Rightmove/Wrongmove?

On a slow day, we’ve had quite a bit of interest generated by the opposite calls in monetary policy either side of the Atlantic. The Barron’s cover story calling for rate hikes while over here, Adam Posen is clamouring for more QE in the Sunday Times. Neither really have had much more than a fleeting influence on markets so far today but there’s a bit of chat about it nevertheless.

The more interesting thing I thought was the Rightmove house price survey. Up 2.8% on the month and in London, up a whopping 6.5%, making new all time highs. Yes, that is higher than the Nov 2007 peak. Does that seem wrong to anyone? Now I get that there is a dearth of sellers, and this makes sense to me given the pocket change mortgage payments those on trackers are faced with…but that property is making new all time highs, that just seems plain wrong. Bear in mind, on average, it takes about 6 years for property prices to go from peak to trough through a recession. We’re now two years in, oh and this recession has been worse than your average one. To be fair, the weak pound has made the UK market more attractive to foreign buyers but I wonder what happens when the tracker rates end and people have to go out and remortgage. While the BoE rate may be 50bps, you’re looking at about 2.5% above that for a tracker and about 5% for anything fixed for 5 years. Interestingly enough this survey comes on the day the FSA has unveiled a number of measures to make the mortgage market more sustainable, including self cert mortgages. I for one am going to be adding another property to the "for sale" list and looking to feed the ducks while they are quacking.

As an interesting addendum; leafing through the Rightmove report, I noticed an interesting statistic. Most buyers, shock, horror, expected house prices to keep going up with only 1 in 10 expecting prices to fall. Typically, people don't buy (investment) stuff when they expect it to go down in value, so before hopping on the house price bandwagon, the above stat should probably be taken in context of the sampling bias it surely is tainted with.