House prices wilting - a little more reality creeping in?

In recent months new channels (including the BBC only yesterday) and papers have been reporting the 'return to growth' of house prices ... based on a mixture of 'hope' and 'flawed economics'.  Today, following the Halifax figures showing them falling the BBC has had to report the situation slightly differently ...

UK house prices wilting in summer

House prices are falling in part because of more properties for sale. UK house prices have fallen slightly in the early summer compared with the start of the year, a survey has found.

Property values dropped by 0.6% in June compared with May, following a 0.5% fall the previous month, the Halifax said. This meant prices in the second three months of the year were 0.1% lower than the first quarter.

More properties coming onto the market and less activity from house buyers has caused the fall, the lender said. The average home in the UK is now valued at £166,203 according to Halifax figures.

The typical property was still 6.3% higher than a year ago, although the figures point to the house price recovery faltering this year.

Martin Ellis, housing economist for the Halifax, said that the figures were not a great surprise. "This pattern is in line with our view that house prices will be broadly unchanged over 2010 as a whole," he said.

"A shortage of properties for sale in 2009 contributed to an imbalance between supply and demand and was a key factor driving up house prices last year.

"An increase in the number of properties available for sale in recent months has helped to reduce the imbalance, relieving the upward pressure on prices."

He said that the continued low level of interest rates continued to keep demand steady. The Bank of England's Monetary Policy Committee is widely expected to announce later that it is to keep the Bank rate at 0.5%."

David Smith, of property consultants Carter Jonas had previously told the BBC "where house prices go from here is difficult to predict because there are so many factors at work at the moment ... the fallout from the Budget will certainly have a major role to play in the coming months, with uncertainty surrounding impending public sector cuts and higher taxes, and of course we still have the ever-present threat of interest rate rises in the mix".

He is right, except for the predicted future for house prices (e.g. take a look at the standard curve for any 'asset' above - we are just going past the 'return to normal' point).  In fact the only thing that will slow the second decline is the realisation that supply of new property under the last Government was allowed to consistently lag well behind known demand (helping to 'inflate' prices and provide a 'feeling of wealth') ... but to everyone's cost.  If you currently feel you are a beneficiary of this, please think again ... e.g. think about the 'hand' you have dealt to your children (and grand children) and all young people today (and how long those clever enough to spot this are likely to stay in this country as a result), about how much you (and everyone else) have actually paid in your lifetime to banks (e.g. double the value of your mortgage) and bankers bonuses (and inflated estate agent fees), the fact that you only actually recover any actual 'profit' when you die and when it's of no use to you (as you still have to live somewhere), and the fact the Government plan to fund your old age care by selling your house to pay for it (as they don't have the cash to do it any other way)!  Speculation and investment in property also does nothing to improve the massive trade imbalance (and our ability to fund the nation's public services) or halt rising Government debt ...  etc etc

The new Government do not appear to be planning anything with regard to easing constraints to building new property either, which will maintain the long term imbalance between supply and demand, and will obviously reduce the speed and final level of decline.  They have also reduced the top rate of capital gains to help the 'speculators' who benefited greatly from property speculation in the past, to maintain people's interest in property, and to once again reduce the speed and final level of decline. None of these things solve any of the real problems however, and just wait until public sector jobs are slashed and interest rates start to increase (due to the rising costs of imports e.g. petrol prices up 30% to £5.30/gallon).

A little more reality still needs to creep in I'm afraid ... and 'flawed economics' (Poweromics - self interest, and greed) needs be replaced by a 'new economics' (Leanomics - based on value, values, trust, honesty, responsibility and respect). Nothing else will do ... as nothing else will work.  Where do you think the millions of jobs are going to come from to reduce the trade deficit, reduce Government debt, and pay for public services?

Steaming ahead ... to a Precipice?

As the UK Government continues blindly along its path (without changing a thing), the 'elephant in the room' is still steaming ahead and taking the UK economy towards the edge of the precipice.  With buoyed up (i.e. inflated) asset prices, colossal debts (Government and personal debts), collapsing tax receipts (income tax and corporation tax) and economic activity 'quietly' but steadily declining (and with massive jobs cuts predicted in the public sector too), it doesn't take long to see the unsustainable nature of the currently 'recovery' (0.1% growth!) and where it's heading.

However, 'talking things up' appears to be back, with news of house prices 'apparently' on the rise once again (i.e. more asset price inflation/speculation - rather than building of new property, which is real wealth creation).  The folly of such concepts is plain for all to see, with just a little digging, as the only people who truly profit in the long run from this are the landowners and the banks (who take away most of our younger generation's salaries). Reports of banks making bumper profits (and paying themselves large bonuses are also back), which is not hard to do in the short term when you can pay out at 0.5%, whilst lending out to businesses/individuals at 5%-30%, and whilst you can also take taxpayers money and re-invest and speculate it in the short term on collapsing assets prices (that are a result of previous actions of the banks themselves) whilst the Government/taxpayer underpins any of their bad debts.

However, inflation is now rising (the Bank of England has had to write to the Chancellor this month), and in normally the best month for tax receipts (January), the Government has had to borrow yet more money rather than being able to pay any debt back - for the first time since records began!! Our economy is in crisis, and founded on outdated/flawed leadership and management practices (i.e. poor moral values, self interest and greed).  The present system is continuing to collapse, but those in power (e.g. Government leaders, banks) are choosing to look after themselves rather than doing anything about it (for the majority of people in this country, and particularly younger generations).  Real economic inactivity and the impact on future generations has been recently highlighted, and there will be more of this to come in the future unless we change things quickly and for the better. The opportunities in the future are vast, but only if we embrace them.

As the risks associated with our economy grow, investment in the UK will drop, our debts will become increasingly expensive to service, and more young people will look elsewhere when considering their future - none of which the UK can afford ...

Blogging - why do we do it?

John Demspter, a fresher to the world of blogging, joined Stephanie Flanders blog recently and instantly made an impact. His questioning was sound, his passion to make difference very evident, and his desire to join people together to open up and tackle the issues clear. He also explained why we need to do it ... and for me he articulated this so well I have decided to summarise what he said here ...

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Post 375. At 11:40pm on 21 Nov 2009, Dempster wrote:

"To Leanomist, ishkandar, Bobrocket, stephenblencowe, armagediontimes, glanaflon, CDG & all other bloggers contributing to this website

I suggest that: as adults with a responsibility to the children, the teenagers and the young families who inherit what comes after us, that we do the right and proper thing.

To consider the issues that face this country, we should debate them and as best as we individuals can, in this limited environment in which we blog, endeavour to show that we did at least try.

Having read what you have posted, I do not believe that a single one of you, would not do that which is right by the future of our children.

Our voices are unlikely to be heard, but at least we gave it our best shot.

I am an absolute nobody, I freely admit it, but you lot give me hope, perhaps you can give hope to others."

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Post 383. At 01:13am on 22 Nov 2009, Dempster wrote:

"To Leanomist, ishkandar, Bobrocket, stephenblencowe, armagediontimes, glanaflon CDG, spartacus & all other bloggers contribruting to this website

Those who will come after us, hope that we will do the right and proper thing by them.

If we don’t do it, then what is our legacy?

Imagine if you are a child, would you hope that adults would do the right thing by you?

I suspect that most of us bloggers are not young people. But what we post may influence the future for those who come after us.

I’m still a naïve blogger, and whilst it may be a forlorn hope, perhaps we can make some difference.

Put your self in the position of a young child, what would you hope we would do?

A young child would want us to look after their best interest… perhaps I am wrong?

But you lot know the answer to that question, don’t you".

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and in response I added ...

Post 383 John Demspter - Well put and I agree with you. Your comments sum up very well my reason for writing ... and why I set up the Poweromics blog too ... which will

i) continue until the environment around us changes,

ii) track/chart the history of the revolution,

iii) try to point out all those responsible/culpable, and

iv) try to acknowledge those taking responsibility to try to do something about it.

and with regard to (iv) you are clearly one such person - hence you are already referred to in it - take a look here for instance.

PS Nobody is a nobody - and you've already made an impact here (on me at least).

'For evil to flourish, all it needs is for good men to do nothing' [Edmund Burke]