The air came out of the bond bubble last month, when bond funds recorded the highest five-week outflows in three years and a half, according to capital flows data analysed by Bank of America Merrill Lynch economists.
The announcement by Chancellor Philip Hammond in his Autumn Statement that letting agency fees charged on tenants will be banned has been met with cries of outrage from estate agents.
Their rage is in part justified. Lately, they have been asked to do much more administrative tasks than simply running credit referencing checks. They are also supposed to check immigration papers as well, to ensure that prospective tenants have the right to be in the country in the first place.
The new chancellor of the UK, Philip Hammond, will present his first Autumn Statement on November 23. There are hopes in certain quarters that he will reverse a plan by the previous chancellor to stat phasing out tax relief on interest rates for buy-to-let mortgages.
If he does reverse it, he will make a big mistake with dire consequences down the line. The previous chancellor, with various governmental programs such as Help to Buy, had already blown up a real estate bubble — helped of course by loose monetary policy and a flood of cheap money from abroad.
The banks are already making plans to shift some jobs out of London into other EU capitals and the French government, usually considered anti-big business, is rolling out the red carpet.
There are some who say “good riddance” to a sector where all sorts of governance scandals have dominated the headlines since the crisis and into which UK taxpayers have had to pour billions to keep it afloat.
While it is true that bank bailouts have cost the taxpayer a lot, a diminished banking sector in the city of London would almost certainly trigger a crash in house prices, which in turn could start a recession.
Another trick to keep UK house prices rising is taking center stage: the extra-large mortgage. It’s the mortgage lasting half a lifetime, or more, which allows you to buy a home even if, under normal circumstances, you would not afford it.
The news that Wells Fargo, the US bank that is the world’s biggest lender by market value, targets millennials with its mortgage loans is seen as a sign that we’ve finally gotten over the crisis that nearly brought down the world economy in 2007-2009.
The Financial Times reported that the head of the bank’s home finance business said he was keen to lend more to first-time buyers, who, the paper said, have so far “put off settling down.”
But what is good for America is not necessarily good for the world. While in the US there has been some deleveraging and restructuring that allows the housing market to re-start from a cleaner basis, it is not the case in the rest of the world.
In a recent speech, British Prime Minister David Cameron again slammed corruption and those who tolerate it, and called for global political leaders to talk more about the “cancer of corruption” and how to combat it.
By Antonia Oprita
House prices in the UK are getting another boost from the government, just in time for the May 7 general election.
The residential property bubble continues in countries like the UK and Sweden, but it seems to have spread to some other countries as well, according to data from the Bank for International Settlements.