I have been told very firmly by one of our readers that I must “lighten up”. MoneyWeek, he says, is too keen to see the gloomy side of things and too quick to assume the worst will happen. If we could just be a bit more upbeat, he thinks we might sell a few more copies.
He might be right – but not, I suspect, for long. Why? Because if, in this environment we came over all bullish we’d be peddling the same over-optimistic nonsense as everyone else and that would make us – like them – probably wrong. Who can be upbeat about the economy or markets when amateur buy-to-let investors across the country are losing 40%-plus on their money; when inflation is spiralling; when there is a rainy summer of strikes ahead of us; when our public finances are a mess; when our summer holidays are going to cost us 15% more than last year, due to the weak pound; and when our leader’s only response to all this misery is to blame “global difficulties”? Not me.
Instead I think, like most of the rest of the MoneyWeek team, that the global economy is in trouble and that there’s a good chance we are in the middle of a bear market that could run for another five or six years.
Still, our critic is not alone in his need to find sunshine in floods (and demand the rest of us join in his delusions). My favourite press release of the week comes from Cluttons. “Excellent news”, it says: any day now the current stand-off in the London market will end as “fixed-rate deals finish”, “City pay rises fail to come to fruition” and “financial constraints” finally drive many to become “forced sellers”. You’ll be wondering what the “excellent” bit is by now, I imagine. Well, let Cluttons tell you. This forced selling, says the release, “could lead to a much-needed injection of energy back into the market”.
Maybe, but I’m not sure it will be the kind of energy that Cluttons’ “anxious sellers” are after. Housing crashes always come in stages. In the first you see no transactions at all as everyone knocks about in denial. In the second, as sellers understand that if they want to sell they’ve got to cut prices, you get what our favourite property bear James Ferguson calls “a sickening lurch-down in prices”.
And that is exactly what is happening from Edinburgh (until recently declared by the ‘experts’ to be “immune” from falling prices) to London. The Evening Standard this week ran a miserable little story about a house in Bedford Park, a “sought-after” area of west London. It went on the market in March for £3.2m. In May the price was cut to £2.25m. Today, if you are fool enough to want to buy a house, it’s yours for anything from its current asking price of £1.9m down.
Then look at our favourite site Propertysnake.co.uk – it currently lists 199,121 price reductions, the top ten on the list all more than 40%. You could call this “energy”, or if you felt like letting a little realism into your life you could call it a “housing market crash”.