According to the old saying, "When the blood flows on the streets, it's time to buy real estate."
Across the pond, every bailout rescue and rate cut tourniquet applied by the Bank of England has failed to stop the hemorrhaging of London's housing market. Case in point: December 2008 saw U.K. home sales drop to their lowest level since 1978, with sale prices plunging 25% below their May peak. (Also: the number of new homes built in 2008 plunged to an 85-year low, alongside a 13-year high in U.K. household debt.)
So, "There is blood." And soon, there will be buying -- or so says London's largest residential property website. In their words: U.K. home prices will drop by another 10% before making way for "The Year of the Property Deal" in 2009. "While it's sad," writes the website, "we are likely to see prices in 2009 at levels that persuade cash rich and mortgage ready buyers to reenter the market in great numbers." -- December 15 Bloomberg
One problem: Ever since the cracks began to appear in London's real estate sector, the mainstream officials have been sliding down a slope of hope. As a whole, they have been the "Boy who cried" Great Britain's housing bottom. To wit:
- "Home price growth forecasts of 1% this year could mean a negative equity dip for some first timers, but I don't think this will be a massive issue." -- February 5 Guardian
- "UK Property Market Stabilizing… The rise in home purchase mortgage approvals provides some tentative signs that we may be close to the bottom…" -- March 1 AP
- "With lenders redesigning their products and mortgage provision moving back to some semblance of normalcy, it seems reasonable to assume that the pace of price declines will moderate as we move into the second half of the year." -- May 29 JP Morgan
(Is London's Housing Market Calling? Only those who saw the TOP in U.K. house prices can say whether the bottom is near. Read the riveting June 2008 Global Market Perspective Special Report on the "European Housing Mania" today. Click Here)
Did I mention that the same website now touting 2009 as the "Year of the Property Deal" also predicted that U.K. home prices would at worst "stagnate" in 2008?
That said, while the usual pundits were searching for a bottom to London's housing slump, Elliott Wave International's chief global market analyst Alan Hall was setting up shop in the other direction. Closely off the May peak in U.K. home prices, Alan presented a special June 20 Global Market Perspective special report titled: "European Housing Mania: Tulips Pale In Comparison"
In that riveting publication, Alan presented the following close-up of U.K. house prices since 1952 and wrote:
"If you are one of the tens of thousands of Europeans who own speculative real estate, you tread the crumbling edge of a huge cliff. Now is not the time for nonchalance. The recent lull in concerns about the bursting housing bubble has lead many investors to hope that the worst is over and that a recovery in real estate is nigh. There is substantial reason to doubt the optimistic view.
UK: The analysis strongly suggests that UK house prices have formed a major top. The end-of-trend momentum pattern visible in the one-year rate of change helps us clarify the wave count and define the corrective target area."
Right now, you can see the complete "Housing Mania" special for FREE when you begin a risk-free subscription to Global Market Perspective – Elliott Wave International's premier resource for long-term analysis and labeled price charts on London's FTSE 100.