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The Masked Tulip

Merry Christmas? It's New Year We're Worried About...

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Long, worth reading to get to the bit about Brown and property at the end.

Government statistics suggest that retail sales grew by 0.7% during November, while annual sales growth rose from 1.5% in October to 2.1%.

This is in marked contrast to the CBI’s latest survey, which had retailers complaining that sales growth in November was the worst they’d seen in 22 years. But let’s assume for the moment that the retailers themselves are just feeling overly gloomy.

Part of the boost can be put down to cold weather. Clothing sales jumped 3.6% on the month, which is likely to be a one-off. After all, there’s only so many scarves one person can wear. Sales of household goods remained in the doldrums, suggesting that the apparent pick-up in housing transactions hasn’t translated into demand for goods to furnish those houses.

Another factor behind the rise was heavy price-cutting – prices were down 1.1% on last year. And Christmas sales are starting earlier. Sales also rose in November last year, but then fell back in December. History may well repeat itself.

But could the November figures show consumers throwing caution to the wind? After all, National Savings & Investments suggests that we are now saving 7% of our monthly income, up from 6% last year. Perhaps consumers feel that by cutting back on their credit card spending and mortgage equity withdrawal, they’ve been parsimonious enough this year, and deserve a Christmas blowout as a reward.

Even if this is the case, any pre-Christmas pick-up will just make the January debt hangover even worse than usual. Bankruptcies are already at record levels, and debt advice companies such as Debt Free Direct are reporting record business levels.

As Vicky Redwood at Capital Economics points out, the “fundamental drivers of spending” are still weak. “Unemployment is still rising, consumer confidence is falling and households’ appetite for unsecured borrowing is waning.”

And the spending squeeze isn’t just being felt by the retail chains. Leisure group Whitbread, which owns hotel chain Premier Travel Inn, and the Brewers Fayre and TGI Friday's restaurant chains said that underlying sales fell by 0.5% during its third quarter.

Hotel bookings remain solid, but sales at its pubs and restaurants have been hurt by the falling number of people pounding the high street, and it expects the “remainder of the year to be challenging”. Which is corporate-speak for “don’t expect our numbers to improve any time soon.”

All companies which cater to consumers are facing three big problems: rising business rates, inflation-busting minimum wage hikes and rising energy bills. The trouble is their customers are also facing higher taxes, mortgage payments, and energy bills.

When a company has to cut prices to attract custom at one end, but its costs go up at the other end, that means it eventually has to cut jobs and shut shops. And that means less people spending money on the high street, which means more job losses and shop-shutting.

Sorry about all the doom and gloom. If you could do with a laugh after all this sobering stuff, try this on for size. The UK’s largest property investment club, Inside Track, is calling on the industry to adopt a voluntary code of conduct to “head off further criticism of the sector.”

Property investment clubs essentially encourage investors, many of them novices, to pay large sums of money for the chance to buy into developments of new flats before they are completed, in the hope of then renting them out or selling them at a profit. Of course, the price of new-build flats has fallen more than 5% in the past year, so the chances of becoming a "property millionaire" by this route are significantly smaller than they might have been five years ago. In fact, becoming a "property pauper" is far more likely.

So it’s nice to know that a group which charges £2,500 for a two-day seminar and £6,000 for membership is so concerned about its would-be members. Apparently, "consumers need protection from the 'sharks' in the industry, said Tony McKay, chief operating officer," reports the FT.

But what's not so funny is that the group says that it's being encouraged to draw up this voluntary code by the Treasury. This suggests that the government might be satisfied for the industry to regulate itself.

This is despite the fact that the Royal Institution of Chartered Surveyors and the Investment Property Forum have both asked for the sector to be regulated by the Financial Services Authority.

This is incredible. Gordon Brown loves nothing better than wrapping things up in red tape (it is nearly Christmas, after all) and yet when it comes to – let’s be polite here – extremely high risk, expensive and aggressively marketed get-rich-quick schemes, he suddenly turns all libertarian.

A cynic might start thinking that he wants people to believe that property prices can only go up, so that they start borrowing more against their homes, and spending it on the high street, thus boosting economic growth and the tax take.

Surely not...

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The Treasury now stipulating comliance condistions in the speculative end of housing market.

You couldn't make this up.

When this country fails becuase of the mountain of bad debt and insane costs just remember who heled to get it to the point of no return.

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I had to laugh at the Inside Track bit, voluntary code of conduct! Ha ha.

Inside Track won't be in business in a year!

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  • 301 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%

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