This morning has brought news which will have had Bank of England Governor Mark Carney spluttering as he enjoys his morning espresso. The Halifax Building Society does its best to hide it but their house price for January 2019 at £223,691 is lower than the £224,025 of a year ago. Or if you prefer the index at 724 is below the 725.1 of a year ago. Perhaps his staff will console him by reminding him that the index means that house prices are according to the Halifax over seven times higher than they were in 1983.
In case you were wondering how the Halifax spins it we are told this.
Prices in the three months to January were 0.8% higher than in the same three months a year
earlier – down from the 1.3% annual growth rate recorded in December.
Although they cannot avoid having to point out these two rather inconvenient facts..
House prices in the latest quarter (November-January) were 0.6% lower than in the preceding
three months (August – October)
On a monthly basis, house prices decreased by 2.9% in January, following a 2.5% rise in
The Halifax has another go at presenting the numbers and note the swerve from monthly to quarterly numbers which they omit to mention.
Attention will no doubt be drawn towards the monthly fall of -2.9% from December to January, the second time in
three years that we have seen a drop as a new year starts. However, the bigger picture is actually that house prices
have seen next to no movement over the last year, with annual growth of just 0.8%.
“This could either be viewed as a story of resilience, as prices have held up well in the face of significant economic
uncertainty, or as a continuation of the slow growth we’ve witnessed over recent years.”
So they have shown “resilience” by falling 2.9% in a month? That sort of language is of course central banker style as it covers banks which quite often then collapse. If we look for a pattern we see that the monthly moves are erratic but that the quarterly comparison has been negative for the last three months now. Also if prices remain here then 2019 will show some more solid annual falls because there were some blips higher last year especially in the summer.
The underlying situation does not tell us a lot either way.
Monthly UK home sales latest quarter. December saw 102,330 home sales, which is very close to
the 5 year average of 101,515…….In December mortgage approvals showed little difference to the previous month. Bank of England industry-wide figures show that the number of mortgages approved to finance house
purchases – a leading indicator of completed house sales saw a flat 0.2% rise to 63,793. The December rate is still not far below the 2018 average of 64,913 but is 2,694 below the average of the past 5 years.
So maybe a little weaker which they try to offset with this.
On the demand side we see very high employment levels, improving real wage growth, low inflation and low mortgage rates.
The catch of course is that we saw plenty of house price growth with falling real wages and compared to them house prices took quite a shift upwards. Let us move on as we note that none of the house price measures we look at are perfect but that overall we have seen a welcome fall in house price growth which hopefully will begin the long road to making them more affordable again. Otherwise the only way for them to be more affordable is for more interest-rate cuts and credit easing, or a trip to negative interest-rates as we looked at yesterday.
Okay let me open with a reminder that we are looking at something that was badged as reducing energy costs with the implication that it would reduce inflation. Or to link with the topic above “help” with energy costs.
The price cap for customers on default (including standard variable) tariffs, introduced on 1 January 2019, will increase by £117 to £1,254 per year, from 1 April for the six-month “summer” price cap period. The price cap for pre-payment meter customers will increase by £106 to £1,242 per year for the same period. ( UK Ofgem)
As you can see those are pretty solid increases to say the least. Here is the explanation.
Capped prices only increase when the underlying cost of energy increases. Equally when costs fall consumers’ bills are cut as suppliers are prevented from keeping prices higher for longer than necessary.
The caps will continue to ensure that the 15 million households protected pay a fair price for their energy because the rises announced today reflect a genuine increase in underlying energy costs rather than supplier profiteering.
We do get something of a breakdown.
Around £74 of the £117 increase in the default tariff cap is due to higher wholesale energy costs, which makes up over a third (£521) of the overall cap.
That is really rather odd as I note that the price of a barrel of Brent Crude Oil is at US $62.63 some 7% lower than a year ago. Of course there is the lower value of the UK Pound £ to take into account but that leaves us roughly unchanged. Or to put it another way UK weekly fuel prices at the pump have fallen by approximately ten pence per litre since the peaks in the autumn of last year.
Accordingly I hope that this is investigated as there is more to it than meets the eye in my opinion.
While the prices of wholesale energy contracts used for calculating the cap have fallen in recent months, overall these costs remain 17% higher than the last cap period (see wholesale energy charts below).
Also there are ongoing higher prices from the cost of green energy.
Other costs, including network costs for transporting electricity and gas to homes and costs associated with environmental and social schemes (policy costs), have also risen and contributed to the increase in the level of the caps.
These get tucked away in the explanation but over time have been substantial. If the establishment have the faith in them they claim why do they keep trying to hide it? there have been successes in the world of green power such as the substantial improvement seen from solar efficiency but we have made little progress in the obvious need to be able to store it. Also according to Wired the polar vortex which hit the US caused trouble for electric vehicles.
That’s because the lithium-ion batteries that power EVs (as well as cellphones and laptops) are very temperature sensitive.
There is a fair bit to consider here but let me start with my theme that the UK suffers from institutionalised inflation. For once let me give the BBC some credit as Victoria Fritz has figured out that something does not seem right.
11 million households protected by the Government’s energy price cap have been told that their bills are set to go up by around £100 a year. What good is a cap if it moves just months after it was set?
Governor Carney will be particularly keen on this form of inflation as he regularly flies around the world to lecture us on climate change, But on what is a Super Thursday as we get the quarterly inflation report ( Narrator, for newer readers it is usually anything but,,,) his mind will be on house prices and perhaps in the press conference he will have another go at this.
Mark Carney met senior ministers on Thursday to discuss the risks of a disorderly exit from the EU.
His worst-case scenario was that house prices could fall as much as 35% over three years, a source told the BBC. ( September 2018)
Or he 33% fall scenario suggested in November although of course that required a Bank Rate rise to 5.5% which stretched credulity to way beyond breaking point.