Good reads from around the Web.
I know someone looking to buy a flat in London who was astonished last week to find his low-ball opening gambit treated with some reverence.
Earlier this year our mild-mannered friends had recounted harrowing tales of being transformed into bare-toothed gazumpers by those insidious ‘open house’ days, which were blatantly designed to game frightened buyers into bidding well above the asking price (after they’d trapped the opposition couple in the box bedroom with a strategically placed Eames chair wedged under the doorknob.)
But now? Fewer viewings, no offers, and “yes, that does sound like a reasonable position to take in today’s market”.
ThisIsMoney [1] sees a chill is coming, and it blames democracy:
It may still be six-and-a-half months before the General Election, but the market is already preparing for its traditional slowdown leading up to polling day.
Sellers know if they do not complete by Christmas, they may be stuck with their homes until well after the election, which we know will be held on May 7.
As a result, between a quarter and a third of homes on the market today have had their prices cut, with more to come.
If you prefer to hear from the frontline rather than hacks hunting for a story, then consider this week’s update [2] from Foxtons, one of London’s swankier agents:
Although the longer term outlook for London property markets remains positive, the market is expected to continue to be constrained for some time due to political and economic uncertainty within the UK and Europe, tighter mortgage lending markets and mismatches between the price expectations of buyers and sellers.
These external headwinds have exacerbated the rate of slowdown in sales transactions we noted at the time of our H1 results.
Market volumes in Q3 have been more in line with the first half of 2013 and we now believe that market volumes in H2 2014 overall will be significantly below levels during the same period last year.
That was enough to knock roughly 20% off Foxtons’ share price, and it had already been sliding for months beforehand.
General uncertainty
I’ve heard some hedge fund managers predicting very dire things for next Spring in the UK, and while I’m not one to spread doom they might have a point when it comes to the frothy [3] property market down south.
Their concern is that no political party is likely to win the General Election, and that all subsequent tie-ups come with uncertainties.
In particular the Conservatives seem to be talking themselves into a position where mooting a UK withdrawal from Europe is not a bogeyman to frighten the moderates but an implied plank of their manifesto. Amongst much else, it’s hard to see London continuing to suck in capital and talent in a world where we are leaving Europe. The potential alone could put off buyers, especially foreign money.
Meanwhile Labour and the Lib Dems are promising mansion taxes, which are hardly bullish for London house prices.
Add the prospect of higher interest rates and ever-tightening banking regulations and one does wonder if the trigger is here to finally pop one of the last great pre-2008 asset booms.
Merryn Somerset-Webb thinks so. In the FT this weekend in her article [4] “The deficit will kill the property bubble” [search result] she writes:
Sooner or later, and regardless of who wins the next election, wealth taxes in the form of property taxes are going up. […]
You might not be ready to accept this yet – but the buyers of London property clearly have.
On the other hand I’ve been short one London house for far too long, and I may be clutching at straws.
Where do you think UK property prices will go in the next 6-12 months?
From the blogs
Making good use of the things that we find…
Passive investing
- Three reasons to ignore market downturns – Canadian Couch Potato [5]
- The ‘MythBusters’ approach to indexing – Vanguard blog [6]
Active investing
- How to get poor quickly: Buy expensive stocks – Millenial Invest [7]
- Don’t take this market personally – A Wealth of Common Sense [8]
- How blue chips get locked into irrelevancy – Abnormal Returns [9]
- UK stock market still looks cheap-ish – Retirement Investing Today [10]
- Lessons from an accidental trade – Beddard/iii blog [11]
Other articles
- How to become an equity fund manger [Sort of! 😉 ] – Banker’s Umbrella [12]
- The world is not deleveraging – The Value Perspective [13]
- How much is enough? – The Escape Artist [14]
- 10 lessons learned from Shelby Davis – Novel Investor [15]
- Rewording retirement planning – Kitces [16] (via Mike [17])
Product of the week: ThisIsMoney [18] argues not all is rosy with the upcoming pensioner bonds. There will likely be no monthly income option (popular with pensioners) and interest will be paid net of tax, which means non-taxpayers will need to reclaim the rest. On a brighter note, the predicted 2.8% interest rate (gross) for the one-year bond would easily beat all the current Best Buys at MoneySupermarket [19].
Mainstream media money
Some links are Google search results – in PC/desktop view these enable you to click through to read the piece without being a paid subscriber of that site.1 [20]
Passive investing
- Pension fund managers chase performance too – Swedroe/ETF.com [21]
- What drives defensive factor strategies? – Swedroe/ETF.com [22]
Active investing
- Why Warren Buffett was right to bail out of Tesco [Video] – Motley Fool [23]
- Equity income managers downplay dividend gloom [Search result] – FT [24]
Other stuff worth reading
- Successful investors never give up – Motley Fool (US) [25]
- When a stock market theory is contagious – Shiller / New York Times [26]
- “I save £1,000 a year on fancy supermarket shopping” – Guardian [27]
- Ridiculous article claiming a rabbit costs £5,000 to own – Telegraph [28]
- Nationwide’s 1.74% fixed mortgage for existing customers – Mortgage Advisor [29]
Book of the week: The Economist [30] admits it’s “easy to get steamed up about how much executives earn” but then kicks pay reform and tackling soaring income inequality into the long grass by claiming (and I do think it’s far-fetched claim) that $10-million-a-year CEOs might run off to become hedge fund managers or even “writers” (really?) if they weren’t paid gazillions in share options. Read Michael Dorff’s new book on this subject – Indispensable and Other Myths [31]
Like these links? Subscribe [32] to get them every week!
- Reader Ken notes that: “FT articles can only be accessed through the search results if you’re using PC/desktop view (from mobile/tablet view they bring up the firewall/subscription page). To circumvent, switch your mobile browser to use the desktop view. On Chrome for Android: press the menu button followed by “Request Desktop Site”.” [↩ [36]]