cardboardbox?Youwerelucky
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Any another cheery article <- note the sarcasm!Double cock!
| Quote: | The IMF drew comparison with the Great Depression yesterday. “By any measure, this downturn represents by far the deepest global recession since the Great Depression,” it said.
But what is the current state of play for the globe’s top economies, and what is the prognosis for housing markets?
The IMF said: “Overall, global GDP is estimated to have contracted by an alarming 6¼ per cent (annualized) in the fourth quarter of 2008 (a swing from 4 per cent growth one year earlier) and to have fallen almost as fast in the first quarter of 2009.”
So that’s not good.
As for the developed world, it said: “The advanced economies experienced an unprecedented 7½ per cent decline in the fourth quarter of 2008.” Even emerging economies are thought to have contracted by 4 per cent.
The reasons are a familiar story. The US suffered from the meltdown in its housing market, most of Europe and the emerging world suffered from the resulting fall in world trade.
Of the world’s largest economies, the two worst performers this year are expected to be Japan and Russia, which are expected to contract by 6.2 and 6 per cent respectively.
Both Germany, and what the IMF calls newly industrialized Asia countries, are expected to contract by 5.6 per cent.
Next on the chart of worst performers comes Italy (-4.4 per cent), the Euro area as a whole (-4.2 per cent) and then the UK (-4.1 per cent).
Central and Eastern Europe are expected to contract by 3.7 per cent, Mexico by 3.3 per cent, France and Spain by 3 per cent, the US by 2.8 per cent, Canada by 2.2 per cent and Brazil by 1.3 per cent.
Of the countries/regions shown by the IMF, only China, India and Africa are expected to expand, and by 6.5, 4.5 and 2 per cent respectively.
As for next year, the IMF expects most regions to be posting growth. The exceptions being the Euro area, Germany, Italy, Spain and the UK. The UK is expected to contract by 0.4 per cent, although actually, of the contracting economies, it is expected to suffer the least. Germany is expected to see a 1 per cent contraction next year.
The IMF reckons the US will be flat, and China will expand by 7.5 per cent.
What emerges from all these figures is that, despite the so-called failures of Anglo-Saxon economies, it will be the big manufacturers of the developed world, Germany and Japan, which will suffer the most.
It is all very well the Germans slamming the Anglo-Saxon model, but until Germany starts importing more, and relies less on the rest of the world’s borrowing, there can be no sustainable recovery. The same arguments apply to Japan, up to a point, but Japan has done all it can. It seems that maybe the real problem for the economy of the Rising Sun is its ageing population – and there ain’t much you can do about that.
As for France, while it is true that France has managed reasonably well in this crisis, this is in part because of the rigidities in the French economy. These same rigidities are responsible for France having one of the highest unemployment rates in the world. If you hide behind a Maginot line of business, you may not do quite as badly as everyone else in a recession, but you do pretty awfully for the rest of the time.
What about the housing market? This is what the IMF had to say:
In the US, the IMF expects another fall of 10 to 15 per cent in US house prices, and then stabilization, meaning prices will have fallen by around 35 per cent from peak.
But remember, before this crisis erupted onto the scene, the IMF said house prices were more overvalued in certain European countries, especially the UK, Spain and Ireland.
This was the key sentence from the IMF report on this particular issue: “Ireland, Spain, and the United Kingdom are now experiencing major corrections that most likely have a considerable distance still to run.”
It added: “A number of countries in emerging Europe are also suffering major housing downturns, and for some of these countries, the situation is made more dangerous because a high proportion of mortgages are denominated in foreign currencies, implying a rising burden on households if currencies move abruptly. Downside risks include overshooting in western European markets already experiencing major corrections, more severe corrections in other markets where there are indicators of significant house price misalignments (although household leverage is much lower than elsewhere), and rising household stress in emerging Europe.” |
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raveydavey
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The housing market is screwed and after todays budget, I'm seriously concerned that the one-eyed Scottish idiot is planning to throw more of our money away.
Two developments in Leeds spring to mind. One is touted as 'City Centre' living but is in fact a good 25-30 minute walk from City Square and is sandwiched between what could be generously described as one of Leeds less favourable areas and a dual carriageway. Apartments here were being sold off plan for £100-£150k IIRC.
The developer has made several offers in an attempt to shift them, each of which has seen the price drop. Last week they were offering 'move in' prices from £45k, with a deferred sum of another £20k.
Clearly no-one wants these flats and secondly, what do you imagine that the people who bought 'off plan' at £100k+ are thinking now.
Similarly another development of mainly houses again in a less than glamourous or desireable area has seen prices slip "from £105k" to "from £62k" in the last 6 months. To be able to afford those sorts of discounts simply suggests to me that the original prices were taking the p*ss.
Builders have, until recently, been able to slap up any old rubbish, in areas people wouldn't normally consider and shift them at nearly any price. That bubble has burst, people are wise to them and suddenly no-one wants a "luxury" apartment the size of a shoebox and a half hour walk from the nearest shop. Funny that.
Just wait until the desperate 'buy to let' lot who've taken out 100% mortgages now worth double the value of their flat start renting to DSS tenants in order to get some money in...
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cardboardbox?Youwerelucky
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Exactly Ravey - the problem is this isn't being given any news worthy airtime at the moment. There are 3 major issues that could be about to happen
1. The BTL brigade (i.e. the small times who thought they could become property tycoons) are now starting to see their houses are burdens - mortgage costs gone up, rents stagnant, house value going down - this will lead to a glut of property on the market when they start listing their properties on mass
2. Repossessions - at a very high % at the moment = more property on the market
3. Builders having to drop prices dramatically just to stay afloat
All of this means new property to the market will see a further reduction in price as the supply will outweigh the demand (made worse by the fact lenders won't lend to anyone at the moment)
Not
Looking
Good
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