No, house prices are not falling

It's just a summer blip.

Time to don youy hard hats, cancel this winters ski trip and think twice about the kids school fees, house prices have dropped by 1.8 per cent compared to July. The time for panic though may be a little premature however: what the newly released figures from Rightmove, a property website, have shown is no more than the annual summer blip. In fact since January house prices have continued to rise by 5.5 per cent, the fastest rate since 2006 and that’s £20,000 on January’s average house price of £230,000.

But is a rise in house prices really something to be happy about? Even if we dismiss the much publicised concerns over first time buyers (hard to do I know) the rise in prices may have greater worries for us all. One of the areas for concern is the ability to deal with inflation, as almost any rise in house price will mean higher levels of debt among households.

Even at just 2.8 per cent inflation is outstripping wage rises by 1.1 per cent month on month according to the office of national statistics. That’s a real terms wage cut of 1.1 per cent per month for everyone compared to the price of things like food. Conventional logic dictates that the Bank of England (BoE) cuts inflation back by raising interest rates when that happens, poverty not being a popular condition in a democracy.

But the Bank of England is doing the opposite. They hope that by keeping the lending rate at 0.5 per cent banks will lend more, and in turn we will spend more, boosting the economy. But after four years the BoE has not changed its policy despite banks stubbornly refusing to lend ro all but the safest bets. So maybe there’s another reason to keep rates low?

Maybe the answer lies in the fears of a collapsing housing bubble, a housing bubble so huge it can’t be inflated away.

Mortgage default levels have remained low despite rising unemployment and lower wages. This has been because the main affect of the crisis was that the BoE cut rates to record lows of just 0.5 per cent.  This helped the overleveraged homeowner from defaulting when living costs rose but their wages didn’t. The new rates gave them a cushion on which to land softly.

Any rise in the BoE rate though will pull away that cushion and the bump will be a hard one. Politically a hard bump is unacceptable. Voters could suddenly be homeless or struggling to pay debts. Any government in power when this happens can effectively say goodbye to any chance of a return to power, no matter how independent the BoE is supposed to be.

Therefore the pressure on the BoE to keep rates low and let house prices climb must be huge, if unspoken. The problem is that it’s a short sighted policy. Even if the average homeowner is not likely to default today or tomorrow because they can afford the low repayments, those repayments will inevitably be squeezed by other rapidly rising costs of living. Sooner or later there may not be enough money in the house-holders pockets to pay for all their outgoings including their mortgage. And by holding rates low, the BoE has no room for manoeuvre. Raise rates and be seen to cause a property crash, or keep rates low, increase our daily costs and cause a crash anyway.

They are caught between the devil and the deep blue sea.

So maybe it is time to don our hard hats and cancel that holiday. Not because house prices are falling, but because they’re not.

Photograph: Getty Images

Mike Cobb is a reporter at Private Banker International

Photo: Getty
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How the row over Jackie Walker triggered a full-blown war in Momentum

Jon Lansman, the organisation's founder, is coming under attack. 

The battle for control within Momentum, which has been brewing for some time, has begun in earnest.

In a sign of the growing unrest within the organisation – established as the continuation of Jeremy Corbyn’s first successful leadership bid, and instrumental in delivering in his re-election -  a critical pamphlet by the Alliance for Workers’ Liberty (AWL), a Trotskyite grouping, has made its way into the pages of the Times, with the “unelected” chiefs of Momentum slated for turning the organisation into a “bland blur”.

The issue of contention: between those who see Momentum as an organisation to engage new members of the Labour party, who have been motivated by Jeremy Corbyn but are not yet Corbynites.

One trade unionist from that tendency described what they see the problem as like this: “you have people who have joined to vote for Jeremy, they’re going to meetings, but they’re voting for the Progress candidates in selections, they’re voting for Eddie Izzard [who stood as an independent but Corbynsceptic candidate] in the NEC”.  

On the other are those who see a fightback by Labour’s right and centre as inevitable, and who are trying to actively create a party within a party for what they see as an inevitable purge. One activist of that opinion wryly described Momentum as “Noah’s Ark”.

For both sides, Momentum, now financially stable thanks to its membership, which now stands at over 20,000, is a great prize. And in the firing line for those who want to turn Momentum into a parallel line is Jon Lansman, the organisation’s founder.

Lansman, who came into politics as an aide to Tony Benn, is a figure of suspicion on parts of the broad left due to his decades-long commitment to the Labour party. His major opposition within Momentum and on its ruling executive comes from the AWL.

The removal of Jackie Walker as a vice-chair of Momentum after she said that Holocaust Memorial Day belittled victims of other genocides has boosted the AWL, although the AWL's Jill Mountford, who sits on Momentum's ruling executive, voted to remove Walker as vice-chair. (Walker remains on the NEC, as she has been elected by members). But despite that, the AWL, who have been critical of the process whereby Walker lost her post, have felt the benefit across the country.

Why? Because that battle has triggered a series of serious splits, not only in Momentum’s executive but its grassroots. A raft of local groups have thrown out the local leadership, mostly veterans of Corbyn’s campaign for the leadership, for what the friend of one defeated representative described as “people who believe the Canary [a pro-Corbyn politics website that is regularly accused of indulging and promoting conspiracy theories]”.

In a further series of reverses for the Lansmanite caucus, the North West, a Momentum stronghold since the organisation was founded just under a year ago, is slipping away from old allies of Lansman and towards the “new” left. As one insider put it, the transition is from longstanding members towards people who had been kicked out in the late 1980s and early 1990s by Neil Kinnock. The constituency party of Wallasey in particular is giving senior figures in Momentum headaches just as it is their opponents on the right of the party, with one lamenting that they have “lost control” of the group.

It now means that planned changes to Momentum’s structure, which the leadership had hoped to be rubberstamped by members, now face a fraught path to passage.

Adding to the organisation’s difficulties is the expected capture of James Schneider by the leader’s office. Schneider, who appears widely on television and radio as the public face of Momentum and is well-liked by journalists, has an offer on the table to join Jeremy Corbyn’s team at Westminster as a junior to Seumas Milne.

The move, while a coup for Corbyn, is one that Momentum – and some of Corbyn’s allies in the trade union movement – are keen to resist. Taking a job in the leader’s office would reduce still further the numbers of TV-friendly loyalists who can go on the airwaves and defend the leadership. There is frustration among the leader’s office that as well as Diane Abbott and John McDonnell, who are both considered to be both polished media performers and loyalists, TV bookers turn to Ken Livingstone, who is retired and unreliable, and Paul Mason, about whom opinions are divided within Momentum. Some regard Mason as a box office performer who needs a bigger role, others as a liability.

But all are agreed that Schneider’s expected departure will weaken the media presence of Corbyn loyalists and also damage Momentum. Schneider has spent much of his time not wrangling journalists but mediating in local branches and is regarded as instrumental in the places “where Momentum is working well” in the words of one trade unionist. (Cornwall is regarded as a particular example of what the organisation should be aiming towards)

It comes at a time when Momentum’s leadership is keen to focus both on its external campaigns but the struggle for control in the Labour party. Although Corbyn has never been stronger within the party, no Corbynite candidate has yet prevailed in a by-election, with the lack of available candidates at a council level regarded as part of the problem. Councilors face mandatory reselection as a matter of course, and the hope is that a bumper crop of pro-Corbyn local politicians will go on to form the bulk of the talent pool for vacant seats in future by-elections and in marginal seats at the general election.

But at present, a draining internal battle is sapping Momentum of much of its vitality. But Lansman retains two trump cards. The first is that as well as being the founder of the organisation, he is its de facto owner: the data from Jeremy Corbyn’s leadership campaigns, without which much of the organisation could not properly run, is owned by a limited company of which he is sole director. But “rolling it up and starting again” is very much the nuclear option, that would further delay the left’s hopes of consolidating its power base in the party.

The second trump card, however, is the tribalism of many of the key players at a local level, who will resist infiltration by groups to Labour’s left just as fiercely as many on the right. As one veteran of both Corbyn’s campaigns reflected: “If those who have spent 20 years attacking our party think they have waiting allies in the left of Labour, they are woefully mistaken”. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.