One of my readers - Simon - asked a brilliant question. "How much have house prices already fallen in euro terms?" He correctly pointed out that since last summer, sterling has crashed against the european currency.The chart above answers Simon's question. Since last July, UK house prices, when expressed in euros, have fallen 19.2 percent. Putting it in cold cash terms, house prices are down €57,000 from a peak of €297,000.
19 comments:
Good time to buy if you are holding euros.
It is always a good time to buy.
Shocking stuff, imagine buying a flat in London with Euros a year ago. 19% is a real whack.
I'm kind-of kicking myself... I anticipated that Sterling would slide against the Euro... and I was in a position that I knew how to take advantage of this... but I did nothing... mainly owing to inertia and - while I anticipated a slide, I didn't anticipate a slide on this scale.
What about prices in roubles?
Brilliant question, brilliant answer.
Thanks, now that is a bubble bursting.
Looking forward to when it shows that in sterling.
Interesting but you could have priced it in gold, oil, wheat, Whoppers, Rolex watches or anything else.
UK houses are bought for pounds with mortgages denominated in pounds.
For what it's worth, I think the Euro is in a bubble and will burst soon. The ECB can't stay hawkish forever and their export driven economy is suffering.
But yes, the chart is a graphic illustration.
Nick
The Euro is not a bubble, its the Pound that has fallen. Of course the pound will eventually gain strength agian. I know that the outcome is the same but it is important to understand the difference.
Haunted,
The ECB is protecting the Euro right now by holding rates and making hawkish noises. Great. Well done ECB.
However, the Euro-zone is rapidly falling apart with Spain, Italy and Ireland sinking into depression and begging for bailouts. At the same time the strong exporters like Germany and France are facing uncompetitiveness from a strong currency while also seeing their markets evaporate.
The clamour for devaluation is rising and there's a fair chance the ECB will cave in.
I don't like the Euro's current price based on where the Euro-zone is headed. I think it's propped up because the dollar and pound's falls came earlier and by the rush to any currency but them.
I'm still calling a bubble.
Nick
I chose euros for the obvious reason that we are members of the EU.
If not for Brownite cowardice we should also be part of the euro.
The ECB have maintained rates well below sterlings' for years now.
As sterling collapses, interest rates will have to rise alot. Mortgages in pounds will increase and UK house prices will fall further.
Germany is in an incredibly strong economic shape.
I cannot see them devaluing the mark oops euro in this inflationary period of time.
Simon, so house prices will recover in euro terms. Good time to buy!
I'm enjoying this london estate agent gimmick, is it a bot ?
It is a EUR bubble! Against USD or JPY, GBP hasn't changed that much.
I'm enjoying "London estate agent" too. It is always a good time to buy, if you have the cash. The problem is only the price asked and the quality of the asset offered. That's his problem and why he is posting here rather than tending to customers.
Mark - I beg to differ. GBP has fallen significantly against the Yen. June 2007 - £1 bought ~250yen; Now £1 buys ~200yen... that's over a 20% difference in less than a year. Hardly conducive to the carry trade!
In fact, the US$ and GBP have fallen relative to just about every other currency... and we've managed that devaluation in the UK without needing to slash interest rates. That should tell you something.
GBP has been falling also against Eastern European currencies - such as the Polish Zloty (5.6 a year ago; 4.3 today - a ~25% fall) and Czech Koruna (~42 a year ago; ~31 today - a 25% fall). Sterling has also fallen by a similar amount against Swiss Francs and had fallen sharply in 2008 against the Chinese Yuan (20%ish so far) though it has risen against the Indian Rupee... if by a smaller proportion.
asteve,
Do you think there'll be a reversion to mean or that the pounds fall so far is just indicative of further falls to come?
The yen is a special case, I think. In 2001 the Bank of Japan increase money supply by 25% within a few months. Astonishing really. The yen had been hovering around 180 per pound until then and before long it was up to 250 (I was living in Japan at the time, so it made quite a difference to me). I think that, absent crazy printing, the yen would've trended towards 200 regardless.
Nick
Honest answer: God only knows - I don't.
I've a feeling that China will continue to gain strength (though, ironically, that is not what I think its leaders want) and Eastern European currencies will continue to strengthen against Western European ones.
The major currencies - who knows? The strength of the Euro depends upon Euro politics - a standoff between Spain and Germany... and American strength depends how mad Bernanke feels like being and how quickly they can start exporting.
It is entirely beyond me to grasp what is going to affect the Asian currencies.
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