Prices in London tumble

Reason for the fall?

http://business.timesonline.co.uk/tol/business/economics/article4553694.ece

what does this have to do with Manhattan RE?

London, Dubai, Dublin, Spain, Miami, New York...if you can't see how or why they are all inter-related, then you need to read up a bit on the ups and downs of liquidity.

I don't see the connection. How is a global slowdown, increasing unemployment and a banking system on the verge of collapse, effect NYC RE?

A lot of the same financial abuses took place in London as in the US. London and U.S. banks have all done some of the same dumb mortgage lending. And London prices soared to astronomical levels making New York look almost cheap. (And they had their own invasion of wealthy Russians using their petrodollars.) London is now experiencing similar I Bank layoffs to what's happening here and their economy is also tanking. In addition, it is worth noting that there has long been a significant statistical correlation between UK and US stock and housing prices.

(I trust you mean "affect" NYC RE.)

dco, I didn't realize you were being facetious at first. (It's hard to keep track of the ranks of the bulls and bears on this site.)

Prices are over the top what would a 5% drop mean...absolutely nothing.

Right over my head as well! I used to be a lot quicker.

east_cider- No problem, I also find it hard to keep track.

julia- Prices were over the top in whole the country as well and look how that turned out. 5% drop in a month is not "nothing", at that pace it will be 20% in a month and then what? You have made these comments before and they seem very naive.

Wow, this was the last straw! Between London being down 3.8% YOY, the Turkish stock market being down 1.3% today and GM pulling out of the Oscars, I will scared to buy any property anywhere in next 10 years!

All of this is going to end bad, people. I suggest any owner wake up, face reality and list their property for sale within a month.

I was traveling a couple weeks ago, was talking to a Londoner, and the subject of real estate came up. She sold her apartment late last year, and was very glad she did. A lot of the things she mentioned about the dynamics of what felt (to her and many others) like a bubble sounded very familiar. The biggest one, though was the consistent view that "London is different" from the rest of the UK and the rest of Europe. Her view was much more nervous/cautious, which is why she sold.

BG, the schtick was funny the first few times. Now...not so much. I suggest creating a new user profile or developing some new material.

bgaria,
LOL, you win comment of the day man.

No schtick here here. I am serious. Not my problem that you can't make the connection between the NYC real estate market and GM pulling out of the Oscars. Or are you one of those bulls who is going to try to rationalize that away??

Wake up, man. Denial is only gonna take you so far.

Hey, I'm just trying to help. Your act is more stale than Larry the Cable Guy.

Good luck with the cognitive dissonance.

BGaria, these headlines taken by themselves may not have much of an impact but they are facts that a savy investor would likely take into account. There is little question that the strong fundamental backdrop that propelled some of these major RE markets to historic valuations has changed. Where they go from here, time will reveal all.

What should cause at least some concern (outside of the obvious bank/broker issues) are the serious fiscal budget deficits NY state and the City are facing today and in the out years. Perhaps some folks do not consider this to be of importance but history would dictate otherwise.

I'm with Serge on this. All these different news items are like the pieces of a mosaic. With enough of them the picture becomes increasingly clear.

Topper and when fundamentals begin to turn ever so slightly, the little pieces of the mosaic will also begin to fall into place. Then it be a lot easier to drop the tailgate load up the truck. :)

newbuyer99, can't say I disagree but be sure to distinguish between properties in Kensington, Chelsea, and Pimlico vs. places such as South London and Canary Wharf. Canary Wharf is a perfect example of a bubble. Endless condos built right next to each other in the middle of nothing (Miami rings a bell as a good comparison).

Do people out there understand the cause of bubbles? The hardest hit areas are those that had little constraint on building in locations that were not interesting to begin with. Couple that with cheap money and a bunch of folks living above their means and you have a bubble. Was Manhattan a bubble? Did we have a run up of prices that may not be sustainable long term? Potentially. Did we have asset values created out of thin air like the Inland Empire, Phoenix, and Florida? No we did not. There is something to be said about the desirability of an area before all of this occurred and this is the exact reason why Manhattan did not fall with the rest of the country.

So yes, Manhattan is different from the Inland Empire where rows upon rows of houses were built on former diary farms in the middle of East Bum. Manhattan is different from Miami where too many to count 4000 unit condos were built right next to each other, and Southwest London is different than Canary Wharf. Once again, the old real estate adage is true. It is all about location, location, location.

I know it pains some of you to be more specific in your doom and gloom speeches, but lumping all of these areas together is quite silly and tragically inaccurate.

Juice, don't you know that specifics and nuance are not welcome on this board? Try to be more like Jim Cramer - just "Buy buy buy!" or "Sell sell sell!" will do.

JM- I agree with much of what you said. However, the problem I have with your explanation is, that you act as though we haven't developed any new condos in NYC. The truth is that thousands of these units are being artificially kept off the market. Just look at the Financial District. There are thousands of units listed and thousands more still not offered. Lets not even start with the outer boroughs. So to say that we haven't had the same building boom, is just not true. The question is, will demand meet supply? Will prices be able to stay at these levels or will they need to adjust? and by how much?

dco, I think that is a fair point. So how about a conversation about the financial district (or other areas) and whether or not they have been over developed? What has been the appreciation in that area and how has it changed the perception as a place to live? Will supply meet demand? I have no idea because I know nothing about FiDi but it sure would be a much more interesting and accurate conversation than "Manhattan will correct by 40%" or "Manhattan is the same as Miami".

JM- I'm sincerely sorry that you don't see my point. I'm may be proven wrong. I actually would hate to be wrong, however I don't mold my analysis toward my feelings. I go strictly by the indicators. Lets hope I'm wrong.

I actually would hate to be right

Yes, lots of different neighborhoods with different dynamics. But there still is a strong positive correlation between most of the different Manhattan neighborhoods. Certainly a lot higher than the correlation between Murray Hill and South Beach!

I'm most familiar with all the cranes in the Chelsea gallery district. Boom town! And these places are not priced for your average Coop Joe. These are designed exclusively for I-Bankers.

Someone tell me, who is going to buy, the thousands of units, currently on the market and the ones that will food the market in the future. Wallstreet is dead for the next 2-3 years. Bonuses will take years to recover. I just don't see demand meeting supply. I don't know, perhaps I'm crazy.

JuiceMan - totally fair point about London neighborhoods. To be fair, I know next to nothing about London, so was just reporting a conversation I had.

With respect to Manhattan neighborhoods, I completely agree that you have to look at each one in its own right. However, I also second Topper's point about the positive correlation, since manhattan neighborhoods are (imperfect) substitutes for one another.

Further, I totally agree with the point that Manhattan is a very desirable place to live, and thus doesn't have the problem of asset values created out of thin air. However, the issue I have (and many of the bears) is the run-up in recent years. Is Manhattan desirable? Absolutely. Is it more desirable in 2007-2008 than it was in 2002, or 3 times more desirable than it was in 1998? I don't think so.

Agree completely. And at these prices it is very profitable for builders to keep building. Eventually the market returns to a new (lower) equilibrium.

I hope.

Signed,

Frustrated Wannabe Buyer

dco -- I agree. My spouse and I both work in finance and it's just ugly. You're lucky if you have a job (I'm concerned for mine) and you better be able to live off your base salary. B/C unless you've got a good contract and are a trader with a super P&L, you won't get a bonus. BTW, my bank just froze open recs as well (answering to a different thread I know).

So, we were looking to buy last year, but now we just want to stay employed through the recession. I've got to imagine there are lots of worker bees in the same spot as us.

LP1- I 'm sorry to hear that your going through a rough ride. Hang-in there and like all things, it will eventually get better. In the mean time, you know as well as I that, the best offense is a great defense. Stay within your means and refrain from throwing money away. By not buying last year you probably saved yourself a lot of stress and money. Concentrate on that aspect, and prepare for a housing opportunity of a life time, in the next few years. Good Luck.

LP1 - excuse me for butting in but if you and your wife both work in finance why on earth would you "invest" a large portion of your net worth in an asset that is 100% correlated with the health of the finance industry? Diversification is key. Buy farmland and rent in NYC if you want to weather the tough times.

> Canary Wharf is a perfect example of a bubble. Endless condos built right next to each other in the
> middle of nothing (Miami rings a bell as a good comparison).

Middle of nothing? Thats quite a stretch.

Canary Wharf is the big new major London business district. The 3 tallest buildings in the UK are there. A host of household names have their UK HQs there... Credit Suisse, HSBC, Citigroup, Lehman Brothers, Morgan Stanley, Bank of America, Clifford Chance, Thomson Reuters, the Daily Mirror, bla bla bla.

Comparing that to Miami is a pretty big stretch... Canary Wharf was nowhere before they built it. But the specific plan was to "move" the downtown center.... same plan as WFC (and built by the same folk).

Coincidentally, a friend who lives in (and owns property in) London was here last weekend saying that the situation I described here was pretty much the case over there... CRAZY stretches of credit, and folks are starting to get into real trouble. IF anything, he still thinks its worse over there, and is trying to sell..

"Middle of nothing? Thats quite a stretch"

um, not it's not. It may have the 3 tallest buildings in the UK there (which is what, ten stories?) but it would be a dreadful place to live, sort of like moving into an office park. The place has a man made suburban shopping mall feel to it and condos galore built right on top of each other. It may be a great new business district, but getting there on the tube sucks and once you are there, you better hope you are working because, there is nothing else to do. This is a perfect example of asset values out of thin air and the area is and will continue to be highly speculative.

JuiceMan- Sounds just like LIC. hahah...

Juice, I'm not saying its a good place to live, but "nothing" was just wrong. Battery Park city is a much better comparison. I also think thats an awful place to live. But "nothing" is just not correct.

> JuiceMan- Sounds just like LIC. hahah...

Damn, dco, you beat me to a good one...

Not quite dco, LIC is 5 minutes from Manhattan. It can take a half hour or more to get to Canary wharf from center of London.

It can take a half hour or more to get to LIC from the center of Manhattan as well...

"Battery Park city is a much better comparison."

No it isn't EW. You can walk from BPC to something cool in 5-10 minutes. If you walk 5-10 minutes from Canary Wharf, you are smack dab in the middle of nothing.

Thanks for more of your typical wrong information Eddie Wilson. LIC is a 5 minute train ride to either Grand Central or 53rd and 3rd.

I used to work in the Isle of Dogs, of which Canary Wharf is a part.

Isle of Dogs = Jersey City redevelopment zones . . . it even has its own "other" subway system: DLR = PATH

Londoners' opinions on that part of the Docklands closely track NYers opinions on JC. I opted not to live in a company apartment there; you'd make the same decision.

It's heavily tilted towards American companies, if that implies anything.

But, JuiceMan, London is ridiculously sprawly (almost entirely three stories tall), and they have a saintly patience for commuting, so a simple time comparison doesn't say as much as you'd think.

Long Island City is more comparable to one of the blighted cities of the North of England.

"something cool" as in the financial district? So, CW stinks because its mostly commercial and isolated, but BPW is cooler because its near a neighborhood thats... mostly commercial and isolated?

> LIC is a 5 minute train ride to either Grand Central or 53rd and 3rd.

Because all of LIC is right on top of the train. Especially the waterfront.

> Londoners' opinions on that part of the Docklands closely track NYers opinions on JC.

Then the LIC comparison is confirmed...
;-)

> Long Island City is more comparable to one of the blighted cities of the North of England.

I think the Who played there.

"It's heavily tilted towards American companies, if that implies anything."

I actually didn't know that alanhart, but that certainly makes sense based on the housing stock out there. JC is probably a good comparison without the views.

"But, JuiceMan, London is ridiculously sprawly (almost entirely three stories tall), and they have a saintly patience for commuting, so a simple time comparison doesn't say as much as you'd think."

You have a point alanhart, all I'm saying is that Canary Wharf won't hold up as well as other parts of London for the same reasons Miami didn't hold up to Manhattan. There are great spots a half hour away from city center that already had a solid foundation, Canary Wharf is an experiment gone bad.

EW, where would you rather live? BPC or JC?

> EW, where would you rather live? BPC or JC?

If commuting were not an issue, JC. MUCH more going on there. Not the waterfront area, thats ass (a lot like BPC in fact).

> Canary Wharf won't hold up as well as other parts of London for the same reasons
> Miami didn't hold up to Manhattan.

Ok, we just made a HUGE logic jump.

You said the difference between training it to CW (from central longon) vs. LIC (from Manhattan) too far to compare, but Manhattan vs MIAMI is a fair comparison?

That makes absolutely no sense. We're talking about value of areas relative to proximities, and Miami isn't even on the map here..

Mind you, BPC commute 'aint so grand either... having to cross the footbridges (which are only at a couple points) is a real pain.

"If commuting were not an issue"

But communing is an issue, I think that's my point. EW, lets not get into neighborhood bashing here. I really don't have an opinion on JC or BPC except for proximity. I'm not really even sure why you are arguing with me on this except that you like arguing.

"That makes absolutely no sense. We're talking about value of areas relative to proximities, and Miami isn't even on the map here"

EW, I agree and have said this for months. You should have a talk with your fellow doomers.

Juice, to me fair... you brought up Miami as a comparison. You can't now say it shouldn't be brought up as a comparison.

> But communing is an issue, I think that's my point.

But if I work in midtown, its 6 of 1...

Not to mention, it was you who brought us into specific neighborhood arguments.

The original point is this... London is having its own issues.

"to me fair... you brought up Miami as a comparison"

You are correct, bad comparison. Please strike from the record.

Done. Nice doing business with you. ;-)

Seriously, though, based on your other comments, am I reading it right that you are predicting that the fringe neighborhoods will decline more than Manhattan?