House price drop cannot be hidden
Annual house price inflation was 1.8 per cent according to the latest analysis by the Nationwide Building Society.
That is the lowest figure since May 1996, but it is still an exaggeration. Prices rose by 1.8 per cent in the six months to last April — but they have not risen at all in the subsequent half year.
In other words, prices are not rising — they did rise last winter but they are now flat as pancakes. Inflation in the past half year is nil — and on an annualised basis, that is still nil.
Today’s survey from Hometrack presents a picture that home sellers will recognise. Prices fell by 0.1 per cent in the last month. That’s not a huge sum, but it is the 16th consecutive month of falls and prices are 3.5 per cent lower than they were a year ago.
Nationwide and its lending rival, the Halifax, are finalising their price statistics for October this week. House price measurement is not a precise science and we should not get diverted by the difference in decimal points between surveys or take hope from one analysis showing a slight recovery when another shows a decline. The truth is they are all are pointing to a rapidly slowing housing market
The supply of homes on offer exceeds demand. Fewer people are looking at properties but it takes more visits before a purchaser emerges — 14 in London, according to Hometrack. Sales are taking longer and more deals fall through.
And it is a circular argument. The slower the market, the longer buyers will wait. Gone are fears that if they dither today, a home will cost more tomorrow. On the contrary, they can save money by waiting. Add in the gloom on jobs and the wariness of borrowing and the housing market is set for a long depression
Early next year — when last winter’s modest increases drop out of the statistics — Nationwide’s figures could not only be telling us that prices are falling monthly, but that the annual rate is negative too. And that will seal the curse on the market for the near future.
Poor performing airlines shouldn’t be protected
The great and the good of the aviation industry will fly in to London on Wednesday for a service at Westminster to remember Lord King, the curmudgeon who turned British Airways from a tired nationalised industry into the world’s favourite airline.
King, who died in July, converted the loss-maker into a profitable private company, but his efforts to merge with foreign rivals were constantly thwarted by overseas governments that insisted on preserving their own flag-carriers, however great the subsidies.
Aviation is still an industry crying out for consolidation. In every year of this millennium, the world’s 300 carriers have made losses greater than any profits they make, and they will report a collective deficit exceeding $5bn (£2.84bn) this year — much of it financed by governments or creditors. Even in America, the leading airlines shelter inside bankruptcy protection rather than make profits.
If the airline leaders singing hymns at Westminster this week really want to pay tribute to King, they would pull down the protection that allows poor airlines to keep flying and which prevents strong carriers from taking over the weak and making them efficient.
British Airways, under new chief executive Willie Walsh, should be aiming to lead international consolidation, ensuring BA does the buying rather than being bought. There is much talk of “open skies” by politicians, but little evidence. If the skies open on Wednesday and King’s voice booms down it will be to tell the congregation to swallow their national pride and allow market forces to create an efficient international aviation industry.
Oil firms face awkward week explaining results
Royal Dutch Shell and BP will announce third-quarter profits this week that should add up comfortably to $10bn. The oil giants will find themselves on the defensive about profiteering from the sharp rise in crude prices
Each dollar on the price of Brent crude adds about $500m a year to their bottom lines, but the increase in world prices came at a time when North Sea production had been run down for maintenance and when refinery output in North America was hit by hurricane Katrina. The negative effect on the profits of BP alone could be $700m, and with prices heading back to $60 a barrel, the oil giants have missed out on maximising some of their best margin business.
But even with global growth prospects deteriorating, both of these companies have cash gushing from their wells. BP can afford a healthy dividend increase tomorrow and Shell, reporting on Thursday, should have made enough profit in this one quarter alone to finance its $5bn share buy-back programme for the whole year.