Best of the Week
Most Popular
1.Crude Oil Price Trend Forecast 2016 Update - Nadeem_Walayat
2.Will Deutsche Bank Crash The Global Stock Market? - Clif_Droke
3.Gold Price In Excess Of $8000 While US Dollar Collapses - Hubert_Moolman
4.BrExit UK Economic Collapse Evaporates, GDP Forecasts for 2016 and 2017 - Nadeem_Walayat
5.Gold Stocks Massive Price Correction - Zeal_LLC
6.Stock Market Predicts Donald Trump Victory - Austin_Galt
7.Next Financial Crisis Will be Far Worse than 2008/09 - Chris_Vermeulen
8.The Gold To Housing Ratio As A Valuation Indicator - Dan_Amerman
9.GDXJ Gold Stocks - A Diamond in the Rough - Rambus_Chartology
10.Gold Boom! End Game Nears As Central Banks Buying Up Gold Mining Companies! - Jeff_Berwick
Last 7 days
US Presidential Election Forecast 2016 - Trump Riding BrExit Wave into the White House - 25th Sept 16
US Economy GDP Growth Estimates in Free-Fall: FRBNY Nowcast 2.26% Q3, 1.22% Q4 - 24th Sept 16
Gold and Gold Stocks Corrective Action Continues Despite Dovish Federal Reserve - 24th Sept 16
Global Bonds: Why Our Analyst Says Things Just Got "Monumental" - 24th Sept 16
Where Did All the Money Go? - 23rd Sept 16
Pension Shortfalls Could Be 4X To 7X Greater Than Reported - 23rd Sept 16
Gold Unleashed by the Fed - 23rd Sept 16
Gold around U.S Presidential Elections - 23rd Sept 16
Here’s Why Eastern Europe Is Doomed - 23rd Sept 16
Nasdaq NDX 100 Big Cap Tech Breakout ? - 23rd Sept 16
The Implications of the Italian Banking Crisis Could Be Disastrous - 22nd Sept 16
TwinLakes Theme Park Summer Super 6 FREE Return Entry for Real? - 21st Sept 16
Has the Silver Bullet Run Out of Fire Power? - 21st Sept 16
Frack Sand: The Unsung Hero Of The OPEC Oil War - 21st Sept 16
What’s Happening With Gold? - 21st Sept 16
Gold vs. Stocks and Commodities, Pre-FOMC - 20th Sept 16
BrExit UK Inflation CPI, RPI Forecast 2016, 2017 - 20th Sept 16
European banks may be more important than the Fed this week - 20th Sept 16
Gold, Silver, Stocks and Bonds Grand Ascension or Great Collapse? - 20th Sept 16
Mass Psychology in Action; Instead of Selling Gilead it is Time to Take a Closer Look - 20th Sept 16
Hillary - Finally Well Deserved Recognition for Deplorables - 20th Sept 16
Fascist Business Model: Reich Economics - 19th Sept 16
Multiweek Correction in Gold and Silver Markets Continues - 19th Sept 16
Stock Market May Turn Ugly This Week - 19th Sept 16
China Is Digging Itself into a Deeper Hole - 19th Sept 16
Yellen’s Footnote 8 Would Put Interest Rates on Autopilot - 19th Sept 16
Central Bank Digital Currencies: A Revolution in Banking? - 19th Sept 16
UK Government Surrenders to China / France to Build Nuclear Fukushima Plant At Hinkley Point C - 19th Sept 16
Stock Market Correction Already Over? - 18th Sept 16
American Economics - 18th Sept 16

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

The Power of the Wave Principle

UK House Prices - This is London Falling

Housing-Market / UK Housing Mar 21, 2016 - 06:39 PM GMT

By: EWI

Housing-Market

Editor's note: The following article is adapted from the State of the Global Markets Report--2016 Edition, one of the most anticipated annual reports for technically minded investors and analysts around the world. For a limited time, we are making the report available 100% free of charge. After that, it goes to $99 per download, where it will stay for the rest of the year. Click here to get your free copy now >>


This Financial Times article alerts readers to another bygone bubble where a surging comeback has recaptured investors' imaginations:

Britons Pin Their Pension Hopes on Property
The UK has fallen in love with property as the best way to make money for retirement

--FT, Nov. 11, 2015

Once again, fast-rising home prices have "convinced the public that bricks and mortar are likely to provide the most comfortable retirement." (FT, 11/11/15)

A recent survey of 10,000 Britons finds that 44% believe property will be their biggest moneymaker during retirement. Pension income came in a distant second place at 25%, while stock investments took third.

Here's how one retirement specialist captures the magnitude of society's preoccupation with property: "For many people now approaching retirement, their property ... will be particularly relevant as a capital reserve for costs such as later-life care." (FT, 11/11/15)

By itself, the widespread belief that real estate is the financial equivalent to cash is one of the most dangerous ideas going. Cash is liquid by definition, whereas property requires time, energy and money to off-load. Cash generates income; homes generate expenses. Cash is boring and, as an investment, cash exists in a financial corner that is totally off the average investor's radar. Real estate, in contrast, is caught in the throes of another speculative frenzy that nearly everyone expects to continue.

Take the chart below, which compares London home prices to first-time buyer affordability (mortgage payments as a percentage of mean take-home pay).

It shows a rising lower graph, which indicates the declining affordability of London homes, because a greater percentage of income goes to meet mortgage payments.

When buyer affordability hit 69.6% in the fourth quarter of 2007, London home prices promptly plummeted 20%. Prices bottomed in the first quarter of 2009, sending mortgage payments back below 50% of take-home pay.

But, today, nearly 66% of Londoners' income is going toward mortgage payments, just a few percentage points shy of the 2007 peak.

More important, the top graph depicts an extended fifth wave in London home prices, with wave (5) of 5 reaching equality with wave (1) of 5. This is a common wave relationship.

As the textbook Elliott Wave Principle observes, fifth-wave extensions "are typically followed by swift retracements," which usually return to the price territory of the "fourth wave of one larger degree." So, by common wave relationships alone, London home prices are set for a 30%-50% decline.

Either way, unaffordable homes are once again colliding with euphoric sentiment and complete Elliott wave patterns. The combination should prove to be even more deadly than it did in 2007.

Click here to continue reading the rest of the 50-page State of the Global Markets Report--2016 Edition 100% free >>


About the Publisher, Elliott Wave International
Founded in 1979 by Robert R. Prechter Jr., Elliott Wave International (EWI) is the world's largest market forecasting firm. Its staff of full-time analysts provides 24-hour-a-day market analysis to institutional and private investors around the world.


© 2005-2016 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife