Tuesday, June 30, 2015
I agree, but think USA will be yet more attractive for capital flight.
Could London real estate benefit from Greek Eurozone exit?
"It does look as though the London real estate market will benefit to a certain extent from safe haven status and the ongoing problems in Greece. Whether this will stretch what many perceive to be already overvalued UK property assets remains to be seen but there is no doubt that the decision of previous UK governments not to adopt the Euro is certainly starting to pay great dividends for the country."
Posted by libertas @ 12:55 PM (6816 views)
12 thoughts on “I agree, but think USA will be yet more attractive for capital flight.”
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britishblue says:
The money is already here! The weekend Cyprus went bust in March 2013 money flowed into London real estate from across Europe. I think what will be more interesting is when the Eurozone falls apart and highly devalued local currencies start coming back in, how the money flows back to the native countries, especially as many of the Europeans have not only made a killing on the real estate price but also the rise in sterling over that time period. There could well be a glut of those horrible flats that are ruining the landscape along the river Thames coming onto the market.
icarus says:
bb said ‘There could well be a glut of those horrible flats that are ruining the landscape along the river Thames coming onto the market’. Yes –
“In superheated London, where stratospheric land values beget accordingly bloated developments – authorities are allowing planning policies to be continually flouted, affordable housing quotas to be waived, height limits breached, the interests of residents endlessly trampled. Places are becoming ever meaner and more divided, as public assets are relentlessly sold off, entire council estates flattened to make room for silos of luxury safe-deposit boxes in the sky. We are replacing homes with investment units, to be sold overseas and never inhabited, substituting community for vacancy. The more we build, the more our cities are emptied, producing dead swathes of zombie town where the lights might never even be switched on” (See quiet guy’s previous post.)
Furthermore: “Introduced as a negotiable levy on new development, Section 106 agreements entail a financial contribution to the local authority, intended to be spent on offsetting the effects of the scheme on the local area. The impact of a hundred new homes might be mitigated by money for extra school places, or traffic calming measures. In practice, since council budgets have been so viciously slashed, Section 106 has become a primary means of funding essential public services, from social housing to public parks, health centres to highways, schools to play areas. The bigger the scheme, the fatter the bounty, leading to a situation not far from legalised bribery – or extortion, depending on which side of the bargain you are on. Vastly inflated density and a few extra storeys on a tower can be politically justified as being in the public interest, if it means a handful of trees will be planted on the street”.
http://www.theguardian.com/cities/2014/sep/17/truth-property-developers-builders-exploit-planning-cities
reticent says:
@1 exactly.
The question is: will a renewed flood of Spanish, Portuguese and Italian capital flight offset greeks moving back into drachma?
I would argue not. Greece is a basketcase. The likelihood of a domino effect is nothing like it was 5 years ago. More significantly, most Europeans I’ve spoken to with money in the UK are fixated upon the threat of Brexit. Other safe havens are available…
hpwatcher says:
Happened months and months ago. Too late now.
London estate market more likely to tank, look at what is happening in China.
icarus says:
‘Other safe havens are available’ and we don’t yet know to what extent investors will choose those havens instead of London in the wake of the introduction of CGT (from April 2015) for non-UK residents on gains from their disposing of UK residential property. Before then non-UK residents typically paid no CGT on such gains but since then they will pay the same as UK residents, with individuals and trusts taxed at up to 28%, and companies at 20% (on gains made after April 2015 valuations).
mark says:
i think buying in greece in a few months will be a winner, cash strapped people wanting to sell property in greece, it will be like poundland
reticent says:
@5 Yeah, you mentioned that a few days ago. TBH, it had completely slipped my mind with everything leading up to the election and the surprising result.
The more I read, the more it seems like those luxury flats will be sold to locals at a massive discount.
The cheapest studios in Battersea Power station are £825k off-plan. No way there won’t be a correction before those flats are all built.
clockslinger says:
Democratically elected party asked people what to do about something that will really affect them and who should take the pain and IMF say “no, you can’t do that”. Christine Lagarde (elected by whom?) compares democratically elected representatives of the Greek people as “children”. Troika have secret negotiations with a party commanding a towering 6% of the vote in the last election with a view to enforcing the will of the banks through precisely what mechanism, one wonders? But hey, f**k it, that’s how democracy rolls.
Two generations ago British people fought and died in Spain for matters of principle not far removed from what’s happening right now in Greece. Now we worry about what the baks will do to London property. Do you think we might be to blame?
But yes, QE will be resurrected on steroids (because of Tory economic policy failing, but blamed on Greece) the moment there is Greek exit. If there is one. And if there is a link between QE and London property, then yes, that will rise too. Might be too expensive already but if dirty shirts are increasing in value, I’ll have one too. Isn’t that how it works?
Daring Dan says:
Maybe in the short term it would benefit, but if greece defaults, which is basically a certainty, call it a host of polite names if you want, ‘restructuring’ ‘refinancing’ it all means the same thing, default. Then Ireland and/or Portugal will follow suit, if that happens, its not the end of the world. But when that happens, Spain will be next, and Spain, being the worlds 12th largest economy will crash the euro entirely, meaning germany, italy, and all the euro countries would have to return to the peseta, drachma, deutschmark etc etc, which will be worth roughly half of what the euro was worth. So in the long term, everything in europe will be halved, including house prices.
taffee says:
They did all the same things in Japan but once the public realised it was just a speculative
Bubble nothing the government did made any difference.huge sellers rushing for the exit
And buyers holding off……went on for 20 years
sneaker says:
Maybe some silly questions but
1. if money wanted to leave Greece, it’s had five years to do it: why would it suddenly be smart enough to leave now when it hadn’t left before?
2. with Greece’s banks closed, how would such money leave?
icarus says:
Think globally. US/UK QE/ZIRP meant loadsamoney sloshing around. It went from ‘advanced economies (AEs)’ into Latin America (LA), China and other ’emerging economies (EEs)’ because AE economies were stagnant, based as they were on bank bailouts, said monetary policies and austerity with little or no government investment. LA, China and other EEs were, OTOH, growing substantially, based to a large extent on China’s massive fiscal stimulus, government investment and phenomenal growth around 2009-10 to 2012-3. Other EEs grew too since they were supplying commodities and semi-finished goods to China. AE QE/ZIRP money went into EEs in a big way – some say as much as $1 trillion into LA – into its real economies and infrastructure as well as its burgeoning stocks and other financial assets.
Then China started to try to clamp down on over-lending and bubbles and its growth slowed, and the Fed ‘recalled’ a lot of those dollars back to AEs by announcing the QE taper and by signalling possible IR rises. So the money sloshed back. This left LA bereft, with its big 3 (Brazil, Argentina, Venezuela) experiencing sharp recessions and falls in asset prices. The money went into such AE assets as southern European government bonds, US stocks and junk (also high yielding) bonds and real estate and infrastructure, especially in London and the South East.
The point of this little story is that this sloshing back was a one-off event, so the major investment in London property has probably happened already.