The Invisible Foot: The impact of ‘buy to leave’ on prime London’s housing market

Financial Times has an interesting story entitled “The impact of ‘buy to leave’ on prime London’s housing market.”

Fears are growing about the number of homes being bought by investors and left empty — but what can be done to stop it?

Should we be morally outraged by the phenomenon called “buy to leave” or should we dismiss it as a tiny if inevitable consequence of a resilient housing market?

Politicians and estate agents use the term for properties bought as assets, intentionally and permanently left unoccupied until they appreciate and are sold at some later date.

With prime London housing prices rising 73 per cent from March 2009 to November 2014, according to Knight Frank, the existence of buy to leave is perhaps unsurprising.

The global distortion of asset prices (including home prices) is one of the causes of the UK’s “buy to leave” phenomenon. Better known as “The Invisible Foot.”

As the Bank of England joined the global Central Bank suppression of interest rates, the UK also saw a contraction of credit (in the form of UK mortgage approvals).


So how is there a massive bubble in prime London housing prices? Super low Central Bank rates causes investors to seek out risk assets rather than storing funds in bank deposits. So now London is seeing the housing bubble (often from foreign investors like Russia and the Arab Gulf) and the consequences of a Central Bank induced bubble.

And Brent Crude Oil Futures have dropped from 115 in June 2014 to 33.36 on February 13, 2016.


This is simply the market adjusting to the glut of high-priced inventory. The market will clear once home prices fell to the market clearing price.

I would suggest that UK politicians do nothing and let the market clear. The problem was caused by government intervention in the first place, so let’s not compound the problem.


How China and The Deutsche Tank Are Helping The US Mortgage Market

The China slowdown is wrecking havoc on the global financial markets, including Germany’s largest bank, Deutsche Bank.


The benefit for the US mortgage market? Despite The Fed’s abandonment of QE and raising The Fed Funds target rate by 25 basis point is the decline in the 10 year Treasury yield.


Lower interest rates and relaxing credit standards are very stimulative.




Now, bear in mind that mortgage applications generally rise from January 1 to around May 15. Then begin a long downward slide until December 31.

This gets really interesting with the talk of negative interest rates.

JPM Nirp_abs