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11/06/2007All
the evidence says we are in the midst of a slowdown, writes
Edmund Conway
I can't have been the only person who laughed when I saw the
front pages late last week.
The Daily Mail and the Daily Express devoted them to the
housing market. The only problem was that one of them said
the boom was over - the other that house prices were soaring.
More intriguingly, both of them based their stories on the
same report - the Land
Registry's Housing survey.
In reality, the reports weren't so contradictory - they merely
seized on different figures from the report; one, the fact
that house-price inflation around the country as a whole remains
close to 10 per cent; the other that prices are now actually
falling markedly in a few pockets of the country.
The very fact, though, that two papers could have such different
takes on the same numbers is more evidence that we are in the
midst of a slowdown. It generally takes much longer than most
people think for a housing market to turn around, and when
it does eventually slow, it does so in fits and starts.
In different parts, too. The market in the nicest parts of
London is booming, thanks to the big bonuses received by City
workers. Scotland is doing well partly because it missed out
on some of the price increases in England, while Northern Ireland
is soaring - thanks to renewed hopes for the area's economic
regeneration, and also to a deluge of government subsidy over
the past decade.
The story throughout the rest of Britain is rather different.
In many areas, prices are flatlining, if not falling. Values
in Yorkshire and Humberside, for instance, are tumbling at
their fastest rate in at least seven years. Many potential
sellers there have seen their homes languish on the market
and been forced to take the galling decision of cutting the
advertised price, or accept a lower offer.
Meanwhile, according to the Bank of England, the number of
new mortgages being approved has fallen to the lowest level
for 12 months, while the amount people are borrowing outside
their mortgages is the smallest in a decade.
These are pretty convincing signs of a slowdown. So, while
it is still early days, I would be inclined to side with that
version of events.
However, it is important to remember that these processes
take time.
Unlike stocks, which rise and fall relatively quickly, housing
markets move in slow motion - after all, it takes far longer
to buy a flat or house than a few shares.
It will take more time, then, for this to be reflected in
the most closely watched statistics from Nationwide and Halifax
- particularly if London and Northern Ireland keep growing
and drag up the national average. However, bear in mind that
even though they are still in double digits (just), they are
far from the 25 per cent peaks they hit only a few years ago.
That said, even if rates don't head all the way to 6 per
cent, as many economists expect, this summer will not be a
hot one for housing.
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