UP?

09/05/08

With today's announcement that repossessions are up by 17% comes comfirmation - if needed - of a declining housing market. As mentioned on this page earlier (30/04/08) this will act like ripples in a pond, even in areas with a strong demographic and high prices. As repossessed homes are sold off at knock-down prices surounding prices will also fall.

There is also the hidden social cost. In many cases there is the added risk of the strain of loosing one's home also affecting relationships. Families have been known to break up. It takes a very forgiving employer to make alowances, over a long period of time, for a fall-off in performance of an employee. Sometimes job-losses are the result, further compounding the misery.

However, this is another case of the news media indulging in tabloid journalism by sensationalising the issue. Most of these repossession claims are resolved without homes being possessd, precluding the issuing of a possession order.

As often is the case London is the execption. Claims are down by -1% and possession orders by -6%.

02/04/08

The second successive announcement of a year-on-year fall in house prices is a clear indication of a long-lasting trend. The recent housing boom in the market generally couldn't continue. Grossly over-inflated by the reclessness of the Banks, credit crunch or not, a return to 'normality' was inevitable.

No one in their right mind could believe that prices could keep on rising at the rate they were. The simple fact is markets are cyclical.

How long prices continue to fall is a matter for conjecture but several years seems likely. At best, prices will level off in a year or two.

30/04/08

Nationwide's announcement of a 1% annual fall in house prices, the first for 12 years, is seen as an indication of a weakening market, with April seen as a particular time. The rise in the number of unsold properties improved the bargaining position of buyers and so pushed down prices. However much the Bank of England would rather cut rates more gradually than homeowners might prefer, mortgage rates, on recent evidence, will not follow suit.

In a speech on Tuesday David Blanchflower of the Bank's Monetary Policy Committee claimed that prices could fall by 30%.

Those who think that Southfields, with its high proprery prices, is in some way protected from a house price decline should bear in mind that of the 4,100 or so houses in the A to D Council tax band area about 250 are subprime.

If a significant number are repossessed and have to be sold off at a large discount property prices in the surounding areas will fall.

15/0408

If today's TV and newspapers are anything to go by the housing market is spiraling out of control. If the statistics are right this is more than just a 'correction' of an artificially inflated market. Too large a section of our economy has depended on the apparent 'wealth' created by rising house prices. Even the buy-to-let market is creaking as rental income in many areas fails to keep pace with mortgage repayments.

The situation has been exacerbated by the speculative building of apartment blocks, all over the country, which remain largely unoccupied.

With a downturn on this scale, during the current recession a collapse seems a distinct possibility. This is made all the more likely by the Treasury and the Bank of England's performance ( or lack of it ) over Northern Rock and their inept handling of the credit crunch. The so-called 'hot spots', Southfields included will soon feel the effects. Downsizing will difficult as who would want to buy a property that is loosing value? At best, the hotspots will be stagnant.

11/04/08

So, house prices are falling nationally but London appears to be one of the 'hotspots'. This obviously includes Southfields. The Buy-To-Let market seems healthy enough, due no doubt to the reluctance of people to move during times of uncertainty and first time buyers unable to get on the property ladder.

However, the Government's paltry £1,5000 bribe to encourage first-time buyers is an insult and a waste of public funds. The fact is if you don't have a significant deposit you are not going to get a mortgage. Whatever the state of the housing market on a local or regional basis the facts remain that first time buyers are the foundation of the market and their inability to buy could undermine the whole edifice.

30/03/08

With the strong chance of house prices falling, mortgages becoming increasingly harder to get hold of we are faced with falling demand and increasing reluctance to lend.

The pound is low against the Euro, household spending only growing by 0.1 %. The probability of a further reduction in interest rates next month will do little to help in the face of world-wide inflation.

The Nationwide building society forecasts a drop in the housing market. It's time for government to start using the 'R' word and stop trying to paper over the cracks.

27/03/08

So,who do we believe? Some experts suggest proprerty prices falling by around 30% over the next two years. David Miles, Morgan Stanley's chief economist postulates a 20% fall.

None of this is helped by the current economic gloom. So, will there or will there not be a house price crash? One thing is sure, borrowing restrictions will soon have a tangible effect on the housing market. It has been cogently suggested that house prices are over-inflated by around 50%. Yet some claim that prices have continued to rise by 2.7 to 8%. The ST's main concern is that none of these 'experts' seems to know. So, the obvious tactic is to 'smokescreen' until an opportunity for capitalising on confusion presents itself.

ISA CHANGES - OUTLINED

25/03/08

CHANGES TO ISAs 2008/09

Overall subscription limit on stocks & shares ISAs increases from £7,000 to £7,2000, £3,600 of which can be put in a cash ISA.

Maxi & Mini ISAs become Stocks & Shares ISAs or Cash ISAs.

ISAs can be consolidated into one account.

PEPs ( Personal Equity Plans ) become Stocks & Shares ISAs.

From April the 6th Tessa & Peps become obsolete, investments already held will become stocks & shares ISAs.

PITFALLS

It may be the case that currently attractive rates are due to the 'credit crunch' As institutions need new ways to raise money, they are offering better rates but their ISAs may contain hidden obligations.

PLAN 'B'

Northern Rock are offering up to 6.5% and may raise the offer. Remember, this is guarnteed for 'up to four years' but is subject to three months' notice of 'change'.

20/20 HINDSIGHT

INTEREST RATE HELD FOR NOW
08/05/08
As expected the Central Bank kept interest rates on hold, at least for this month but a cut to 4.75% is expected in June. In spite of concerns over inflation further cuts are necessary to try to prevent the economy sliding further into recession.
However the British Chambers of Commerce would have welcomed a cut as they believe this would have underpinned business. It would have served to limit the damage to the economy and boosted consumer confidence.
Among the other dissenting voices, Roger Bootle of Deloitte believes that by leaving the rate on hold the Bank's Monetary Policy Commitee risked 'presiding over the deepest and longest economic downturn since the recession of the early 1990's'. He predicted a fall in rates to around 3.5% but claimed that this would be 'too late to prevent the economy flirting with recession'.

BANKS' BOND BAIL-OUT
20/04/08
Mervin King's proposal to encourage banks to improve balance sheets by raising fresh capital rather than pulling in new lending, though generally to be welcomed, highlights another side to the issue.
Their going cap in hand to the central bank doesn't sit well with their increase in dividnds to shareholders and their reluctance to issue shares.

10% Income Tax is Dead, Long Live 10% Tax
20/04/08
MPs' protests at Alistair Darling's abolishing the 10p/£ rate Gordon Brown introduced some years ago have a hollow ring to them. In March, as happens every year, the Chancellor's Budget proposals are 'past on the nod' by MPs prior to the April budget.
This is obviously aimed at Gordon Brown's failing Premiership and the dismal performance of his Cabinet.
As for the the 10%, it is still applicable to those with qualfying savings above their personal allowances. These are £5,435 for those under 65, £9,030 for people aged 65 - 74. Income within the next £2,320 will be continue to be taxed at 10%. SHOT IN THE DARK Department: Why bother trying to find ways of making up the shortfall in loss of income for the poorly paid by introducing another ( expensive ) kind of credit, why not simply reduce the rate of National Insurance for those on low incomes.

16/04/07
UPDATE
According to today's Times newspaper, City job losses may reach 40,000.
That's a big profit drop for City winebars.

15/04/08
With the housing market in decline, national and personal debt running into Trillions, the log-jam of the credit crunch, the Central Bank and the Treasury displaying a frightening display of ineptitude things look bleak. But, not to worry, Prime Minister ( Wee Gordie ) Brown assures us that the economy, employment and housing were 'safe for them over the next six months'. So what happens after that? His statement that he was determined not to make decisions for short-term popularity is risable on two counts. Firstly, whatever he does, recessions are cyclical so tinkering at the edges won't help. Secondly, What popularity? with his ratings tumbling in the polls he is seriuosly damaged politcally, like the rest of his cabinet of clowns.
Puting another £15 bn of our money into the banking system is simple throwing good money after bad ( debts ). After all it was this bunch of bankers whose short-term greed was a major cause of the current crisis. 100% mortgages were for the asking. often without a check on borrowers' incomes. Loan were practically forced down customer's throats.
'sentiment is at a very low ebb and will continue to remain depressed while the economy suffers from this unique liquidity blight'. Jeremy Leaf, Royal Institute of Chartered Surveyors
Wee Gordie's suggestion that the current crisis can be blamed on America is simple passing the buck.
The centre for economic and business research ( cebr ) claims that nearly 20,000 jobs will be lost in the city over the next two years, mainly in corporate finance, derivatives and investment banking.

12/04/08
'recession': a temporary decline in the economy (Concise Oxford Dictionary)
if only as a self-fulfilling prophecy the prospect of a global recession looms large. A correction was inevitable but how long this will last is a matter for contention.
In the USA the Banks have accepted responibility for much of the blame for the credit crisis.
The Group of Seven (G7) industrial nations are struggling to put a rescue package together. They plan to force Banks to hold more capital so as to deter them from complex credit products.
G7 will meet with the top Bankers and the US Treasury for the first time ever.
The Council of Mortgage Lenders indicate that the Bank of England are planning to take over risky mortgage assets in the hope of opening up the lending markets.
Though far from running around like headless ckickens it seems that the financial pundits are more than a little uncertain as to the future state of the global economy.

Yahoo!
12/04/08
Microsoft's unsolicited bid for Yahoo has come up against increased opposition as Yahoo considers an alliance with Internet giant Google and AOL. Of course this may just be a ploy to get Microsoft to increase its offer.

THE STORY SO FAR

26/11/07 There is speculation that Microsoft will buy Yahoo, Yahoo may buy AOL.
07/04/08 Yahoo's board of directors believe the Microsoft bid of $29.36 undervalues Yahoo
09/04/08 Yahoo's testing of Google's AdSense service, if successful, search results on yahoo will show ads run by Google.
11/04/08 The possible AOL Yahoo partnership was described by AP as a last ditch effort to prevent a Microsoft takeover.

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