Jump to content
House Price Crash Forum
Sign in to follow this  
Cornish Pasty

Mystery Mpc Member Revealed!?

Recommended Posts

- Forget the staid image of bankers in starched collars – the Bank of England has got a celebrity advisor on board.

- Fresh from a talk by Stephen Nickell, one of the nine members of the bank’s interest-rate setting committee, MoneyWeek can exclusively reveal the identity of this great economic mind.

- It’s Phil Spencer.

- Yes, that Phil Spencer. Estate agent Phil Spencer of Kirsty’n’Phil fame – the duo that present all those TV shows that tell you how property can only go up, and that a flat in the bullet-riddled wastelands of inner Nottingham is a good investment.

- Professor Nickell, one of the Monetary Policy Committee members who voted for a rate cut in August, was arguing that there wouldn’t be a property crash – because there probably hadn’t been a property bubble in the first place.

- So the 123% rise in house prices between mid-1999 and

mid-2004 wasn’t a property bubble? No, says Professor Nickell, because this time it’s different.

- He mentioned the standard property bull arguments that higher divorce rates and immigration, more double- income households, and lower building rates had pushed up supply relative to demand, though admitted this would only account for some of the rise.

- A bigger effect came from low inflation and low nominal interest rates meaning that people could afford to borrow more, pushing up the amount they spend on houses.

- Some might argue that if lower interest rates push up house prices so drastically, that might mean the Bank of England should take some responsibility for not acting to prevent such an unsustainable rise – but not Prof Nickell. According to him, it’s not up to the bank to target asset bubbles – even if there was a property bubble in the first place.

- But Prof Nickell’s clinching argument against a house price crash was that it still hasn’t happened. In fact, he said, even though house prices “more or less”

stopped rising in July 2004, “one pundit felt able to remark by November 2004 that ‘public sentiment has finally accepted there will not be a crash’”. That pundit was Phil Spencer.

- We can’t be the only ones slightly concerned that someone with his hand on the UK’s economic tiller is relying on the UK’s biggest property bull to back up his opinions on the housing market.

- Here at MoneyWeek, we prefer to back up our take on property with concrete evidence – so let’s look at the latest statistics.

- The Royal Institution of Chartered Surveyors reported this month that house prices kept falling in August. In fact, according to RICS, prices have been falling for more than a year now, which suggests Prof Nickell’s assertion that there are no signs of a crash is a bit short-sighted.

- But to be fair, the group also saw buyer inquiries rise by the most in over a year. And the Council of Mortgage Lenders reported a pick-up in the number of mortgages taken out in August, to 101,000 from 96,000 in July.

- So is Prof Nickell right? Should Phil Spencer be the next addition to the MPC?

- We don’t think so. One fresh piece of evidence comes from the team at Capital Economics, who have literally been scouring the gutters.

- By looking at the August data on drainage searches, which buyers tend to commission when they are serious about buying a property, they believe that increased buyer interest is unlikely to translate into higher sales. The number of searches fell 10% on July, a bigger slump than at the same time last year, when the housing market first started to cool off.

- But if you really want to know about house prices, just look around your local area. At MoneyWeek, we know for a fact that prices have fallen by about 20% in Docklands. And just this week we received a letter from a reader, who decided to sell their home to rent in mid-June last year. They put it on the market for £310,000, but didn’t manage to sell until March this year – at £249,950. That’s 19% down on their asking price.

- That house was on the market for nine months before the sellers decided to take the hit. How many more people are sitting on their homes in the hope that things will pick up again? And what will happen to the market if they don’t?

- The sellers managed to break even, but are now thanking their lucky stars they’re renting and not buying. We recently published a very in-depth piece from Capital Economics on the costs of renting versus buying – if you missed it, you can read it here:

http://www.moneyweek.com/article/1316

- Our editor-in-chief, Merryn Somerset Webb also has some choice words to say about the concept that renting is ‘dead money’ – you can read those here:

http://www.moneyweek.com/article/1261

- Prof Nickell’s speech came just ahead of the latest minutes from the Bank of England’s September MPC meeting. The vote to hold rates at 4.5% was unanimous, which the market had expected, with the MPC caught between rising inflation and shaky economic growth.

- Strangely, the minutes don’t note any discussion of “Location Location Location” or property investment opportunities in Nottingham. But oil on the other hand did make an appearance. The MPC reckoned that prices will stay high and could go even higher in the near- term – and if Hurricane Rita stays on course for Texas, that’s a fairly safe bet.

- Rita is now more powerful than Katrina, and is set to hit the Texas coast on Saturday. Texas accounts for 26% of US refining capacity – one analysts on Bloomberg described it as the “ground zero” of the refining industry. Oil prices in New York were above $67.50 a barrel in Asian trading hours, while a barrel of Brent crude moved closer to $65. The price of natural gas was trading at over $13 per million British thermal units.

- Fears over the potential impact of the hurricane sent stocks on Wall Street sharply lower. The Dow Jones lost

103 points to 10,378, its lowest level in nearly three months. The S&P 500 shed 11 to 1,210, and the tech- heavy Nasdaq dropped 24 to 2,106.

- The negative sentiment in the US hurt UK stocks too.

The FTSE 100 fell 46 points to 5,369. Cruise operator Carnival was one of the leading fallers, down 3% to £28.85. The FTSE 250 also closed lower, down 80 at 7,849. The main riser was advertising group Aegis. Its shares leaped 21% to 145.25p as it revealed a bid approach at about 140p a share. Postal group Business Post saw its share price plunge 27% to 475p as it warned pre-tax profits would be about 10% down on last year.

- Amid all the fear over rising oil prices and the US economy, gold continued to thrive, with spot gold jumping to a high of $473.25 an ounce in Asian trading hours, a fresh 17-year high.

– In Asia, Japan’s Nikkei 225 index fell from recent highs, down 37 points to 13,159 as statistics showed the country’s trade surplus fell by more than expected in August, hit by the higher cost of oil imports.

Meanwhile, after the close, consumer electronics giant Sony announced plans to cut 10,000 jobs worldwide with the aim of cutting costs by $1.8bn.

- In the UK this morning, the FTSE 100 headed for a weak start as fears over Hurricane Rita continue to weigh on stocks.

Share this post


Link to post
Share on other sites

I get an email every morning from moneymorning, its a branch of Moneyweek. Its free. I think if you go to the moneyweek website you can sign up there.

There are some adverts for get rich quick schemes you have to ignore, but the editorial is really good stuff.

C.P.

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...
Sign in to follow this  

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 302 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.