Tag Archives: housing

The new Monopoly game

Do you remember playing monopoly? Did you ever play it? I grew up loving it. I am not some realtor, some real estate dreamer beyond the dream of having my own place. Most of us are like that. Just the time when I was young and the family played that game, or plying it with a couple of friends. I ended up having several versions, including the replica original with coins, in a wooden box, just a cool thing to have. So when we consider this game, as the prices of the streets were shown in those days; we knew that blue was the highest an always out of our reach. I lived in a green property for some time, so life felt good, yet today, Yellow, Red, Orange, Purple and light blue are no longer in my view of affordability, in the best case, I might be able to get one of the brown coloured properties. This is how the market changed in a mere 22 years. From an optional 80% of the map to a mere 2 out of 16, that is all that was left to me. So when I read ‘Total UK wealth tops £10tn thanks to City and property boom‘ by Larry Elliott (at https://www.theguardian.com/business/2017/aug/08/total-uk-wealth-city-property-homes-inequality-saving), I just had to laugh. I understand that he might be trying to have a sense of humour about it. Yet when we see “A booming City and rising house prices provided a double boost to Britons holding assets in 2016 as they pushed the nation’s wealth through the £10tn mark, according to a new survey“, the question becomes: ‘How much of that is NOT owned by foreign investors?‘ Is that a weird question or what? Even as we see “Since the better off held a greater proportion of these assets, 40% of the gains of rising share and bond prices went to the richest 5% of households“, is ‘households’ correct or should it read clients represented by British law and accountancy firms, representing foreign interests in the UK? With “The £3.9tn increase in the value of residential property and financial assets owned by UK residents represented a 59% rise, whereas prices rose by 39% and gross household income was up 37%“, we see again the ‘UK resident‘ part and when we take a look at the government (at http://www.ukimmigration.com/investor/uk_investor_visa.htm), we see that basically any person investing in any property (as the London bulk is well over £1 million, the threshold for foreign investors is reached), which beckons the call, when we start digging into UK residents versus UK citizens, how will this all end? Lloyds shows even more sense of humour with “Lloyds said its figure excluded non-residential property and assets held by charities and other non-profit institutions“, which clearly includes all the foreign investors and they are always in it for the profit. It is the final part that gives the new consideration “However, a continued low mortgage rate environment, combined with an ongoing shortage of properties for sale, should help continue to support house prices over the coming months“. This now gives the premise, have the current and previous governments been guilty of betraying the British people by setting the stage of ‘ongoing shortage of properties for sale‘, in this we see the historic part that former Prime minister Margaret Thatcher was the last of the prime ministers giving a rising and clear need for social housing. We see this in the 2015 article from the BBC (at http://www.bbc.com/news/uk-14380936) where the amount of social housing went up in the beginning of her ‘reign’ to the highest ever recorded surpassing 150,000 right-to-buy, it took a small dive and in 1987 it got back to around 140,000, after she was succeeded in 1990, social housing took a steep dive to below 50,000 and from there it just went down and down. At the end of the labour reign in 2010 it was at the lowest stage ever, only now is there a small increase visible in that graph. Yet in the BBC article we also see a problem, even as it compares to 1918 where owner occupied is a mere 23%, the 2012-2013 part where 65% is owner occupied is as I call it ‘misrepresented‘ at 65%, because how much of that is empty and what part is foreign invested? You see, plenty of places in London are not offered for rent, but for lease, so who is the owner in that case and where does this fit in that graph? If we add the privately rented, we see that socially rented is a mere 16% (way higher than 1918), yet as we see the Thatcher numbers, who got the people there and how were the people kept out of affordable housing by not making that available. In Australia it might be as bad as the valid people in NSW housing are on the lists for a time in excess of 6 years. So how is that a solution to solving housing issues? And let’s not forget, when the housing is set and forced to become a larger contributor to social (read affordable) housing, what then remains of this ‘£10tn UK wealth‘ housing side? The fact that both sides of the political isle have been in denial and remiss to get any of that solved and Jeremy Corbyn claims to have a solution by pushing the UK in even deeper debt, deeper by the better part of a trillion pounds. So how does that help anyone?

Now, we might accept and understand that life in London is never affordable ever again, yet the political isles must equally accept that this change could constitute an infrastructure collapse. This gets us to some old news. In August 2014 we saw (at https://www.theguardian.com/news/datablog/2014/aug/07/london-gets-24-times-as-much-infrastructure-north-east-england) the mention ‘London gets 24 times as much spent on infrastructure per resident than north-east England‘ which is a nice title, yet the dangers are shown soon thereafter. With “more than half of that total was down to the decommissioning of the Sellafield nuclear plant in Cumbria – necessary, doubtless, but hardly an infrastructure ‘improvement’ as most people would understand it” we see only part of the danger. The quote “New analysis of public infrastructure spending by IPPR North lays bare the gap between how much capital expenditure there is in the capital than the rest of England” shows another part, yet the actual issue is not what is spent, but what is required to get something done. When we paraphrase it into “analysis of public infrastructure spending by IPPR North lays bare the gap between how much is required for the same amount of work in London compared to the rest of England” we see the dangers, when the infrastructure maintenance is 2400% of the rest of the UK, there is a danger, yet is it the correct one? In February this year, we see a partial repetition of the old Guardian article, yet with updated numbers it shows (at https://www.theguardian.com/uk-news/2017/feb/20/more-than-half-uk-investment-in-transport-is-in-london-says-study) that London requires 50% of all the funds. In all this we are not given any reliable numbers, because in all this I do not see the comparison of £ per mile of rail serviced. Consider that London has 20 times the amounts of rail that most places have and he London rail when stretched can get a person from Waterloo station to Glasgow five times over (OK, slight exaggeration). Yet the message should be clear. As the infrastructure has less options with in addition less people being anywhere near it, the city of London is facing all levels of collapse. Another part was shown on July 17th in the Independent. The title ‘More than half a million social homes in England do not meet basic health and safety standards‘ is the first indication that social housing and infrastructure are beyond collapsing. With quotes like ‘almost one in seven of all social homes in England‘ are below standards, we see a dangerous escalation. So in this we see a mention of 224,000 houses where the most dangerous safety hazards (category one) is seen. It includes “exposed wiring, overloaded electricity sockets, dangerous boilers, leaking roofs, vermin infestations or inadequate security“, yes, the right and proper place to get your partner pregnant and start a family, would you not agree?

Even as we now see that the Grenfell disaster is a first step in looking into cladding, they all seem to forget that the cladding was done to appease the houses around Grenfell, in addition, the other failures and dangers are basically the non-cladding issues, so the mess is a lot bigger. when we consider the quote “Local authorities have a legal duty to act if a category one hazard is discovered, but hundreds of thousands are going unreported or ignored” we see a much clearer situation where government and city council members could be held accountable towards the transgression of ‘reckless endangerment‘ of lives, so in all this, what is the CPS doing? Has the Crown Prosecution Services made any start on taking a look at this, because these 244,000 houses would in theory represent 300,000 people working to some degree for the London Infrastructure, being it the underground, busses or other civil offices, if even 10% falls away, what happens then? How much pressure, increased costs and non-functional infrastructure remains for London at that point? It seems that the City of London has no way of dealing with such dangerous terms. As I see it, Lord Mayor Sadiq Khan has his work cut out for him. We should all agree that he did not cause this, but he can equally agree that it is on his plate at present and his success will be weighed against his ability to lower that danger and remove the hazards within his largely leased London city.

So as we look at the wealth boom, how exactly is it benefiting the UK and specifically London? As London becomes less and less affordable, as its ‘status’ as premium investment location continues, we might soon see a London that even the tourists can no longer afford. This is not a danger at present with the dropping pound against the Euro, so London is a great place to visit for Europeans. Yet the reality is that this benefit is merely short term, the dangers as the UK turns its economy around, which they will for certain, gives dangers that the dangers I predict are merely 5 years away. When that happens the tourism part will drop, not by a small part, but by a phenomenal amount (In my speculative view well over 20%), so whoever is investing now needs to get that part back in 4 years, they might be facing deadly competition for the few remaining tourists after that. The Time in 2015 talked about the tourism bubble and set it to greed, I think that it is not merely greed; in all this the infrastructure that is dangerously close to a collapse would be a much larger contributing item in all this. So as we see that the infrastructure is in a dangerous place, we need to wonder how the UK government will be addressing this. It is not like it is not a clearly visible issue. It is merely one of several critical issues that the UK faces. Yet in this, the housing part is also the contributing factor for other sides of infrastructure as well. We saw 3 weeks ago that the NHS has 86,000 posts vacant. Not only can they not be filled, even if there was a person available, the reality is that for nurses life in London has become largely unaffordable, which hits social housing as well as infrastructure, a clear visible item known for the better part of 3 years. As a conservative I would be willing to blame my political party, yet the BBC chart clearly shows that as the conservatives came back into office the social housing curve was moving back up (to the smallest degree). Now, there is part that was done by the previous labour government, but only to an even smaller degree. In this I will end with an article that the Business insider has in 2015, in it we see the minimum income per area, when we take a look is that only the cheapest place was affordable for NHS nurses, 54 miles from the hospital, anything nearer would require double the income they presently have, some places are forever out of their reach. Even whilst I know of some places in Swiss Cottage, Southwark and West Brompton, it is shy of the 86,000 places, it will not even give aid to 1%, or 860 places to live in. So, as some people are shrugging at the £10tn wealth value, or the imaginative issue that the NHS problem will solve itself. We need to realise that a few of these issues were interconnected and have been for many years. In this Labour and Conservatives are both to blame, they achieved nothing in stopping, or decently reducing the danger. So when you look at the Monopoly board consider the 22 places and which of these streets you cannot afford a place to live in. So how was this UK wealth any help in resolving the quality of life for those not in the top 5% wealth part, which amounts 98.85% of the UK population, foreign investors excluded.

Consider that side when the next rent is due, and more important, even as all the papers are shouting about rent drops, in the end, the rental price is merely increasing slower for now. With the rent being on average set to £1,500, the 12 month increase is set between £22 and £35 a month depending on your condition, so when you consider that if these people are lucky, their pay increase ended up being up to £61 a month, we see that the increase only takes care of the rent, it will not hold water to take care of the increased price of groceries or heating, so the outlook for the British tenant will be gloomy this Christmas. And before you start blaming Brexit, it would not have mattered one bit. If anyone tells you different, as I personally see it, they would be lying to you.

The people in Britain are seeing a new Monopoly board. Where you start with £800 and passing start gets you a mere £100, in addition add 15% to every street in the first 5 turns and add another 15% for the rest of the game. The final changes are 40% more due for any station and set utilities to 15 times rolled, regardless if it is one or both owned. Now we get a slightly more realistic version of the game as we live it today, so how far would you get in that version of the game? I might want to add that we would need to add 4 pubs, one for each side and treat them like the stations, yet the amount due is 10 times the rolled dice. It seems that our childhood monopoly is the one we still think we live at times, even as we never had any ambitions to own hotels, we always expected to get one house in one street sometimes in our lives; the reality is that this is no longer an expected reality. The reality is now that whomever owns and keeps a place, leaving that to the children is the only guarantee that they have any future at all in the UK, a reality that was not due to Brexit, but due to a government having other commitments, one that was to spending too much whilst not having any backup in place, it is the reality all in the UK face until well over 2040. I still believe that the conservative path to diminish the debt is the only way out and when we consider the news about the £40 billion divorce bill, that is not too weird, because at present Mario Draghi is spending 150% of that every month and getting out now seems to be a lot safer than being around when that collapses, or is that explodes into the faces of EU citizens? Most disagree with me on that, loads of them with economic degrees and that is fine. As I see it, the people all over are in denial of previous debts made and seem to imply that it is not for them to solve, so at your banks when you borrow £2500 every month to pay for things like rent, do you think that you will not have to pay any of it back? Do you think that financial institutions are that philanthropically minded? So as City AM announced on July 17thEurozone inflation fell in June, the European Commission today confirmed, easing pressure on the European Central Bank (ECB) to start tightening monetary policy at its next announcement on Thursday”, yet a week later we see “Draghi struck a dovish tone at the meeting in Frankfurt, with no firm date given to an announcement on the future of the quantitative easing programme, but investors were not convinced”, which we got on Friday July 21st. So as the spenders are all in denial on several levels, we see that their impact could be a disaster for London when that hits, I have stated in personal belief that getting out of that mess sooner would be essential for the UK. A mere week ago we saw (at https://www.bloomberg.com/news/articles/2017-08-03/big-investors-losing-faith-in-europe-s-ecb-fuelled-junk-rally). Now we see the first mention, not of QE, but the mentioning of ‘ECB-Fuelled Junk Rally’, Bloomberg is now speaking almost the same parts that I have advocated against for many months. With the quote “Deutsche Asset Management has reduced holdings of European junk bonds in its 100 billion euro ($106 billion) multi-asset portfolios and JPMorgan Asset Management says investors should brace for a tough second half. BlackRock Inc. says risks for European credit are tilted to the downside and Nataxis SA recommends dialing back high-yield debt exposure” the large players seem to accept (read: come to the conclusion) the dangers I warned for, for many months, this is a dangers that Brexit should avoid. So, as some players are trying to delay it all, so that the UK gets part of that additional 2 trillion (as I see it).

These matters are connected, you see, when those players try to escape the sewers they will seek other parts that give rise to returns on investment that avoids their downfall, this is where the Monopoly game comes in. Because the reality is that this mentioned UK wealth of £10tn could be the escape hatch they need, yet in that the dangers to the infrastructure would only increase, I might be wrong in that view, yet it is merely my view. So feel free to disagree, providing you do not cry when I am proven correct yet again.


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Greed and the lack of common sense

We have seen the adverse effect of greed for some time now. Going back to 2004, we saw the moves that financial institutions made, and during those days, and in the aftermath of 2008, we saw how a chosen few walked away with hundreds of millions of dollars, whilst at the same time, leaving flocks of people beyond destitute.

The fact that this is still happening in 2013, gives way to a collection of requirements that seems to be non-considered by too many people who should be in charge of protecting the population. Why do governments remain in a state of enabling this level of unacceptable transgressions?

Let’s take a look at the events that are making my blood pressure dangerously rise (again).

On the 10th January a non-formal claim was made by Dutch businessman, Ronald Ras, related to the “Mosa Trajectum” golf resort near Murcia in southeast Spain. The claim is OVER half a billion dollar. Should this pass through then this bank will require serious levels and financial amounts of support. The bank claims that Mr. Ras owes the bank in excess of 165 million dollars. So this could be all ignored as a simple situation (he states versus they state, you know the legal drill).

The issue that makes this event escalating is that this bank received a billion dollars of aid in 2008 during the height of the financial crisis. This bank is also due to announce its restructuring plan which would scrap a massive amount of jobs (a mention of 750 scrapped jobs was mentioned by UK Reuters). In addition to this, the Dutch bank and insurance group SNS Reaal is considering a so-called “bad bank” option so they can push their bad ‘property idea’s’ into a different bank and bookkeep it out of existence. Shouldn’t people go to jail for ideas like that?

Actually, that is not what this is about, but the background is relevant to all of this.

What is interesting and what is the issue, are the amounts just this one bank requires. If we add only these two issues together, then we get to 1.5 billion dollars (2 out of how many issues?). Compared to the population of the Netherlands, the required assistance comes down to $1000 per citizen. So this one bank needs more funding than the entire population can afford. This is the 4th bank in size and their needs have become a fair size of the national debt. How can this even be allowed? Take into consideration that almost a third of the nation makes less than 20,000 euro’s a year, so their share of $1000, will be more than 20% of the taxes they pay. If you look at those parts, then it is clear that the Netherlands is growing deeper and deeper into a hole that no budget can close.

On the other side you should consider the luxury property issue that someone is trying to get done in another nation. It took me almost a year to get one mortgage deal for $50000 within that country, and then it was only possible with almost impossible conditions and guarantees. This ‘person’ gets hundreds of millions and no one installed a proper legal engine to make sure the bank does not get hurt by some of their decision makers?

How does allowing this even compute? In all fairness, the bank did make the statement that this claim has no foundation. Still, how does it get this far? Perhaps we should take another look at the bank too?

So let’s take a clearer look at the issues one part at a time.

1. Someone has an idea for a real estate project worth gold course and as such he gets the financing arranged.
So this first point means that the bank has drawn up agreements, contracts and set up clear lines of credit, as well as the rights and duties of the person who they are lending the money to.

So if this first point is clear, then there is a clear path, and all what happened today on the news is just hot air, with no foundation (the Bank stated January 10th that there is no foundation for the claim).

2. The people behind all this are setting up a good quality sales team (or they should be), all with clear targets. I need to mention here that these targets should be achievable. Under these conditions there is no excuse for sudden financial breakdowns. As we all know, these breakdowns did not affect many in the financial institutions as they walked away with a golden handshake worth mega millions.

Now here is the first issue. I did some digging into their visibility.

–          Their web presence is extremely low, and if there is any that is valid, it is not that visible. THEIR FIRST BIG MISTAKE! I was going over 3 sites, they all showed a lack of professionalism, it is limited in languages (Spanish and English only) and the places they offer are between 1.2 and 1.5 million euro’s. It is interesting that the group who could afford anything like this is less than 0.01% of the Dutch population. So this is an exclusive project that over 99% cannot afford. Now, even if you consider this in European terms. This is a place only less than a handful can afford, and those people rarely all want to live together.

–          If we consider this as a pure resort for vacations, renting/leasing a time shared, or just on a hotel based foundation, then this plan calls in even more questions, as there was little or no infrastructure. This reminds me of the tourist approaches we saw during the 90’s. There were loads of what they would call a time share option, most of them went sour and plenty of people got left holding a bag without value.

So if these two points did not call in questions, then look at the next:

I looked at:

–          http://mosatrajectum.com/venta/
–          http://www.mosatrajectumproperty.com/

These places are all about that project, and I personally find them not that professional (considering the price of the houses), not well conceived, error prone when it comes to the languages and lacking in other ways too. If a faltering sales system is the cause of a failed project then these two links could be regarded as strong indicators that this all failed for many more reasons, not just the economy.

Several of them should be considered as failings of project managers. 1.3 million Euro houses are not realistic. Even before the economic crash it would be unrealistic for many people. It becomes even less interesting when this is all build in a place where there is nothing. I personally see this as the idea of someone seeing their pupils change to euro signs and greed took over (really quickly). Even after the failings of the world economy, this project could have survived if this would have been properly aligned to any kind of realistic market. Yet, even though over the last 2 years the group of Spanish unemployed was OVER 20%, overall spending was down a lot more (not just in Spain), nothing seems to have been done, and now there is a claim? This I deduce from these sites, and searching through several other sites, not making decent mention of this real estate location.

From the data I have now, I would side with the bank, but questions should be asked on all levels. Especially considering America had their Freddie Mac and Fanny Mae issues in 2008, and this plan seems a lot less stable then the huhu idea’s Mac and Mae were having.

So how did the bank fail?

Not sure if call it a fail, but if we look at several of their projects, some that are unaffordable, questions on how these projects are such losses. It is even more important to look at how the numbers are accepted into starting some of these projects to begin with. If some of these places are more decently priced (even considering a minor loss) then it could have drawn prospective buyers and even at a loss, a nation of taxpayers would not be called to pay the bill of over greedy individuals not setting a realistic goal. Consider the Spanish resort example. As the information of the village, even when English is selected most of its information comes in Spanish, I would think the bank, or better its account holder should have kept a better eye on this. This is 100 million plus at the start, so keeping an eye on your investment is always a good idea. If we consider a current projected cost amount of 250,000,000, and divide this by 3100 houses/apartments currently projected, then each house would be less than 100.000. If we consider the costs involved then this solution is a whole new idea.

Should the developers complain? Of course not! They failed, pure and simple. The bank moves in, confiscates the lot and sells as needed. Is that what the developer wants? No! He wants his profit, his ego. It seems to me that for such a reward he should have succeeded. This is not the only project that bares scrutiny. If we consider some of the other building scandals that the Netherlands have faced, then I wonder why these levels of over pricings and overinflated values are not better investigated.

We are looking at a new approach of banks to write of overpricing and bad ideas. Why push this to the taxpayers? These groups are getting too much protection all over the place. The Netherlands are just one example. The US example of Freddie Mac and Fannie May are even more unacceptable.

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