Exactly what I was saying would happen - over a year and a half ago ....... finally an article in the mainstream press that truely reflects what my views were - A YEAR AGO ....... (lol) and how bad the situation will get.

It just seems so blatantly OBVIOUS - and yet people still think it is just a slight slow down - static prices ..... oh how sad for them since it is already too late.

Over the coming months Michael R. Sesit's views (below) will become mainstream and the housing market will unwind. Notice how there is no mention of the word "Crash" ...... in a years time the UK media will have caught up with my views I fear. The general population will panic - and act but all to no avail since they are a year behind the reality - just like the British press.


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Jan. 18 (Bloomberg) -- You wouldn't suspect it listening to the many English accents in New York's Bloomingdale's department store or across the street at the Levi's and Banana Republic shops, but the air has begun to leak from one of the world's biggest financial bubbles: the pound sterling.

Britain's currency soared 55 percent from mid-June 2001 to a 26-year high of $2.1161 last November. In the 10 weeks since then, though, it has fallen 6.3 percent against the dollar, 6.4 percent against the euro and 11 percent versus the yen. On Jan. 15, it fell to a record 76.14 pence per euro and a day later dropped to 207.02 yen, its lowest since May 2006.

Not only is the pound weakening, it's going the way of the dollar for many of the same reasons that have plagued the U.S. currency: a deflating housing bubble, a large trade deficit and the prospect of lower interest rates. Both the U.K. and U.S. also have financial industries reeling from the subprime-mortgage crisis and related credit crunch that augur the probability of large layoffs. All of these suggest sterling has further to fall.

Think exchange rates are just for geeks? From sterling's 2001 lows against the dollar to its November 2007 highs, the U.K. stock market rose only 9.3 percent, according to Morgan Stanley Capital International. But for a U.S. investor, who tallies wins and losses in dollars, the market rallied 66 percent. And for a Japanese investor, the increase in yen terms was 51 percent.

It also works in reverse: A falling pound detracts from a non-Briton's U.K. returns.

Housing Decline

The long-anticipated crisis in Britain's housing market is beginning to unfold, and its full force won't be felt for months. Home prices, after tripling during the past decade and doubling in the past six years, declined in the fourth quarter of 2007 for the first time since 2000. U.K. homebuilders' shares, in a precursor of the bad news to come, have fallen more than 50 percent from their peaks. And real-estate company stocks are more than 40 percent off year-ago levels.

``It will take time before homeowners panic over a diminishing wealth effect brought on by negative house-price growth,'' says David Abramson, Montreal-based chief currency strategist at BCA Research Ltd. ``But confidence will fall as it becomes apparent that the Bank of England has fallen behind the curve due to perceived upside risks to inflation.''

The folks on the hot seats are Bank of England Governor Mervyn King and fellow members of the bank's Monetary Policy Committee. Last month, they lowered the base rate for the first time in more than two years, to 5.50 percent from 5.75 percent. By year's end, the rate should be reduced further to 4.75 percent, according to the median forecast of 29 analysts surveyed by Bloomberg News on Jan. 4. Some gurus even see rates eventually falling to 4 percent.

Price Increases

The bugaboo is accelerating inflation. In December, producer prices rose 5 percent from a year earlier, while consumer prices increased 2.1 percent, the third consecutive month that the rate exceeded the bank's 2 percent target.

Still, the MPC would be wrong to hesitate again in cutting rates. On Jan. 10, it balked at lowering borrowing costs, even with the difficult funding environment for banks, the housing slowdown and weak holiday sales indicating slowing consumer spending. Britain has the lowest consumer inflation among the G-7 countries -- except for Japan -- and the highest inflation- adjusted interest rates.

U.K. consumers are being squeezed by rising food and utility bills, gasoline prices, taxes and mortgage costs. Evidence of their shrinking confidence is reflected in the disappointing holiday sales at three of the country's biggest retailers: Tesco Plc, Marks & Spencer Group Plc and Debenhams Plc.

Consumer Spending

``Declines in house prices, coupled with increased job insecurity, are expected to sharply depress consumer spending,'' Karen Ward, a London-based economist at HSBC Holdings Plc, said in a recent report. ``We expect the unemployment rate to increase due to job cuts in finance, construction and distribution.'' HSBC projects U.K. growth to slow to 1.5 percent this year from 3.2 percent in 2007.

Meanwhile, the deficit in the U.K.'s current account, a broad measure of trade in goods and services, ballooned from the equivalent of about 1 percent of gross domestic product in mid- 2005 to 5.7 percent in the third quarter of 2007. That surpassed even the U.S. trade gap.

Moreover, ``the agreed international convention for measuring the balance of payments has led to the scale of Britain's current-account deficit being persistently understated,'' says Andrew Smithers, chairman of Smithers & Co., a London firm that advises on international asset allocation. ``The size of the underlying deficit could readily exceed 7 percent of GDP.''

Beyond Their Means

These numbers show that Britons, like Americans, have been consuming beyond their means and financing purchases by running down savings and borrowing.

The big question now is whether in pulling back from their borrow-and-spend orgy and increasing their savings, Britons push the U.K. economy into a recession, which seems increasingly likely in the U.S. The answer lies in the severity of job cuts, the credit contraction and consumer reaction to lower home prices.

It would be best for Britain's economy -- and the pound --if the ``special relationship'' didn't become that intimate.

(Michael R. Sesit is a Bloomberg News columnist. The opinions expressed are his own.)

Yawn........

Took you a year to come up with some unknown who supported what you say! The only person representing an organisation anyone's heard of (HCBC) reckons a slowdown to 1.5%. That's not a recession.

Mind you, if you cry "wolf" for long enough...

I cant help it if the press are so slow to see the truth / disclose the truth ..... sure its taken time but now people are beginning to swing into my way of thinking.

Many believe what I believe - economists just wont dare to say it - because they dare not since it will be the ruin of them if they are wrong.

1.5% slowdown is just the start.

UK economy is a house of cards.

Dont forget ........ the crash comes first ...... THEN the recession - it has ALWAYS been thus.

Subprime part 1 might been be over but the after effects remain.

Enter Subprime part 2 - coming to a screen near you 2nd half 2008 - Credit card debt meltdown - the new subprime.

Everything I have predicted has come to pass ..... and if not yet ....... it will soon.

I gave plenty of warning - a year and a halfs worth.

I just dont understand why people cant see it. I guess you just dont want to hear it.

'Everything I have predicted has come to pass ..... and if not yet ....... it will soon.'

Richard, you sound like Nostra Domus! A property investment site is a strange place for such a doom-monger to be predicting the world is about to end with such enthusiastic gusto.

I agree with you that credit card debt will very possibly be sub prime part 2 but it's going to be nothing like the scale of sub prime 1.

A few things you haven't considered....
- Tens of millions of people are sitting on massive equity in the UK, not just a bit but 2/300%. Yes I'm sure prices will come down but how much, and for everyone but those or borderline positive / negative yield it's not going to be a problem.
- If prices do drop substantially, there's a whole generation of people waiting to swoop. Pent up demand for property is so vast any substantial correction will immediately be countered by a huge influx of money and buyers.
- The demand / supply ratio is thro the roof.
- The medium term prediction for interest rates is down.

Richard - How much of a property price drop will you wait for before leaving your parents house? It may take you longer to get a life than you think.

Sure there is some bad economic data which will probably translate into a 5 or 7% drop in prices but it is hard to see more of a drop than that. If interest rates stay reasonably low and this is combined with very tight supply in the UK I don't really see the massive crash that you take as a given.

From my own perspective if prices are dropping theres no way I'm going to look to sell my property. I still need to live somewhere.

Ive invested my money into Gold and Eastern European property, whilst living with my parents. My first 2 bed apartment in Hungary will be finished in 6 months - selling the gold to complete it - prior to the gold peak.

I am teaching myself Hungarian (not easy), and will move into my apartment - coinciding with the sale of the family home (I will be homeless! - no more £60 a month rent!!!). My second apartment will be complete 8 months later and my 3rd a few months after that (If property secrets get off their ass and do a project in Hungary then i'll buy another).

Mondays stock market crash will have a major impact on public sentiment - property falls will accelerate as people feel the pinch of falling value of savings.

Hi Richard,

Your financial acumen, and your links to Hungary. My question is are you really George Soros in disguise????

Richard, I have read your postings and replies from others with interest, and while I do agree with much of what you say, I still do not understand who you are preaching to.

Property investment is about taking the long term view and benefiting from the ups and downs. We all know this.

We are entering an exciting period of property investment, one which all but the most naive knew was going to happen. The first chapter of property investment is about cycles and it has been obvious for several years that the bubble is near the top.

I would think that most of the subscribers to Property Secrets have understood this and have been planning for it and will be reviewing the auction listings as we speak and for the next year or two.

So, while I do appreciate your knowledge, and keep the postings coming, but please, a little humility would not go astray!