Jimmy James
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Posts posted by Jimmy James
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Sam, don't worry too much. These feelings are natural when we watch the property market so closely and have invested a lot of emotional energy in hoping that prices fall. I had a depressing walk around my area of London today - not just seeing a few sold signs, but also pondering what kind of society we are becoming and whether I'm entirely comfortable with it anymore.
It's good to step back and remember the big picture - things go in cycles and we're near the limits of the current price levels. Unless either the risk new entrants take on reaches extremely unwise levels (and they are already at very unwise levels) things cannot go much higher - and if they do this increases the vulnerability for a correction even more. The more likely option is that start to turn or stagnate at a greater or lesser speed. We'll see what happens - at present i'm not prepared to gamble - and really don't have the financial ability to gamble - on the first option, so it's take it easy and see how the second develops.
There is also the reassuring backlog of economic history to point out that we have analysis and time on our side. I also would tend to side with Martin Wolf rather than an estate agent in any intellectual discussion about markets - and he's on our side on this one.
So hold on in there
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In today's Indie, says only convincing reason why MPC raised rates was worry about increasing money supply and need to reign in asset prices. If so, shows an interesting shift in the concerns driving rate setting at the BoE
http://news.independent.co.uk/business/com...icle1219747.ece
"To be sure, there were factors that might lead a prudent central bank to tighten credit. House prices appeared to be on the rise again. Bank lending to financial institutions was ballooning, possibly feeding speculative activity in capital and commodities markets.
However, the MPC had not previously emphasised these factors in its economic analyses. Members had preferred to foster the impression that, however asset prices behaved, they would keep their eyes fixed on the consumer price target.
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A new element in policy thinking, highlighted in those minutes, is the growth in broad money supply and lending. There has been especially rapid expansion in recent months in the liquidity of financial institutions. In the year to June, this sector's M4 deposits rose by 31.5 per cent while its borrowing from M4 lenders increased by 29.6 per cent. This expansion in liquidity contributed significantly to the reported 13.7 per cent surge in overall M4 money supply over the period.
The MPC's August minutes noted that the financial institutions' behaviour could "put upward pressure on asset prices, increasing household wealth and potentially pushing up nominal spending". It is a long time since the Bank worried about the money supply, but the numbers are so extreme now that they can no longer be ignored.
Central bankers from Seoul to Frankfurt are worrying about excess liquidity. The Bank of England seems to be joining them in their concern. The problem for the MPC is to change its policy framework to incorporate monetary influences without forfeiting the clarity of the message it sends about its policy actions. The consternation that greeted this month's rate increase shows the MPC has yet to find the solution."
Stephen Lewis is the chief economist at Insinger de Beaufort
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I'm selling after 9 years of ownership and it's gratifying to know I didn't pay more than I had to to keep the roof over my head because I wouldn't have paid off anything near a significant amount of the original capital.
Surely that's better than paying off no capital at all.
How much money do you still owe the bank by the way?
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In the same way one doesn't need to know how a car works in order to drive it, you don't really need to know how an IO mortgage works in order to benefit from it do you. All these
A car is a vehicle that gets you from A to B in nearly all circumstances. An IO is a vehicle that gets you from a specific 'A' to a specific 'B' and will only work if a whole host of other factors (or potential hazards) are in play. In order to arrive successfully at point 'B' you will need to have had these series of other factors work in your favour - otherwise you'll go off the road, or be unable to pay the bill at the finally destination.
To build on your very wonky metaphor - as most users of IO mortgages appear not to understand what these external hazards are we may have a lot of accidents in the road ahead..
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The general idea today for those who take them out without investment vehicles is that inflation will erode the true value of their debt leaving them with something they can repay
This is where the theory falls down somewhat.
If inflation is going to increase at a rate fast enough to erode the debt, then governments will raise interest rates to reign this inflation in.
This will make it very hard for IO holders to keep up their monthly payments (as IO's are all interest this will mean the repayments required increase proportionally much more than repayment mortgages).
This is a self liquidating theory - in order for it to succed in the long term it will wipe out IO users in the short term. People who are basing their decisions on this logic are very deluded indeed.
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A new journalist working at the Guardian it seems - but is using HPC as a source
http://money.guardian.co.uk/property/first...1842678,00.html
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Really, just 5 mins drive out of Twickenham on the M3 and you will start to see plenty of large green fields. I'd love to live there.
Not if it started to look like Twickenham you wouldn't
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Superb, I drive around this country.. It's fields.. that is all it is..
Take a look at google Earth..
one big field..
London is overcrowded...? Really..
Of course it is.. duh..
And what would you like to have in its place - more places for you to drive your modeo around?
Bleedin townie
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Why is there such a desire to protect green fields, which are not natural, in fact the opposite. They are environmentally damaging to wildlife, the majority are owned by a few large scale farming outfits, the land is private and you and I can't go on it anyway - what the hell are you protecting at the exensive of small housing and denser living conditions for the majority. I just don't get it.
No, but that is a different argument.
I think we need to recognise the some rural farming environments do have some sort of 'value' and should be protected. There is a lot of arable on huge land holdings that I wouldn't miss - if the alternative was carefull done. However there are other areas - the South Downs, the West Country and Wales for example - where land holdings tend to be much smaller and the environmental benefit of farming tends to be much higher, as well as having cultural value that is worth preserving. It's easy to debunk the green myth of farming by turning up to a big East Anglain arable field that has just undergone spray off for set aside and show there's sod all biodiversity there.
We'd also have to bring in some law restricting suburban cats - killers the lot of em!
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What exactly are we trying to protect when we say we don't want to build on 'green field' sites????
In some ways I agree with you munimula - there is going to be a major shift away from the post world war UK model of doing agriculture, although this isn't being driven by the fact that that model was crap at maintaining biodiversity - all to do with CAP reform, declining agricultural prices for commodity crops because of the growth of Brazil and the decline in ag protectionism. Farming's days are numbered, unless of course we may still have a kick back against liberalism in agriculture -from the new EU member states and others.
Adam Smith therefore do have a point in that we need to think about how to use the countryside in a more sensible way. I just don't trust their free market / build loads of homes model to deliver anything but hellish and horrible new builds and be pretty crap at delivering any public goods - by they the environment or asthetic goods.
A distrust of towndwellers and capitalists, not too sure where that puts me. Maybe I should become a morris dancer.
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No way should we become more like Hong Kong - it's full of Chinese people for a start..
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"Recent Census data show that the population of England and Wales is some 900,000 lower than previously thought, that there is a surplus of dwellings over households, that this surplus has increased in the past decade, and that this has happened in all regions of England except London (where the balance is unchanged). There are strong reasons to believe that these Census data are
more reliable than other data sources suggesting the opposite effect."
"House price rises since 1998 cannot reasonably be attributed to constraints on the supply of new houses, because
• such house price rises are an international phenomenon, covering also countries in which there is little or no restriction on land supply, such as the US and Australia;
• new housing represents less than 1 per cent of the housing stock or 10 per cent of the traded housing market, and hence can have very little effect on short-term fluctuations in price (although it can have significant effects on the long-term price); and
• short-term house price volatility is primarily a demand-side phenomenon, driven by factors such as people’s changing expectations of their future wage or employment prospects."
All sound like HPC arguments to me..
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Interestingly the CPRE came out with a report debunking Barker here
They share in many ways the same analysis of HPC - that the level of price rises cannot be explained by supply and demand imbalances, but the real problem is demand sided by changes in the nature of demand through investment actors. A shortage of housing isn't the problem.
Problem is that they aren't really taken seriously becuase they have a clear position of not wanting tarmacing.
The additional great argument backing up CPRE's side is that the building and development industry is short termist and slash and burn - knock up cr@p **** hutches and shove shed loads of peasants in em. No long term view of building or creating decent liveable communities. The English curse - as a French friend said to me "Ah you English, you like to do businezz and live in shitty housezz.. I certainly wouldn't want to hand the future of this country over to Wimpey homes.
CPRE also have a pop at Policy Exchange in a recent report. "CPRE take on Policy Exchange I can't comment on it myself, but having been to Policy Exchange's offices I would take their views with a pinch of salt - they are a small, new and clearly right wing outfit - bookshelves have a disturbingly high proportion of Thatcher biographies - who are clearly out to get as many headlines as they can get.
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Decided that this may get a better response:
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Subject: the NHF report and legal status of advice.
Dear Gavin and George,
I've seen that you've also been involved in writing the report "England’s Housing Timebomb"
I've sent the below comments to David Orr and members of NHF's policy and media teams. Would also be interested to hear your comments.
I also wondered what NHF's view on the legal status of the forcasts you give in the report are.
On page 6 you state: "The average house price in England will be around £300,000 by 2011." and series of other statements including: "Average house prices will increase by 5.1% between 2005
and 2006, but will increase faster than 7% a year from 2008-2011."
I cannot find any legal caveats within the report stating disclaimers for this not constituting investment advice and that these forcasts may not prove to be correct. In fact I can find the following information: "The facts in this booklet use the latest available official government and other statistical sources at the time of going to print. In some areas the National Housing Federation has carried out additional analysis to draw out the social and economic implications of the figures." which seem to add validation to your analysis and directly link this to NHF's own in house analysis.
I, and several of my friends, are now thinking of buying a house in the next month based on the belief that you have given me that house prices are going to increase 50% within the next 5 years.
If this does not happen I believe I will have recourse to sue NHF for providing misleading investment information.
If you believe this is not true could you provide me with an independent legal opinion explaining which parts of the report state that the advice you give should not be interpreted as investment advice.
Many thanks
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If I was writing to Halifax or Nationwide then you might have a point that I was being too nice. The problem is that there are lots of - otherwise well meaning - think tanks and housing groups, such as the National Housing Federation or Shelter, who are way off base in terms of their analysis. If you could get movement within these organisations - who have the resources and write about these issues all the time - to look at the demand side problems then that will be much more effective than just slagging them off.
There are many different types of actors who can bring about change through different routes. Being rude to some is justifiable, being rude to others gets you nowhere. Engaging with the policy teams in these groups makes sense, shouting at them doesn't.
JJ
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Letter sent to the director and a good number of National Housing Federation policy and press staff. Will post any replies I get
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Dear David,
I have just been looking at your report and associated press release for your 'England's affordability timebomb report'.
As someone who is priced out of the housing market with very little hope of affording a home, I welcome the attention your report gives to the issue. However I feel the manner in which you present the report and the policy recommendations coming from it are unlikely to provide much help - and in fact may harm the cause of more affordable housing.
One of the major driver for increasing house prices over the past 7 years has been the evolution of housing into an investment asset - driven by greater levels of lax lending by banks and a new rise of investor, who buy property in hope of returns from their capital or from rental income.
Yet your report makes only passing reference to this issue, and none of its recommendations talk about addressing demand side issues.
It is difficult to see how house price inflation can continue to outstrip wage inflation unless you can convincingly answer the question - who will be able to continue to pay these prices, and why? Your report grossly fails to do this.
Instead you continue to have a myopic focus on supply side issues.
A cynical observer would say that your report is more designed as a case of special pleading for Housing Associations in the run up to the Treasury's Comprehensive Spending Review, than an attempt to set out the policy measures needed to bring about affordable housing.
These cynicism is added to by your use of 'econometric studies' by OEF - the same modellers that helped produce the equally supply side obsessed Barker Review.
Merely paying OEF to dust off their old models to help you catch a journalist's eye may be a good press strategy - but it severely undermines the policy credibility of the National Housing Federation. My bet is that commission was for three days work and with no expert policy input of National Housing Federation staff, and with little understanding of the parameters of the exercise - let alone ability to tweak the exercise to reflect the National Housing Federation’s traditional policy concerns.
It is also highly counterproductive for the quest for affordable housing.
It is also very difficult to see how getting widespread headlines stating "Home prices 'to rise 50% by 2011'" is going to do much to cool the speculative bubble that has grown up around housing. In fact it is likely to encourage more speculative investment.
For those who are priced out of affording a house this is disappointing. If you really want more money from government to spend on Housing Association projects - fine. But in producing such a thin report where the desire for media coverage takes precedence over decent analytical work you do yourself and the quest for affordable housing great damage.
Yours in disappointment
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McCartney is minister of trade at the Foreign Office. Why are they getting an FCO minister to do something that should be under the ministry of trade and industry?
He's in a role that straddles both the DTI and the FCO - previously due to the export promotion side of the job
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Moving to the corrupt city hey. I've done the same myself, for much the same reasons - although i'd much prefer to be able to live back in the west country. You'll miss Devon a lot mind, just make sure you try and get out now and again to keep your sanity.
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Have you got the weblink to the actual house?
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Everyone is very analysis light today and rant heavy - you must have got this one off your chest by now, shouldn't you be looking for numbers to back it up?
Below is the Independent article
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Why the real rate of inflation is twice what the official figures tell us
Rises in bills that have to be paid come what may hurt more than rises in luxury items
By Philip Thornton, Economics Correspondent
Published: 13 June 2006
Official figures later this morning are expected to reveal that inflation rose to 2.1 per cent from 2.0 per cent last month. While this will create huge excitement among City traders betting on the next move in interest rates, it will leave millions of ordinary people scratching their heads in bewilderment. Perhaps with good reason.
...an index devised by The Independent, and published today, appears to back that notion. The index strips out items that are not essential to a basic standard of living. Thus we have taken out leisure goods and services, household services, personal goods, buying a car, tobacco and alcohol. Our index is dominated by the cost of running a home, paying for the public utilities, keeping a car on the road and basic items such as clothing, furniture and chemists goods. It is open to criticism - why include the cost of running a car but not buying it? - but it attempts to isolate areas of inflation that irk people.
While the official inflation rate the Bank of England uses to set interest rates has been below 2 per cent for 20 out of the past 28 months, our index has been above 4 per cent for 17 of those months, and higher than 5 per cent for five.
In other words non-discretionary inflation is running at about twice the targeted one - and in October 2004 showed an annual rise of 5.3 per cent, more than four times the official measure of 1.2 per cent.
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The free bit ends there. The Independent commissioned this study from an economics consultancy - anyone have access to the report?
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I've been wondering for a long time how sterling has stayed so strong. From where I'm sitting there don't seem to be many fundamentals to support this position.
Well as the Buddha would say - 'it's all relative'. Sterling is one currency among many, and many of those other currencies also have plenty of downside risk to them- notably the dollar, but the euro also has a few potential serious faultlines.
One of the other problems is that a great deal of East Asian currencies are pegged relative to other currencies - especially the dollar - restraining their appreciation or depreciation. That means when the fed looks to massage the dollar down (or it goes down of its own accord) it tends to mean that free floating currencies such as Sterling and the Euro go up relative to it.
Of course more bad news for UK plc and growing gaps in interest rate differentials will change this, but to the market at present it is not such an obvious outcome.
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Bank of England - goes back a long long way http://213.225.136.206/mfsd/iadb/Repo.asp?Travel=NIxIRx
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Lib Dems are now proposing a tax on second homes - which is worth making a noise about.
Even if the lib dems don't stand much chance of getting in you will be able to use it to draw attention to the deficiences of the other two parties. Write to your Tory or Labour MP asking why they aren't supporting taxing second homes.
Crisis At Bank Of England, Sterling Plummets
in House prices and the economy
Posted
Just off the wires from Reuters..
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Reuters: Markets Panic as Pound Stolen
Agency Staff
Fri Sep 15, 2006 11:23 AM BST
The Bank of England is in chaos after the discovery that the pound has been stolen. As the news broke, trading rooms were plunged into chaos, even seasoned campaigners known for grace under pressure being reduced to squawking the day's panicked cry, "What's happening?"
TRADER: What's happening?
The pound was stolen at 1.30 this afternoon by thieves dressed as cleaners. They drove a white Montego - helicopter police gave chase but despite the shunt the men escaped, making good with their legs across open ground.
As City markets crashed and flew off, the government tried to stabilise the economy with an emergency currency based on the Queen's eggs, several thousand of which were removed from her ovaries in 1953 and held in reserve. This meant anyone mad enough to seize on the panic selling of dead pounds could become a dollar millionaire in less than an hour.
CREEPY-VOICED INTERVIEWER: How much money have you personally made today?
TRADER: About ten million.
CREEPY-VOICED INTERVIEWER: Wow.
Throughout the day, bank officials have refused to confirm the rumours that the pound was only vulnerable at all because they removed it to play with at lunchtime and forgot to put it back.