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Keep The Aspidistra Flying
Aug. 26th, 2006 04:14 pmEven Irwin Stelzer had to admit last week that there was a "slowdown" in the US property market. He called this "patchy", noting that areas in Manhattan were still attracting more buyers than sellers.
Yes, well, focusing on Manhattan is a neat way to deflect the view from Florida, where new-builds will soon be available at knock-down prices (if they aren't already). The impact of the shift to variable mortgages in the US seems to have been missed by most US commentators, but we in the UK know how much more volatile it makes the market.
On the plus side (for most) it will halt the sequence of interest rate rises in the US. What impact this will have on the dollar depends on where interest rates go elsewhere, but with an inevitable slowdown in the US economy, it's hard to see the rest of the world not catching a bit of a cold from this, which is likely to suppress interest rates in Euroland and any non-commodity country. Similarly, this should slightly depress the BRIC economies' demand for raw materials, slowing down growth in Canada, Australia andother suppliers of raw materials.
In other words, there's the potential for a "soft landing" if the timing is right, and this might ease the downward pressure on the dollar, although a fall seems significantly more likely than not, because of US internal politics as much as anything else.
Anyway, thinking of Manhattan, I see that London now has more than half its prime residential properties (more than $3.8m, or about 2% of the market is my guess) going to buyers abroad. I did some rough numbers in my head and reckoned that the trickle-down effect of this probably added about $40,000 to the average London house price, with the impact gradually diminishing as you move down the food chain.
It's tempting to say that this makes London more resistant to any price dpression, but in fact it just makes the contributing factors to price rises and falls more volatile. Foreign money can leave just as fast as it comes in. The argument is similar to the one put forward about Las Vegas house prices, and it is equally spurious.
But, for the moment, London seems disconnected from the housing economy in the rest of the UK.
++++++++++
Yes, well, focusing on Manhattan is a neat way to deflect the view from Florida, where new-builds will soon be available at knock-down prices (if they aren't already). The impact of the shift to variable mortgages in the US seems to have been missed by most US commentators, but we in the UK know how much more volatile it makes the market.
On the plus side (for most) it will halt the sequence of interest rate rises in the US. What impact this will have on the dollar depends on where interest rates go elsewhere, but with an inevitable slowdown in the US economy, it's hard to see the rest of the world not catching a bit of a cold from this, which is likely to suppress interest rates in Euroland and any non-commodity country. Similarly, this should slightly depress the BRIC economies' demand for raw materials, slowing down growth in Canada, Australia andother suppliers of raw materials.
In other words, there's the potential for a "soft landing" if the timing is right, and this might ease the downward pressure on the dollar, although a fall seems significantly more likely than not, because of US internal politics as much as anything else.
Anyway, thinking of Manhattan, I see that London now has more than half its prime residential properties (more than $3.8m, or about 2% of the market is my guess) going to buyers abroad. I did some rough numbers in my head and reckoned that the trickle-down effect of this probably added about $40,000 to the average London house price, with the impact gradually diminishing as you move down the food chain.
It's tempting to say that this makes London more resistant to any price dpression, but in fact it just makes the contributing factors to price rises and falls more volatile. Foreign money can leave just as fast as it comes in. The argument is similar to the one put forward about Las Vegas house prices, and it is equally spurious.
But, for the moment, London seems disconnected from the housing economy in the rest of the UK.
++++++++++
