Regardless of whom you read, Brexit it having a negative impact on central London housing. An Oct. 17 European Union summit was presaged by European Council president Donald Tusk saying yesterday there is “no grounds for optimism” given the state of negotiations. Coupled with fresh inflation data, the pound was down again. Since the Brexit vote, the pound has almost exclusively traded +/-$1.30 where as it typically had ranged in the $1.50-$1.60 range previously.
Adding to the stress, in early October, two more large financial institutions announced plans to shift some London operations to Paris with whispers of more to follow. Financial services is one of the largest employers in London as well as one of the highest paid. Removing significant quantities of high-earners will cause a glut in some price bands as relocated staff sell up for Gay Purr-ee.
During my London holiday, I was able to meet with a host of HGTV’s House Hunters International, Richard Blanco. A Spanish national growing up in the UK, Blanco schooled in theater and dance – a story common to many real estate professionals whose early interests gave way to a profession in property. So far Blanco has chalked up over 30 House Hunters International episodes including being the only presenter to work in multiple countries (eagle eyes have seen him in Spanish episodes). He’s currently a spokesperson for the UK’s National Landlords Association and is a regular commentator on various television shows – in fact, Blanco had popped into the BBC earlier in the day. For those wanting a regular dose of the London property market, Blanco produces a monthly podcast Inside Property. In his spare time, Blanco flips homes he buys at auction.
We’ve been hearing a lot about the Libor scandal lately, and as I’m sure most of you know, the LIBOR rate affects many home mortgages. The London Interbank Offered Rate, or LIBOR, is a benchmark interest rate on which a whole lot of loans and financing is based. The scandel, which started in good ole’ London, is a self-reported estimate of how cheaply banks can borrow very-short-term money from other banks. It’s like the honor system. Only guess what — the banks involved were not honest, and the financiers violated honesty in the interests of profits.
And how does it affect us in Dallas? Do you have a credit card?
A student loan or adjustable rate mortgage? About half of all variable-rate student loans are tied to Libor. Out of all adjustable-rate mortgages, 45% of prime loans and 80% of subprime loans are tied to it. State and local governments have exposure to Libor when they use interest-rate derivatives to control their credit exposure. And many types of consumer loans are tied to the rate.
I love this piece by Anthony Mirhaydari at MSN Money, but I disagree with him on a few fronts. Mirhaydari — is he Greek or Persian, not that it matters, he’s smart! — says the answer is more regulation.
I do not think you can regulate honesty. The more laws you enact, the more these weasels will find ways around them with their never-ending armies of CPAs and Harvard-educated attorneys.
The takeaway is that we need tighter regulation and capital requirements for large, global institutions, despite worries from the industry and some on the right that this will reduce profitability and tighten lending.
The 2010 Dodd-Frank financial reform, which addressed the problem with tools like the new Consumer Financial Protection Bureau, was criticized by Republicans as being too harsh. In reality, the package was too lenient, because it failed to address Wall Street titans’ too-big-to-fail status.
I think we need way tougher punishments. While part of me thinks we could just go back to old-fashioned hanging, why not get them where it hurts: the money. Consider this: “Barclays’ disgraced CEO Robert Diamond was forced out by British authorities for his failures — yet was about to get a “you’re fired” bonus of as much as $31 million before public rancor forced him to relinquish it.”
Let him get the bonus. Then turn around and fine him $32 million.
The idea of socialized lending — that is, the state creating lending funds, or actually going into the mortgage business, scares the hell out of me. The Post Office cannot even stay solvent. Apparently this has been done before in history, it worked, and it would put the banks out of the mortgage business:
“… one remedy would be to bypass Wall Street completely and have the government issue mortgage loans at 0.25%, the upper end of the Fed’s short-term policy-rate window.”
Banks are getting money at 0% right now, then lending it to us — or not lending it to us — for 3% to 4%.
I also think the largest banks in this country should be broken down, as large corporations have been forced to break up when they became monopolies. If the government lent to us at highly discounted rates, that could stimulate the economy:
“On a typical 30-year $250,000 mortgage, a drop in rates from 3.5% to 0.25% would slash payments by 30%, from $1,435 to around $1,000.”
That’s an extra $435 a month a family could spent on food, education or health care. I don’t like the notion of the government becoming a bank. But historically, whenever we have had eras of greed and excess, socialist policies tend to follow to rein it all in.
I myself prefer the noose.
I’m a British journalist based in Austin and I’m working on a story for the Sunday Telegraph magazine in London that I’m hoping you can help with. It’s pegged to the new season of Dallas starting in the Fall in the UK (in June, I believe, over here) but I’m actually focusing on the Hunt family (which Harry Hurt III’s book called ‘the real Ewings’!)
Meet Alex Hannaford. He was in town last week digging up dirt on, as he said, “the real Ewing family” which Harry Hurt III claims is based on the H.L. Hunt family. Well, of course I helped. As did some other high-profile journalists in town. Because any time you talk about family greed, wealth, mega-money and oil, guess what crosses the path? Real Estate. Case in point: does anyone in Texas ever sell off their mineral rights? I didn’t think so.
Alex toured the Residences at the Ritz Carlton Dallas, and was introduced to modern day Dallas tycoons like Tim Headington via his $14 million condo. Alex was shocked that we stage our listings in Texas.
“Are these homes occupied?” he asked?
Turns out, one was– whoops! I explained that to help buyers visualize the empty space, agents hire designers to decorate the room beautifully so as to impart the image that if you buy the home, your life will be as perfect as the design of that unit. He was impressed. They don’t do that in London, home of the priciest real estate in the world.
Then, after the obligatory visit to Southfork Ranch, he popped over to meet Allie Beth Allman herself at Mt. Vernon, built by H.L. Hunt and one of Dallas’ most famous real estate landmarks. Asking price: $29,500,000. So don’t be surprised if some wealthy Dallas-obsessed Brit reads about Mt. Vernon in the London Daily Telegraph Sunday magazine — it’s the British equivalent of the New York Times — and jets down here to buy it.
Another reporter from the Daily Telegraph was in town two weeks ago, John Swaine, his assignment on what George W. Bush is doing these days, his life in Dallas. Like where is he golfing? How has real estate held up on Daria Drive? Pretty darn well, I told him.