Go to the Office for National Statistics website, look for the latest UK House Price Index release, and you will see what we think is one of the most encouraging charts we've seen in a long time. It shows UK house prices flatlining. The average house price was £226,000 in May 2018, a little under 3% higher than in May 2017, and unchanged from last month. Move then to the inflation figures and you will see that annual CPI (consumer price index) inflation is sitting at 2.4% and the old RPI (retail price index) inflation measure is at 3.4% (for more, see our cover story this week on the oil price). Next, look to the latest wage numbers: regular wages are rising at an annual rate of about 2.7%.
Taken alone, none of these numbers are particular exciting. Add them up and they might be. If we have a dream at MoneyWeek, it is to see house prices flatten out in nominal terms, and fall slightly every year in inflation-adjusted (real) terms something that would limit the pain for those with big mortgages,but also make houses more affordable for new entrants. The house-price growth and inflation numbers taken together suggest this might just be beginning to happen. Add in the (still-slight) rise in real wages, and the affordability trend looks as though it is going in the right direction for the first time in a long while.
We have hopes, too, that real wages will soon be rising at more than the 0.2-0.3% a year that they are currently. That's firstly because the market is so tight (the unemployment rate is at the lowest it has been since the mid-1970s,at 4.2%), but also because there is a chance that productivity (the real driver of wages) will soon start to rise again. That's because a decade-long trend for employers to hire hordes of cheap and easily available workers, instead of investing in automation, is coming to an end. The new scarcity of labour is driving investment, which should drive productivity and then wages. Hooray! (See here for more on this.)
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There is more good news around this week. The EU-Japan trade deal is a nice example. This is happy evidence that the world is not going to hell in a protectionist hand-basket; that it is possible to make good trade deals with the EU; and that cheaper Japanese soy sauce in the West is a near-term possibility (who knew the EU imposed a 7.7% tariff on the import of soy sauce?).Then there is Brexit. You could see the endless rows of the last few weeks as proof that the whole thing is a miserable fiasco. You could also see them as democracy in action and therefore vital stepping stones on the long and boring path to the inevitable compromise deal. I see them as the latter.
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British Airways revamps Avios scheme bringing down flight prices to £1With the new Avios part-payments scheme you can now bag a British Airways flight for as little as £1
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RBS to close a fifth of branchesRoyal Bank of Scotland plans to shut 18 branches across Scotland, resulting in the loss of 105 jobs. We have the full list of closures.
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Beat the cost of living crisis – go on holidayEditor's letter As inflation rages, energy bills soar and the pound tanks, what’s a good way to save money this winter? Go on holiday, says Merryn Somerset Webb.
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How capitalism has been undermined by poor governanceEditor's letter Capitalism’s “ruthless efficiency” has been undermined by poor governance, a lack of competition and central banks’ over-enthusiastic money printing, says Andrew Van Sickle.
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Don't be scared by economic forecastingEditor's letter The Bank of England warned last week the UK will tip into recession this year. But predictions about stockmarkets, earnings or macroeconomic trends can be safely ignored, says Andrew Van Sickle.
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The biggest change in the last 17 years – the death of the “Greenspan put”Editor's letter Since I joined MoneyWeek 17 years ago, says John Stepek, we’ve seen a global financial crisis, a eurozone sovereign debt crisis , several Chinese growth scares, a global pandemic, and a land war in Europe. But the biggest change is the death of the “Greenspan put”.
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The wolf returns to the eurozone’s doorEditor's letter The eurozone’s intrinsic flaws have been exposed again as investors’ fears about Italy’s ability to pay its debt sends bond yields soaring.
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Things won't just return to normal – that's not how inflation worksEditor's letter You might think that, if inflation is indeed “transitory”, we just need to wait and everything will return to “normal”. But this is a grave misunderstanding of how inflation works, says John Stepek.
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Car hire and the strangeness of the post-pandemic economyEditor's letter A global shortage of hire cars and unusually high hotel occupancy rates sum up the post-pandemic global economy in a nutshell, says Merryn Somerset Webb, with enhanced demand meeting restricted supply.
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Why we need to get a grip on our governmentEditor's letter Our government is trying to do too much, enacting policies that are destructive to the private sector. It needs to drop the the feel-good nonsense and create policies that lead to long-term wealth, says Merryn Somerset Webb.
