Something has changed in the five weeks while I’ve been away. When I left, the money sections in the weekend papers were still filled with suggestions on how first-time buyers could get on the property ladder; endless assurances that the buy-to-let business is as good as ever; and tips on the best banking shares to buy.
This week, they’re packed with ideas about how to ease the pain of negative equity in the UK; the horrors of the collapsed property market in Spain; detailed explanations of the massive rise in food inflation and irritable columns about the idiotic economic policies of Gordon Brown.
Indeed, so convinced has the journalistic world become that the 1970s are just around the corner that Wednesday’s Evening Standard devoted an entire double-page spread to the subject of “how to eat well on a tight budget” (first “gently boil your pig’s head for three to four hours”).
It would be nice to say that this sudden change of heart is as thoughtlessly silly as the optimism that preceded it, but I suspect it is not. Things are bad, and they are getting worse. Consider the numbers on mortgages just out from the British Bankers’ Association. Last month, a mere 35,417 new mortgages were approved. That’s 46% fewer than in March last year and 18% fewer than in February. Total approvals (including refinancing and mortgage equity withdrawal) look just as bad: they are at their lowest level since 2000.
Then, to back this up, look at the number of houses actually changing hands. Henry Pryor of Primemove.com has tracked the fortunes of over 18,500 homes put on the market since August last year. His findings? A mere 20% have either been sold or taken off the market: the other 14,500 are still for sale. It seems, says Pryor, that most of the people “who have put their property on the market since the Northern Rock crisis have yet to find a buyer”.
Given the state of the mortgage market none of this is going to change any time soon (see The great bank bail-out), proving, I think, a point that we have been making here for sometime: that house prices have nothing to do with the demand for, and supply of, houses themselves, and everything to do with the demand for, and supply of, credit. Loose credit means rising house prices. Tight credit means falling house prices.
The upshot is it’s now impossible for anyone, even John Wriglesworth (oft-quoted as saying that “there is more chance of finding Elvis on the moon than house prices crashing over the next five years”) to deny that the UK housing market, which has sustained the personal finances and the consumption of Britain’s indebted population for the last five years, is crashing. It is.
And it’s doing so at the same time that food bills soar (up, on average, £800 per family in the last year, says Mysupermarket.com), energy bills spiral out of control, taxes rise, sterling collapses and one of Britain’s largest oil refineries shuts down in preparation for a two day strike. Hmmm. Pig’s head anyone?