Comments: Flat in January

Happy pancake day - all the more so for it being a metaphor for the housing market - it's flipped and it's flat.
I'd be somewhat hesitant about reading much into one month's figures. And as for the annual price change - if one is looking at 12 months where there's been a peak in the middle (I'm not saying definitively there has) then the annual rate doesn't really tell the story.
However I would venture that in the last six months or so that sentiment has changed decisively. The media is awash with price falls stories, we're starting to see programmes like Monday night's Panorama suggesting that some developers distorted the figures arriving with the Land Registry by hiding price cuts. If people expect prices to be lower one, two and three years hence they'll hold out.
I'm sure you'll counter that the market will hold steady without a rise in unemployment and or interest rates. Fair point. Let's wait and see.

Posted by Jonathan at February 5, 2008 06:02 PM

When the facts change …..

Given that the bank seems to have engineered a soft landing in housing market, do rates have to be cut?

Posted by Giles at February 5, 2008 09:01 PM

Halifax, Hali-facts? more like Hali-fiction.
they should stop tampering with seasonal adjustments. As pointed out by a Times' reader, the "raw" average house price in January is down 4,000 pounds versus December. Hardly a flat pancake.
Then the usual "strong fundamentals of the UK economy" will save us all... so why should the BoE cut rates?

find more comments at:

Posted by Michele at February 5, 2008 09:34 PM

Oh Michele, that's pathetic. If the Halifax is reporting sharp falls, as its figures were last autumn, the crashers love them. When they don't they cry foul. The figures are seasonally adjusted in the way they've always been.

Giles, even I would say it's too early to call a soft landing --- one month's figures and all that.

As for Panorama, what a pathetic shadow of a once-great programme that is these days. I can't see the logic of anybody exaggerating the price of a transaction, when surely it costs them in higher stamp duty. And anyway, the Land Registry figures are only one of a number of house price measures.

Posted by David Smith at February 5, 2008 10:15 PM

Hold on a moment David. All I was saying is that sentiment has shifted sharply and that Panorama's programme was an example of that. It doesn't matter whether it is the great programme or not any more than it's important whether the Daily Mail is respected by the financial community. They both have an audience, as do you. A big chunk of journalistic opinon has done a volte face and that appears to reflect wider shifts in public opinon and will probably have the effect of reinforcing those shifts.
As for the point the Panorama made it was that some developers want to keep the headline prices of their properties high so they disguise price cuts as gifts of deposits. As long as this doesn't take prices through a stamp duty threshold from one band to another the costs are limited - one developer was accused of giving a 'free desposit' of 25K against a 299K property effectively slashing the sprice to 275K - 3% of 25K - is 750 quid. That's not such a huge hit under the circumstances. Before you poo poo the notion bear in mind that there are now official investigations into the practice. And frankly it's not silly to hide discounts one is giving to customer A if that prevents customer B from arguing down the price further.
I very much enjoy reading your column. However when you get grumpy you sell yourself short. People may post things with which you disagree but they're all paying you a huge compliment by following your thoughts and by taking the time and trouble to discuss them. If I were you I'd simply settle for being flattered. People clearly think that what you write matters.
very best wishes


Posted by Jonathan at February 6, 2008 07:42 AM

Hi David

I think you need to SA the complaints about SA, you only every get them in Autumn and winter, complaints in the spring and summer are rarer than hens teeth. ;)


Posted by kingofnowhere at February 6, 2008 07:52 AM

you do NOT address bloggers in the forum you host as "pathetic", which shows an extreme lack of good manners.
I admit I can be wrong. You never.
But, reading from the Times:
"Poor lookout for homeowners losing £470 a month"
"For reassurance, however, they need look no farther than Halifax’s figures. Since house prices peaked in August, the average home has fallen in value from £199,600 to £197,244. It sounds a modest decline, and the penny may not have yet dropped among the millions who see their homes as places to live in rather than their main retirement fund.
Once homeowners start to realise they are getting poorer at the rate of £471 a month, the residual heat in the British economy will very quickly fade. "

Posted by Michele at February 6, 2008 09:11 AM

I'm with Jonathan on these one, both as regards the people who blog on this site, the tone in which David addresses some of them (what's wrong with polite refutation?), and sentiment in the housing market having turned.

Housing bulls do generally come out with the "market will hold steady without a rise in unemployment and or interest rates" line, which is fair enough, although I've long thought they might add "and/or other circumstance we haven't forseen".

Like a world-wide credit crunch, for example.

Posted by bears all at February 6, 2008 10:20 AM

Let me report the unadjusted Halifix figures below.
The single largest monthly drop on record is between Dec07 and Jan08

Period Index %12MChange £Value £Dec-Jan
Jan 2008 619.1 3.9 191,275 -4,058
Jan 2006 539.7 4.2 166,744 -2,694
Jan 2005 517.7 12.6 159,956 -607
Jan 2003 388.8 22.5 120,137 194
Jan 2007 595.7 10.4 184,067 422
Jan 2002 317.5 16.8 98,088 676
Jan 2000 269.2 16.0 83,175 1,356
Jan 2004 459.9 18.3 142,105 1,447

but then we should be happy, lower house price inflation is good for the economy and for society

Posted by Michele at February 6, 2008 11:18 AM

OK, I'll apologise for the robust tone but some comments can be a little exasperating. Michele, let me politely point out that it is not surprising that the unadjusted fall in January 2008 was bigger than in previous Januarys because (a) the overall level of prices is higher and (b) in all the previous Januarys you quote, the house-price trend was sharply upwards. And let me also politely point out that the £470 a month figure is just a little bit silly. My suspicion, as I've pointed out before, is that there was a Hips-distortion to the Halifax data which has now passed through. Looking at all the house-price measures taken together, prices are at most marginally down since the summer. But even if you take the Halifax numbers at face value, which you seem happy to do, I don't think most home-owners carry out a monthly wealth check.

Jonathan, I agree that the tone has shifted, and it has particularly shifted in newspaper coverage, giving the lie to all the conspiracy theorists who said the media would disguise bad news in the housing market. This is a version of the bigger myth that journalists never wrote about the early 1990s crash before it happened. They did. I did. I just didn't think much of the programme.

Posted by David Smith at February 6, 2008 12:38 PM

There is an very interesting article in today's Times by David's colleague, Anatole. The artcicle link is:

It's quite an amazing article from one of the biggest cheerleaders of the Brown/UK miracle economy.

Kaletsky starts off by saying that he had thought that the UK economic miracle was real, and would outlast its critics. He then confesses that it has been built on 1) Public spending (i.e. public debt), 2) House price inflation (private debt), and 3) Financial services (real, but about to suffer as a significant downturn).

Amazingly, he conjectures that Britain is on the brink of a severe house price crash - he uses comparisons with the US to illustrate how Britain's property market is extremely vulnerable to an unravelling (more so than the market in the US, where the crash is already underway).

Kaletsky's panic attack/moment of realisation article (which was clearly written for MPC consumption - to give the doves more ammo) proposes that rates be cut very steeply immediately to counter the risk of an imminent UK recession and property crash.

So.....having at last admitted that the UK economic miracle has been built on a mountain of public sector spending (debt), and a mountain of private sector debt (property), Kaletsky proposes that debt needs to be made drastically cheaper immediately, presumably so that more credit can be created, more debt taken on by consumers and house buyers, and the reinflation begin.

Let's get this straight: The solution to a credit crisis and over inflated property market? More debt! The cure for an inbalanced economy built on debt? More and cheaper credit! No mention of inflation. No mention of zero saving UK. No mention of the need to reign in an out-of-control state. No mention of why the property market needs, and must be alllowed to correct. Just more debt. Cheaper funds.

When a heavy weight bull turns bearish and panics like this, my ears prick up. But then when I see that the proferred antidote to the malaise is more of the same debilitating intoxicant that caused the illness in the first place, I depair.

David is still valiantly and boldly holding the line on the UK economic miracle, and hats off to him for his integrity. It's very gratifying for a bear to see Kaletsky fall and make such admissions. There is a growing public awareness that all is not well in the realm, and that we have been sold a story that unfortunately has a very unhappy ending.

Posted by T Gumbrell at February 7, 2008 11:01 AM

I suppose I should point out that the Times and Sunday Times are separate newspapers, with big Chinese walls between them. Part of the reason we love Anatole is that he is given to these great dramatic sweeps. I think T Gumbrell (is there a first name there?) that your own style is not dissimilar. I'm not going to deconstruct his piece but one thing I would say is that I've never claimed this is an economic miracle, rather that the last 15 years has seen the best and most stable performance on growth and inflation in statistical memory. Public spending has gone up too much, the budget deficit is too high, and there is a nasty imbalance on the current account. But on the two numbers that matter most, growth and inflation, we have been through an unusually good period.

Posted by David Smith at February 7, 2008 05:01 PM

David - point taken. Interesting what you say about the Times and the Sunday Times, and Anatole's approach. I had wondered whether he might have been circumventing that Chinese wall in order to take inspiration from Merryn SW!

Posted by Tom Gumbrell at February 7, 2008 10:43 PM

I certainly hope not - but good to have that first name Tom.

Posted by David Smith at February 8, 2008 10:29 AM

With respect to Mr Kaletsky, his predilection for "great dramatic sweeps" has done much to undermine his reputation. I often don't agree with David, but you have to respect his consistency and moderation of tone.

Undoubtedly as growth weakens the BoE will try to encourage us to take on more debt by making it cheaper; undoubtedly there's something circular about this, as T Gumbrell (I prefer this - it's more Dickensian than Tom) points out. But lower rates also means a weaker pound which might help us rebalance the economy towards manufacturing.

The reason David I feel that you and KoN are over optimistic about house prices is that there are a whole raft of factors which will have a bearing on the outcome. A brief selection: 1) Even in a slowing economy, fewer migrant workers may well mean higher wage inflation, and thus higher rates than seem likely at present, 2) credit is likely to be harder to obtain well into this year and possibly beyond, bearing down on consumer spending and leading to fewer BTL purchases, 3) government spending is likely to be much tighter than in the recent past, 4) the US economy may be going into recession, 5) all these things affect confidence, turning property from a one-way street to riches to an altogether dodgier proposition; house prices are perceived to be ludicrously high, and people are more aware than previously that committing themselves to high levels of borrowing is a substantial risk.

No, I'm not predicting a crash. But I think we'll see more negative numbers soon, and I don't think those at the end of 2007 were a HIP-induced aberration.

B All.

Posted by bears all at February 8, 2008 10:53 AM