Wow! That Sounds Great to Me! Where Do I sign?

Making homes more affordable.  Another excellent reason to quit the EU.

House Price Crash (Survivors' Group)

M'learned colleague 'Pete Green' and I (and others) decided that the editorial line at HPC was becoming rather more dictatorial so we've set up a Facebook group so that we can keep in touch.

Sign yourself in and one of us will add you as soon as we have time.

"Westlife declared bankrupt"

From the BBC:

Westlife have been declared musically bankrupt in the UK.

The Irish band sold millions of records but fans suffered enormous financial losses as the CDs contained not a single note worth listening to. In a statement, the 32-year-old lead singer Shane Life said he had "worked long and hard" to try and come up with something original for over a decade and was devastated that fans have finally come to this conclusion.

The pop group filed for moral and intellectual bankruptcy in the UK which has a less onerous bankruptcy regime than the Islamic Republic of Afghanistan. In the UK the period of artistic bankruptcy typically lasts for the rest of an artist's life but in the Islamic Republic of Afghanistan it is punishable by death or more commonly 12 years in prison.

Mr Life also owns a second hand record shop with his brother Finbarr. It was established in 2004 and had been involved in accumulating 44 million discarded Westlife CDs, which have since remained in a warehouse in Counties Leitrim and Sligo in the west of Ireland. Last month, the company was placed in receivership.

The band also suffered a legal set-back when their appeal against refusal of their application for copyright in "stepping down off barstools shortly before the truck driver's gear change" was rejected.

David Blanchlower gives the game away

From City AM:

Mervyn King argued that “there seemed no reason to expect the worst recession since the 1930s” and nobody saw it coming because "no-one believed it would happen". Actually many people in the City did. They spotted that house price to earnings ratios had reached unsustainably high levels and the only way was down. Of course, banking crises are old as the hills; plus the 1929 Great Crash started in the Florida housing market.

Yup.

Even if you don't know the first thing about banking (and very few ever will, which puzzles me because it is very simple), you must know about house prices - what they are and how they are changing. Once land prices start rising rapidly (far more rapidly than rents), you know that there must be a credit bubble (the two go hand in hand). You know that bubbles always pop and that 'financial crises' can be very unpleasant indeed, particularly when the people in charge are in complete denial that there ever was a bubble in the first place and spend all their time (and our money) on trying to keep it inflated.

Blanchflower is one of the few people to point out that the 1929 crash was a spillover from the 1920s land price bubble in the USA (which continued the 18-year boom-bust cycle of the 19th century), which in turn was the result of a credit bubble (and the usual subsidies to land ownership). The stock market bubble, which popped in 1929 was the result of the people in charge trying to keep the land price bubble inflated.

There is the same level of denial about Japan's "lost decade". Most articles or textbooks refer to the Japanese share price bubble but ignore the Japanese land price bubble which happened at the same time, and which was far larger in magnitude, and involved a far greater amount of credit/indebtedness. And there is the same denial in the UK right now - there is a widely held delusion that if only we can "kick start" the housing market (i.e. get prices back up to 2007 levels with a combination of easier credit and yet more subsidies) that everything will magically turn out all right again.

I'm surprised to see this in The Daily Mail

From The Daily Mail:

During the property boom of the late 80s, the average British house price passed through the £60,000 barrier for the first time. Because that level was unsustainable – justified by neither average incomes nor rent levels – it wasn’t sustained. Prices collapsed and didn’t recover that level until the end of the 1990s.

Thereafter – insanity. In the decade from 1997, house prices trebled. They didn’t treble because British houses had suddenly trebled in size, or because people had become three times richer, or even because inflation had skyrocketed. They trebled because banks made it easy to borrow, easy to bid up the prices. That was all.

The ratio of average house prices to average earnings went from around 3.5 to more like seven times average earnings – implying that prices at their peak were overvalued by almost 100%...

That heat wasn’t justified then and it isn’t justified now. The sombre truth is that we were due a property crash in 2008-09 and got little more than a splutter and pause. The reason why prices remain high has nothing to do with the supposed uniqueness of the British property market – which isn’t, in fact, much different from any property market anywhere.

Prices are high because money is still being pumped relentlessly into the economy by the Bank of England. That money hasn’t had much impact on the jobs market: I guess you’ve noticed that. It hasn’t had much impact on business investment or wages or productivity or innovation or infrastructure or business creation or any of the other things which might actually make a long term difference to the economy. Instead, it’s affected three markets to an unhealthy degree. Those markets are the stock market, the bond market and the property market.

Via Happy Mondays at HPC.

Unlikely Land Value Taxers: John Prescott

From the BBC, quoting John Prescott circa 2004:

"We own the land; it's a valuable public asset. We don't need to sell it off. We can keep it in trust and we can lease it for essential housing. So the first-time buyer pays the cost of building a home but not the full market cost of the land, [and it's the cost of the land] which is helping to make it impossible for our people to buy those houses."

Funny use of the word "helping" but if you think about what he said, that looks like Land Value Tax to me. It's the ultimate shared ownership scheme - you pay for the bricks and mortar outright and pay rent for the location value, i.e. the value of those services which society in general provides for "free" to the occupier of any particular site.

It's a risk free operation to the purchaser, because if the location becomes less desirable, your tax/rent goes down and vice versa, and it puts the council or the government in the position of a conscientious land lord - if they want more money they have to make their borough or the whole of the UK are more desirable place to live (=> more coppers, fewer council chief executives on six-figure salaries) or do business (=> the government could use the rental income to start reducing VAT and Employer's NIC).

Via TenYears at HPC.

Pent up supply

For several years, the Vested Interests have been gleefully talking about "pent up demand" (which is merely the flip side of articifially restricted supply, of course) keeping house prices permanently high, and somehow or other, pushing these high prices up a little bit more every year in perpetuity.

Ahem. According to the latest report/survey by Rightmove:

Seven in 10 properties put on the market so far this year have yet to find a buyer. This has helped push the average number of homes registered with estate agents up to 78 - the highest ever for the time of year.

So many sellers are struggling to sell their homes partly because mortgage approvals are running at about half the rate they were before the financial crisis, while some buyers are staying away, fearing that prices have further to drop.

Cheered me up, anyway.

Extend And Pretend Fun

Exhibit One

Up to 300,000 cash-strapped households have switched more than £60bn of mortgage debt from repayment into risky interest-only deals over the past three years to help cover their living costs.

Analysis of Financial Services Authority (FSA) data demonstrates just how desperate families have become as they contend with what Mervyn King, the Governor of the Bank of England, has described as the most dramatic squeeze on family finances since the 1920s.

With the average UK mortgage at £109,000 and average borrowing costs at 3.5pc, switching from repayment to interest-only saves households roughly £230 a month. But although the move may help families with their immediate cash-flow problems, concerns have been raised about how the debts will be repaid. Darren Winder, UK economist at Oriel, said: "For someone who's trying to alleviate monthly cash flow pressure, moving to interest-only makes sense. But it does raise questions about how that loan gets repaid."

From other sources, it appears that three million borrowers are on interest-only mortgages, which is about a quarter of all mortgages.

Exhibit Two:

Lender forbearance – where banks shift homeowners onto interest-only deals, extend their mortgage term, or even permit payment holidays – now accounts for 63pc of all troubled home loans, according to the Financial Services Authority (FSA).

Although forbearance can help households, the FSA is concerned banks are using it to flatter their numbers by reducing bad debt provisions.

In a guidance note on "forbearance and impairment provisions", it said: "We believe that there is scope for considerable improvement in firms' interpretation of the disclosure requirements." A spokesman added that "there are concerns" about banks' use of forbearance.

Exhibit Three

Companies including Taylor Wimpey, Persimmon and Barratt have injected huge sums into the market in the form of shared-equity schemes to help customers get on the property ladder.

Details of the massive sums housebuilders have had to carry on their balance sheets came as it emerged the Council of Mortgage Lenders is coming under pressure to ease the supply of finance to first-time buyers by reintroducing 95pc mortgages.

Figures from the Home Builders Federation (HBF) reveal that £835m of shared equity loans were made available between January 2008 and February this year, resulting in 28,000 sales. Under the schemes, housebuilders help customers get together a deposit to buy homes.

The Government has also supported the market with it own shared-equity schemes including HomeBuy Direct and FirstBuy. Much of the shared-equity funding supplied by housebuilders has been done in partnership with Government schemes.

All articles from The Telegraph, spotter's badge MBK.

People say the funniest things...

Here's one example of one of the cornerstones of Home-Owner-Ist propaganda which has entered popular consciousness over the last five or ten years:

The bigger problem is that, for good or ill, our economy now depends in significant part on the property market. Like our over-dependence on the financial sector, it's easy to see why this is a bad thing. Changing it is another matter.

To make homes really affordable would take such a price crash that, were it to happen, it would cripple the recovery and probably drive banks under. Nor are housebuilders going to build to increase supply while prices are static.

Meanwhile ordinary people have quite logically decided to invest in property — something Shapps tuts at —because of employers gutting their pension schemes. It might mean the end of Thatcher's “property-owning democracy” as we know it. But whether we like it or not, we need rising property prices.

That's just one example, but it is really quite extreme; he kicks off with a bald and entirely insubstantiated statement and then builds the rest of the article round it, cheerfully admitting that this is an unhealthy state of affairs but that somehow there is no alternative.

When challenged, Home-Owner-Ists will explain this Double-Think in a few main ways:

Version A

If prices fell, then lots of people would be in nequity. Banks would suffer such extreme losses on repo'd homes that the financial system would collapse.

That's not true. Half of homeowners are mortgage-free and LTV ratios on existing mortgages are spread fairly evenly (i.e. a tenth of mortgages are less than 10% of the current value of the home; a tenth are between 10% and 20%, and so on).

Even in an extreme (and highly unlikely) scenario where house prices fell by half; every borrower who was even one penny in nequity lost his job, defaulted and declared himself bankrupt; and the banks then repo'd and sold all those houses, the total losses to banks would be around one-sixth of their assets, which is an amount that can easily be covered by debt-for-equity swaps.

Version B

If prices fell, then lots of people would be in nequity. They wouldn't be able to trade up or down or move to where they can find a job.

For a start, the number of transactions is already at all-time low and very few people are selling, buying or moving anyway, so we already have all these negative effects.

And it's not true either. It would not be rocket science for the government to change the law so that nequity becomes 'portable', or that these debts are simply written off in 'deserving' cases (in which case see A above), or that the government assumes all or part of the liability and collects it from the borrower's future pay packets (like with Student Loans) etc.

And don't forget that for every 'forced' seller there is a willing buyer. This would get transaction numbers and hence mobility up enormously, which must be good for the economy, not to mention maximise people's happiness in terms of the size and type of home they live in.

Version C

If people's house price goes up (or stays up), they feel wealthier, so they spend more money.

This is quite obviously true, but is this a good thing in the long run? Nope.

By spending more now they are saving less, especially if they are doing mortgage-equity withdrawal, and this 'wealth effect' means that people aren't trying to go out and earn money, which is bad for the economy; even worse, the 'wealth effect' only works when prices are rising and not when they are flat.

And any decisions based on a complete illusion must lead to an unfavourable outcome:

What if, by a sheer coincidence, every single lottery ticket used the same numbers and these numbers came up on a Saturday, but Camelot's machines broke down so every single ticket holder thought he'd won a million pounds, rather than 47 pence? So millions of people would rush out on a mad spending spree for a few days or weeks before they found out the bad news?

Version D

When house prices are going down, there's a feel bad factor. Without optimism, nobody wants to invest or take risks.

This is quite probably true as well - but only as long as prices are falling.

The speed at which they are falling doesn't seem to matter, so if prices fell by ten per cent a month for six months, this would do far less such damage than if they fell at one per cent a month for five or six years (even though in either case, house prices would roughly halve). Does nobody remember the 1990s? Once house prices had bottomed out between 1993 and 1995, that's when things started to pick up again in terms of rising employment, lower government deficits etc.

Shaun in the comments nails it

From The Daily Mail:

They dreamt of a better life on the Costas. Now villa values have HALVED, pensions have crashed - and they can't afford to come home. Now for the really bad news, it's about to get even worse...

Shaun, Leeds, bats it straight back at 'em:

They took money from an over inflated class here and ran to Spain with it where the reverse happened. What about the people that paid £875,000 for their house [in England]... was that a sustainable price in relation to people's income?

And the audience said...

Is gazundering fair game?
Yes: 86%
No: 13%
Other, please specify: 1%

Originally posted at HPC

History reasserting itself

As I've said before, until the second quarter of 2009 (i.e. quarter 10), the current house price crash had been tracking the previous one very closely, then New Labour hurled everything they had at it, and managed to stall things for a year or so. As much as the Lib-Cons would love to continue propping up house prices, there is clearly not enough money to hurl at the banks to hurl at borrowers* so the pattern seems to be reasserting itself. Click to enlarge:

The blue series shows quarter-on-quarter price changes from Q1 1989 onwards; the red series shows quarter-on-quarter price changes from Q1 2007 onwards.

The post-1989 crash continued for another few years after the end of that chart, but rises and falls were no longer so spectacular - however, the forced increases during 2009 (which would have been decreases had history been allowed to run its course) will have to reverse at some stage in the future, so I would expect house price falls for the next few years to be far more noticeable than in the early 1990s.

Source: Nationwide's UK House prices adjusted for inflation (choose from the drop down box labelled 'UK series').

* The Lib-Cons are sticking with the old favourites, like depressing interest rates, which is merely a random transfer of £30 billion a year from 'savers' to 'borrowers' (with their chums at the banks being able to double their profit margins), and a complete block on any new development.

Home-Owner-Ist Logic Fail

From The Daily Mail:

House prices look set to tumble next year but a shortage of homes on the market should prevent a total collapse in value.

Property values are likely to fall by 2 per cent during the coming months but the lack of supply should help to stabilise the market at some point during the first half of next year, the Royal Institution of Chartered Surveyors said. Prices could then begin edging up again during the latter part of the year, to leave property values close to where they started the year by the end of 2011.

1. The Home-Owner-Ists want house prices to go up, fair enough. This makes us collectively poorer, not richer, but like all good Socialist élites, these people want the biggest slice of the pie and don't care how small the pie is.

2. The only possible benefit from rising house prices is if you can sell your home, use part of the money to buy a cheaper one and bank the cash difference. Selling-to-rent is a non-starter, because renting is of course for scum; but being a landlord is seen as A Good Thing. Which is a bit like despising drug addicts but lauding the entrepreneurial skills of drug dealers.

3. The Home-Owner-Ists admit that if enough people sell up, then this will push prices down.

4. Therefore, to maintain the value of your house, the logic goes, you should avoid selling it.

5. Taken to extremes, Home-Owner-Ist logic says they should engage in a seller's strike and never sell a single house again. Ever. In which case, where's the benefit of your house being nominally worth more (to the extent that a price can even be established), if you can't ever sell it?

6. How on earth they can predict that prices will start going up again in six months is beyond me, will that be the impact of falling interest rates or something?

Negative Equity - Fun With Numbers

From City AM:

CLOSE to half a million British households could be facing negative equity, according to survey released today by the Bank of England...

And more people could fall into negative equity if house prices drop further. Close to one in five mortgage holders have debts exceeding 75 per cent of the value of their properties, “not much changed” from last year, the report says.

Ho hum.

Let's ignore everybody with a loan-to-value ('LTV') of 75% or less and assume that one-fifth of borrowers have a mortgage of £180,000 on a house currently worth £200,000 (i.e. 90% LTV, the average of all those people with LTV between 75% and 105%).

If house prices were to fall by a quarter (similar to the fall post-1989), the average nequity of that one fifth of borrowers will be £30,000 (£180,000 mortgage minus house value £150,000).

Multiply £30,000 by two million borrowers and we have a potential shortfall of £60 billion. Let's assume half of those in nequity now default; go bankrupt; AND have house repossessed and dumped at the new lower value.

The total loss to UK banks would be a laughable £30 billion (£60 billion x half), or less than half-a-per cent of what UK banks claim to have as total assets (about £7,000 billion).

In truth, UK banks wildly overstate their assets and liabilities to make themselves look 'too big to fail', so in truth that £30 billion loss would be slightly more than one per cent of total UK bank assets (which are primarily mortgages secured on land and buildings), but hey, it's not going to bring the country to its knees or anything.

Sorting out the UK banking system, part 3/3

1. OK. We assumed a catastrophic house price collapse of 50% and mass bankruptcies - or at least a debt jubilee - in Part 2 earlier today. The resulting consolidated balance sheet of the UK banking system is shown below, and as you can see, the consolidated total assets are still looking positive, albeit down from £873 billion to £36 billion.

2. The next Big Myth is that banks have to refinance £800 billion in bonds in the next few years (the actual figure of £800 billion is correct), and they are unlikely to get this so the government will have to throw another £800 billion of taxpayers' finest at them. Let's assume that the banks really can't afford to repay these loans (which does indeed seem impossible) but similarly that they can't borrow new money either.

So let's turn to our old friend: the debt-for-equity swap. As long as the underlying business has some value and will make more money by continuing under new ownership than it would from being broken up, a debt-for-equity swap is always the most viable option. As to all this Basel-style capital adequacy nonsense, see footnote D.

3. We've also got to show that neither shareholders nor bondholders are somehow being robbed, and that they are no worse off than before - as the balance sheet shows, there is no reason to assume that they would be. See footnotes below:

Footnotes:

A. The total value of all the bonds and shares was £723 billion before the hypothetical house price crash and balance sheet restructuring (see Part 2). For company law/insolvency law reasons, all the bonds would be converted into shares, and the former bondholders would acquire a majority of the issued shares. Twenty five 'new' shares would be issued to bondholders for every eleven 'old' shares (the shares would thereafter be identical, or 'rank pari passu' as they say in the trade).

B. Banks will be charging mortgage interest rates of 4.5% on average - a bit higher than now, but they don't need to worry about house prices crashing any more because they already have done. They'll still be paying a miserly 1.5% interest rate on deposits, and still have typical running costs of 1%, so their maintainable profits from the £1,800 billion average customer balances (deposits or loans) will be about £36 billion per annum. If you don't mind, I'll gloss over corporation tax liabilities and ignore any residual income from the £571 billion worth of 'securities for sale' and the income from their trading or investment banking divisions, which will net off to very little.

C. UK banks' price earnings ratios are currently between 9 and 30. Let's pencil in a price/earnings ratio of 20.1 (it might be higher; it might be lower), which we multiply by the £36 billion maintainable earnings to arrive at a total market capitalisation of £723 billion, which is exactly what is was before we started - this is hardly surprising as the markets have already factored in what will inevitably happen.

In other words, if you own £10,000's worth of UK bank bonds or 'old' shares today, once the dust has settled, you will end up owning about £10,000's worth of shares afterwards. What's not to like?

D. Of course, having shareholder's funds of £36 billion to support total assets of £2,442 billion is far too low. But we are looking at the bottom of the cycle. If we want UK banks to have a ratio of at least 6%, then they'll just have to stop paying dividends for three years, hey presto, job done. Under the circumstances, whether profits are paid out as dividends or retained in the business has relatively little impact, see also 'Berkshire Hathaway' or 'Microsoft'.

Or they can speed up this process by flogging off the 'securities for sale' for £571 billion (they may well get far more than that, of course), which reduces total assets to £1,871 billion - combined with three years' retained profits, they'd have a capital ratio of 10% which is more than adequate.

Sorting out the UK banking system, part 2/3

1. Having accepted that bonds are part-ownership and not a liability, and done all the netting off and contras from Part 1, we arrive at the more respectable balance sheet position shown below, with a healthy Basel ratio of 25% (i.e. £873 over £3,279). This deals with the first Big Myth, that UK banks are likely to go *pop* any second. I'll deal with the last Big Myth - that UK banks have to refinance or roll over £800 billion in bonds in the next few years - in part 3.

2. But let's now confront the second Big Myth - that we have to throw everything we can at propping up UK house prices, because if they fall by one single penny, the entire UK banking system will collapse. So let's do an extreme stress test and assume that UK house prices fall by half (which is unlikely to happen). I've pencilled in these write down percentages, and the resulting balance sheet will appear in Part 3 later today. Article continues below:
3. To see how undramatic the effect of a 50% house price crash would be, we have to remember that not all mortgages are 100% loan to value, i.e. if your loan-to-value ratio is 50% and prices fell by half, you would still not be in negative equity.

4. According to Table 2.17 of the Bank of England's latest Financial Stability Report, 59% of UK residential mortgages had a loan-to-value ratio of less than 50%, so subject to certain assumptions - that every borrower in negative equity declared him or herself bankrupt and handed back the keys (again, highly unlikely to happen), the total losses would be in the region of 15% to 20%. The same sort of figure applies to lending on commercial properties, and there is plenty of non-land related lending. In my 'write down' column, I have assumed a write down/loss of 20%, i.e. at the higher end.

5. Heck knows what's buried in 'Securities for sale'. It'll be a mixture of stuff that is worth what they say it is, second hand mortgages worth 80% of their face value (see 4.) and other US-origin sub-prime stuff that might be worthless. This averages out to 60% of current market value, so let's write this lot down by 40%.

5. For good measure, let's write down banks' own fixed assets - which include their commercial premises and 'good will' - by 10%.

6. You can't 'write down' customer deposits or trade debts as this would be open fraud and politically impossible.

7. And we have to keep track of the market value of all the bank shares and bank bonds in existence. Market value of the shares is explained in Part 1. I've assumed that bank bonds are trading, on average, at 80p in the £. Therefore the total 'enterprise value' of UK banks is £723 billion - the object of this exercise is to show that neither bond nor shareholders would particularly lose out if house prices crashed AND/OR if UK government bail outs were to be halted and reversed.

Sorting out the UK banking system, part 1/3

1. One of the Big Myths put about by bankers and politicians is that 'banks are too big to fail', because if you add up all their balance sheet totals, you end up with a figure of £6,000 or £7,000 billion, which is four or five times the UK's GDP. This is because every bank owes all the other banks vast amounts of money, and because of accounting rules that force you to show closely related assets and liabilities (i.e. derivatives) gross, rather than netting them off to a small, manageable figure.

2. Another Big Myth is that if house prices fall, banks will somehow disappear in a puff of smoke and savers won't get their money back (let alone bondholders or shareholders), which I will deal with in Parts 2 and 3 of today's mini-series.

3. So I have printed off the balance sheets of the five largest UK banks (see footnotes) and done all the netting off for you, which gives a more realistic balance sheet total for the UK banking system of £3,602 billion (still more than twice GDP, but that figure can be whittled down further). Article continues below:


4. I trust it's obvious where all the QE money went - straight back back into the Bank of England!

5. This balance sheet total is still overstated, so I have proposed a couple of further contra entries:

a) The UK government has lent the banks a couple of hundred billion to bail them out, which is included in 'bonds' but it also holds a couple of hundred of billion of the banks' money at the Bank of England (so it has lent money and borrowed it back again). Then there's the deferred tax asset which I can't be bothered to explain. Let's net all these off to nothing.

b) According to their individual balance sheets, total UK bank borrowing from other banks is £359 billion and total UK bank lending to other banks is £238 billion, which I have already netted down to £121 billion. We can only assume that the net figure is borrowed from non-UK banks, so let's net that off with 'Securities for sale', which includes all the mortgage-backed bonds and rubbish from other banks, primarily from the USA, i.e. repay them with their own rubbish. Also known as 'doing an Iceland'.

I'll show the effect of these contras and also look at the impact of a house price crash in Part 2 later today,
------------------------------
Footnotes:

A. Balance sheets downloaded from here:
Royal Bank of Scotland
Barclays, page 19, pdf
Lloyds Banking Group
HSBC, page 357, pdf
Nationwide, page 40, pdf

B. I didn't include Abbey, which is part of Santander, and of course Nationwide is a building society, not a bank. I only included the 53.7% of HSBC which relates to European operations but not smaller UK banks and building societies. By and large, the overs and unders will net off - Barclays has quite sizeable non-UK operations and what we get is a fair picture of the UK banking system as a whole.

C. There is of course no clear dividing line between 'customer deposits' and 'bonds', but a dividing line has to be drawn somewhere between true liabilities and ownership. For example, if you borrow £50,000 from your uncle to set up in business, and a year or two later you have also run up unpaid invoices of £50,000 it is up to the bankruptcy courts to decide that your uncle is part-owner of the business and that your suppliers are normal trade creditors.

D. I added up the market capitalisation of the four banks using Yahoo Finance's numbers to arrive at the market value of the shares. Nationwide doesn't have a market capitalisation, so I have assumed this to be £nil.

NOW That's what I called modest!

From Nationwide's monthly house price index for October 2010:

Modest downward trend in house prices continues in October.
• House prices fell by 0.7% in October
• Three month rate of decline accelerates to 1.5%...

PS, according to their inflation adjusted house price series, we are back to the same price levels as in the first quarter of 2004.

Instant Tradition

Halifax Bank, now part of Lloyds Banking Group, used to publish its monthly house price data in the first couple of days of the subsequent month, but two years ago, when house prices had started falling, they decided to postpone the release until the early morning of the day on which the Bank of England's Monetary Policy Committee finalised its decision on interest rates (usually the first Thursday in the month).

The logic was, in case the MPC were wavering, that 'bad' news on house prices would stampede the MPC into cutting rates and/or keeping them low. This tactic seems to have worked, and once house prices went into the dead cat bounce, the Halifax reverted to releasing the figures a few days earlier.

House prices had sort of flattened off over the past few months, but you could have guessed that Halifax' September house price statistics would be 'bad' because they delayed them until today, the day on which the MPC solemnly announced that it would keep the base rate (a largely meaningless figure) at 0.5%.

BTW, that 3.6% monthly fall (while probably wildly overstated) brings back the average house price, not adjusted for inflation, to the same level as September 2004, i.e. six years ago (from tab 11 of their Excel sheet).

Irish Bank Bail-out Fun

It's always useful to put things in perspective.

In round figures, cost of Irish bank bail-out = £39 billion, Irish population = 4.4 million, cost per head = £9,000.

In round figures, total UK government support to UK banks (share capital, soft loans, guarantees, interest subsidies etc) = over £400 billion, UK population = 62 million, cost per head = £6,500.

So not much difference there.

Further, we are a year or two behind Ireland (or the USA, Spain etc) in terms of the property price crash cycle. From Wiki, Irish house prices since 2000 (click to enlarge):

This leads to two further observations:

1. If an average Irish household is four people, they have gained £36,000 purchasing power parity in terms of paper gain on house value over the last ten years, but have now been landed with a £36,000 tax bill. Does anybody believe still that rising house prices can make us richer?

2. As and when the UK house price crash catches up with Ireland (or USA, Spain etc) we'll be in the same plus/minus nothing position - with a paper gain on the house but an equal and opposite very real tax liability, which will drag down our economy for years or decades.