Friday, August 28, 2009
UK house Prices Leading Indicators Analysis
UK House Prices Tracking Claimant Count Rather than Unemployment Numbers
This analysis seeks to compare UK house prices against unemployment data.
Posted by nadeem walayat @ 06:47 AM (2105 views)
11 thoughts on “UK house Prices Leading Indicators Analysis”
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hpwatcher says:
The important bit for me….
”UK House prices stabilising in response to 0.5% interest Rates, Money printing, 12% GDP budget deficit, Bank bailouts and Arm twisting (May ’09)”
House prices – and thereby voter bribes – are the only measure of economic success that this obscene Labour government values…..recent months have shown that they will do ANYTHING AND EVERYTHING to protect them. This includes putting at risk the rest of the economy, which they have done time and time again….
mrflibble says:
Well said hpwatcher.
It will be interesting to see how much longer this bear market rally can be sustained. I have my doubts the fallacy can run all the way to the election, but Brown is a desperate man so anything is possible. If he can keep the mortgage companies off the backs of the newly unemployed then there will be very few forced sales, at least for now…
growler says:
Thanks Nadeem.
The tricky bit will be to estimate when the fall will resume from the summer bounce.
Assuming QE cannot be applied for ever, governments will be in a corner at some point or other. Or are there further outrageous policies that could be implemented? I see corporate returns falling behind equity markets hopes in the coming months. Initial over reaction that evaporated stocks had led to a “recovery” but I don’t see buyers of good ready to pick up the strain.
hpwatcher says:
Assuming QE cannot be applied for ever, governments will be in a corner at some point or other. Or are there further outrageous policies that could be implemented?
Once the measures that the governments are prepared to take are exhausted – and there will come such a time, as other greater evils appear – falls will resume. The key thing to remember at the moment is that we are effectively in the run up to an election.
flashman says:
Unemployed stats are flawed and subject to manipulation but so are benefit claimant stats (maybe benefit stats are even more manipulated because they have to actually pay out on them). We know that these figures have been manipulated for decades but they are still useful for analysis purposes because we can compare % changes in them and if we assume that the current figures are no more manipulated than previous figures (an assumption that the author appears to share) we can still use correlation analysis.
Benefit claimant counts are only a subset of unemployment stats and any results derived from their use will be limited by this subset status. The author appears to prefer them because when a person is paid benefits, it has a more immediate and direct effect on behaviour and the economy. Fair enough but I prefer to use the master data set because more data is usually better and the ‘lagging’ effect that the much larger unemployment number has on house prices is well understood and documented. When a person is unemployed their behaviour and spending patterns change even if they are not on benefits. I would be very wary of excluding these people from any analysis
mark wadsworth says:
@ Growler “Or are there further outrageous policies that could be implemented?”
Yes of course. The Red and Blue Wings of the Home-owners’ Party have between them cooked up various proposals, which are (he said, exaggerating ever so slightly, but nothing is impossible):
1. Exclude main residence from Inheritance Tax (discourages downsizing and holding cash or shares)
2. Freezing or even reducing Council Tax.
3. Subsidies for people on “fuel poverty”
4. Cut interest rates to nil.
5. Make it nigh impossible for borrowers to be repossessed via legal system.
6. Outright mortgage subsidies (on top of zero interest rates)
7. Increase Stamp Duty threshold to boost selling value of smaller homes.
8. Absolute stop to new developments (All Hail The Hallowed Greenbelt!) and restrict supply by keeping a third of finished units off the market (aka “affordable housing for key workers”)
9. Unlimited mass immigration.
10. Freeze or reduce TV licence fee.
11. Housing associations and councils to buy up part-finished homes for above market value.
12. Soft loans to home-building companies to avoid “fire sales”.
13. Paying out billions in rent subsidies to private tenants (Housing Benefit) to keep rents and hence house prices up.
14. Charge rental income to lower rates of tax (no National Insurance and 10% wear and tear allowance, for example)
15. Capital gains exemptions for second homes, even if an MP says it’s his or her main home.
16. Increase income tax, national insurance and VAT to make housing, in relative terms, an even better investment.
17. Allow pension funds to invest in residential property (largely tax free).
18. Give even more tax breaks to Real Estate Investment Trusts to suck money into the commercial property market.
19. And so on.
20. And so forth…
OK, that’s a few off the top of my head. I’m sure you can think of plenty of others.
bellwether says:
Mark a good list. As a general and impressionstic point, and, concious that Flash’s beady eyes are on this thread, I stress that part, it seems the UK are more wedded to the notion of growth via inflated house prices than any nation I can think off.
As house prices are controlled on the margin, and we operate on the badly mistaken assumption that every house on the street is therefore worth what the last one sold for, and then allowed extremes of leverage on the basis of that assumption, we found away of creating money that had a patina of underlying wealth so convincing that at the height of our bubble in 2007 Sterling was riding an record high against the worlds major currencies. While that belief has been punctured I think it still exists in a reduced form within current valuations.
mark wadsworth says:
Ah yes, I’ve remembered another one they might try…
21. Back in the early 1990s, the Tories saw what was happening to house prices and had something called “Business Enterprise Scheme” that gave people tax breaks for investing in companies, including companies that bought and owned residential property.
A few years later (mid 1990s? I can’t remember) there was an outbreak of commonsense and property companies were excluded and it was rebranded “Enterprise Investment Scheme”. So they might reverse that to get people to pile even more money into property at the taxpayers’ expense.
flashman says:
bellwether: At any one time we have 20 to 30 large corporations on our client list. Over the years I have never heard (in meetings) any of them mentioning house prices. They talk about capital expenditure, acquisitions and developing markets etc etc.
However, I entirely agree that the people of this country seem to talk about nothing else but property as a means of creating personal wealth and even economic growth. I suspect it’s because we have two economies. One useless, outdated, British one that is out of options and so desperately clings to the house price bubble and another internationally based economy that derives its income from the world stage. Unfortunately the former is way to big
mark wadsworth says:
22. Reintroduce MIRAS.
clockslinger says:
mark wadsworth, the allowing of residential property in a SIP is almost certainly in Snooty and Spottys list of things to do to us once they have a spiffing majority at the next election. It’ll please their portfolio owning mates in big business no end, so it will happen. Even Gordon almost did it, remember…’course that doesn’t mean he meant to, could have been another oversight…but the reason he didn’t was HPI, so to get HPI up and running again it is a likely ploy IMHO.