Saturday, 2 August 2008

Rents down, banks crashing

The US banking crisis rolls on.

The US deposit insurance corporation - the FDIC - warned four banks about their lack of liquidity. Remind me again; how many banks are on the FDIC's at risk list?

Rents down in London

Regular readers will know of my deep skepticism about any story suggesting that rents are rising rapidly. The official data simply doesn't bear these claims out. Today, the FT carried a story suggesting that if anything rents are coming down. "The owner of a house in Chelsea, which was let last year for £2,700 a week, was now taking offers of more than £2,000. Riverside apartments that were being let for up to £1,500 a week this time last year were now going for about £1,200." You just got to love a story like that.

Pay restraint

What does the governor of the Zimbabwean central bank have in common with Mervyn King and Alaistar Darling? All three are calling for wage restraint as a means of combatting inflation.

Reserve Bank governor Gideon Gono said "Zimbabweans must realise that the country is in a practically binding state of socio-economic emergency. As such, there is need for a universal moratorium on all incomes and prices for a minimum period of six months."

Here is a better strategy for reducing inflation; stop printing money. Mervyn would do well to follow the same advice.

Thai inflation almost 9 percent

The fastest increase in prices for ten years. The Big I is back.

Lehman trying to offload mortgage securities

Just what the MBS market needs right now.

Citigroup to face fraud charges

Things are so bad at Citi that I am beginning to feel sorry for them. Massive losses, downsizing, a balance sheet full of crap and now this. New York Attorney General Andrew Cuomo plans to charge Citigroup with fraudulently marketing and selling auction-rate securities, and destroying documents that had been subpoenaed.

Greenspan says US housing market nowhere near the bottom

He also thinks that the odds of a US recession is still 50:50.


Anonymous said...

London's calling!

Mmm, the rental figures you cite are fascinating; if one assumes a £1500 per week rental was being asked by a speculative investor prepared to accept an annual return as low as 5%, the capital value of such a riverside flat will have neared £1.5 million.

If one calculates the value of such a property on the traditional rule of thumb for rentals which applied before the bubble of a 10% annual return, 5% for income and 5% to cover maintenance and other overheads, that riverside apartment ought to be worth only £600,000 or its inflated equivalent in a few years time.

That's a real drop of 80% on the cards for speculative buy-to-let investors.

What good news for those London calls to 'live by the river', as the song had it.

B. in C.

peterthepainter said...

I saw that FT article and thought you would post on it.

to paraphrase Christopher Fildes..
Bubble bubble, toil and trouble...our inflation up but theirs is double!

aSteve said...

Recession is 50:50 in the sense that there are two answers to:

"Are we in a recession?"


Anonymous said...

Correction to mine above - apologies, 0.9/1.5 suggests a real drop of speculatively purchased rentals of about 60%, not 80%. Mmm, there it is, that figure of a real drop of 60% by the bottom. Keep saving all!

B. in C.

Anonymous said...

The Economist reported on some high rise flats in the Woolwich as going down in value. It even reported that one went to auction at L115,000- down from a high of L330,000 just a couple of years ago.