Rolling UK Economy Into The Shitbin Thread

in say 2 years time what will the impact of the recession be on rent prices on a flat in a city centre? in the city where i live, apparently 45% of flats are unoccupied at any one time, admittedly this includes all the nasty rougher places on the outskirts but is this normal and can it be sustained?

Which city do you live in?

Conventional logic says if people stop buying completely and consider themselves longer term renters, and investors sell flats off, this would increase number of renters and decrease numbers of places to rent, and finally push prices up

But:

-The huge oversupply of city centre flats available to rent isn't going to disappear overnight (and, incredibly, they're still building them!

-In a recession, numbers of people renting might actually fall, partly immigrants returning home, but also people returning to live with parents as job market implodes

Personally I think large numbers of those city centre flats may never be occupied. may well end up functioning as social housing in the end, but the govt will probably have to build more people to put in them

Also the appeal of living in them is going to pall, for renters now as well as buyers, most are as you say half-empty at best, questionably built, and will probably function as social housing in the nearish future. They were always going to be the slums of the future, but that future might be a lot nearer than imagined

or, to put it another way, can you think of even one reason why the rent on one of those would be more expensive in 2010 than today?

"slums of the future" has become my phrase of the day.

(I'm in Manchester, where I notice new building work for apartment complexes pretty much every month.)

had a feeling it might be Manchester!

Is this social housing of the future thing a realistic prospect? How would it work? ie. would the govt pay a decent price to landlords to buy it off them?

Are rent prices artificially high right now, like house prices?

I don't know how it will work. I don't think the landlords are in a position to ask for a decent price (but it might be that they buy directly from developers) - this is pure speculation, i actually really don't know how they are going to fill those places, they may well just be left, but empty blocks is not good for crime etc

Are rent prices artificially high? No, i wouldn't say that exactly, after all they are lower than house prices, but i guess they are also a consequence of years of flooding the economy with cheap debt

I think the ASKING prices for these particular places is probably too high, im sure you get most of them a LOT cheaper. and perhaps the actual rents on these particular glass fronted city centre flats is too high (do they really look like 'luxury 21st century living' to anyone?), but i'd say its a jump from that to saying that rent prices are too high

It'll be interesting to see what happens to rent prices in general in the recession, but these city centre flats aren't indicative of much, other than enormous folly

(sorry, i mean i think its a jump to saying that rent prices - in general, for regular places - is too high)

for regular places, i think rents will probably stay around the same, depending how bad the recession pans out (but its been distorted so much its very difficult to tell)

Thoughts on the nationalisation of Northern Rock anyone? I'm not really sure I know what I think of this.

If it was going to happen, should have happened last September. Interesting that no one ever talked about bailing out, or nationalizing, Dolcis tho;)

I think they have changed the rules so that any other banks in same boats can now be bailed out in secret? Bradford & Bingley and Alliance & Leicester obviously both in similar waters to NR over the last year or so. All 3 of these are still relatively small fry though (I guess the interesting one is RBS/Natwest). Banks, more than anything else, really can't be permitted to go under - but at the moment it can still be painted that NR is a one-off situation

The thing is, aren't NR still dishing out crazy mortgages? Which means, the govt, and by extension we the public, are now sub-prime lenders!

If you have savings, could think about moving them to NR, their rates aren't bad, and its the safest bank in town now

The other thing is..if NR were the dodgiest of the subprime lenders, this means they will surely have the highest repossession figures once they start really rising

Which means the government will be the ones repossessing peoples houses?

When NR initially got into difficulties we were repeatedly told that their "mortgage book" was one of the best about, i.e. they specifically weren't a dodgy subprime lender. The problem, we were told, was their method of raising the cash to fund these good mortgages (i.e. loan finance) which was going to the money markets, which had crunched up bigstyle.

Is that wrong?

No, Northern Rock got into shit because their business model was over-reliant on being able to access credit, which suddenly dried up. It wasn't because they were particularly dodgy subprime lenders themselves.

(xpost yes, Tim is correct)

They did source a larger amount of their finance from money markets than any of the others, correct

But NR were one of the ones that were lending out the very high salary multiples, and while its true that outfits like B&B are probably more active in subprime than NR, i think they all have been to some extent (read recently that Derbyshire Building Society have a high % of non-prime, and they're a mutual, with supposedly some sense!)

http://www.northernrock.co.uk/mortgages/together.asp

together is different to a normal mortgage. It works by combining your secured mortgage with an unsecured loan at a single interest rate with one monthly payment. This combination can be worth up to 125% of your home’s value.

I'm not really sure what your point is. If your point is that Northern Rock are worse/more mental mortgage lenders than any of the others, I don't really know but it seems doubtful and certainly wasn't the main reason for what went wrong.

If you mean the government will be the ones repossessing homes then yes, by extension, some, and there could be an enormous furore about this if Northern Rock repossessions do appear disproportionate to other banks later down the line. I've no idea whether they will. Presumably the government will look to get Northern Rock off its hands as quickly as possible?

My point is that NR were a subprime lender (even though, yes, the trigger for their collapse, was a model over-reliant on money markets for financing - which i'm not disputing. However the reasons they were reliant on that sourcing were partly because of how they leant out)

And that this therefore means a significant proportion of forthcoming repossessions will be by NR/govt

we were repeatedly told that their "mortgage book" was one of the best about

Yes, we were. But, considering no one has been persuaded to take on this profitable 'mortgage book', even with many incentives to do so, then...do we believe it?

Presumably the government will look to get Northern Rock off its hands as quickly as possible?

bang-up job so far!

re. NR's subprime exposure -- are we talking about subprime lending in the UK?

yes

oic.

repossessions are going up anyway -- faith in a "good mortgage book" is hard to come by even if the loans aren't strictly subprime. or at least that seems to explain why no-one would touch NR with yours.

Also, what is prime today can be subprime tomorrow

Also when your brand is a national byword for 'financial incompetence and failing economy' its going to be difficult to persuade people it's worth investing in.

Ugh apostrophes.

Ironically this means the government is now be responsible for the creation of money!

(other than coins and notes obviously)

On the other hand, Barclays seems to have done alright, considering.

yes, considering.

although of course those are the 2007 figures, including the benign first 7 months of last year.

Northern Rock has apparently put 2% on Labour's poll ratings.

Does anyone in this country actually have the slighest fucking clue who they're voting for next election?

Mentalist swings in poll ratings are kind of New Labour chickens coming home to roost. In the same way the Tories were undone in 1997 by the fact the voters they created had loyalty to no one, New Labour neutralisation of ideology means that people will grasp at anything that may swing their decision.

although of course those are the 2007 figures, including the benign first 7 months of last year.

Yes, it also depends on the extent to which Barclays' accountants have written off its exposure to subprime-based securities though. If they've taken the full hit now then they'll be able to move on, if there are worse revelations to come then they're kind of inaccurate.

They'd have been wise to write it off now IMO.

Since constituency-wise I now come under Hammersmith and Fulham (CON) I suspect I may have to vote tactically yet again.

Well presumably this is all still largely related to exposure to US based subprime. Its going to be difficult to even rate, never mind write off, homegrown subprime exposure until it actually goes bad.

Plus the US stuff is still early days, a lot of that is spreading into prime, auto, student debt

Setting up an ISA with the scarborough building society and came across this from august 2006

http://www.scarboroughbs.co.uk/publicrelations/pressreleases/2006/august14_ssm_announce.html

quote: "‘We have a great deal of experience in the sub-prime arena through our existing subsidiaries and we believe this will give us a head start in the non-conforming sector.’"

But I thought there was no subprime in the UK!?

There probably still was in August 2006.

Might explain why their ISA is a notice ISA.

http://www.theonion.com/content/files/images/Cartoon-Mortgage.article.jpg

http://www.bloomberg.com/apps/news?pid=20601102&sid=aEaHw4s_pqKg&refer=uk

BOE been reading the feds notes?

fuck you BOE, and fuck you the city.

My experience up here in the grim up north at the moment is of being in a recession. Would anybody like to buy a bike? I have plenty, and no takers at the moment.

I desperately need a bike actually. If I were up there Pash I'd know exactly who to buy it from! :/

If only you had a bike to get up to South Shields...

He does orders, if you know what you need.

That whole Bear deal reeks of pre panic

What is incredible to me is that Bear's employees accepted approx. 1/3 of their compensation as shares?? (I would hope that's an average, and that the top fund managers had more like 1/2 and the support and tech people had more like 1/10)

Oh, they should have a bit put away.

Oh no, wait! They don't have plump financial financial cushions!.

A plum cushion, yesterday...

http://www.shopdekko.com/products/630787m.jpg