There is a view that the British are a generally pessimistic lot. But look at the latest survey out from Zoopla and you will see that it simply isn't so. We are, in fact, a stunningly optimistic population.
What makes me say this? The fact that 65% of us think that house prices will rise in the next six months.
Given that house prices and asking prices are falling in both nominal and real terms; that the economy is a seemingly hopeless mess (the IMF has just cut our growth forecast for the year to a pathetic 0.2%); that the mortgage market is as tight as ever (something the same homeowners accept only 10% of them think that finding a mortgage has become easier); and that estate agents are reporting two sellers for every buyer, this is heroic stuff.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
In the face of all the facts, the British population might be prepared to slash a little off their nutty asking prices every now and then, but they aren't giving up on the bubble-price dream.
I suspect that this is partly to do with the way in which house price growth is diverging in the south and the north. Limited falls in the south (and rises in London) mean that average prices don't look like they are falling much (and often not falling at all in nominal terms). That makes everyone in the north think things are better than they are and everyone in the south convinced that nothing is wrong.
This might soon change. According to a note from Capital Economics, the current divergence in house price inflation (about 12 percentage points between the best and worst regions London and Northern Ireland respectively) is far from unusual. Since 1975, the average gap has generally been higher (19 percentage points) and it has "only fallen into single digit territory in 17 of the last 150 quarters."
The pattern of house prices rising in one area and falling in others is also nothing new it happened in the 1980s and 1990s, too. The point is that the recent behaviour of the market (sharp falls in the north, smaller falls in the south) mostly reflects the fact that during the bubble house prices in the north rose far too much relative to house prices in the south. The divergence has now brought relative prices back more or less to their long term underlying trend (where a house in the south costs 1.6 times one in the north).
If you are an optimist, you might think this can only be good news. If prices are in the right place in relative terms, they should now move together: so price gains in the south should mean stability at worst and price rises at best in the north.
If you are a realist, however, you might think, as Capital's Ed Stansted does, that with house prices everywhere still overvalued and mortgages in short supply, "further falls in the north will ultimately undermine prices in the south." We are generally realists.
-
Christmas at Chatsworth: review of The Cavendish Hotel at BaslowMoneyWeek Travel Matthew Partridge gets into the festive spirit at The Cavendish Hotel at Baslow and the Christmas market at Chatsworth
-
Tycoon Truong My Lan on death row over world’s biggest bank fraudProperty tycoon Truong My Lan has been found guilty of a corruption scandal that dwarfs Malaysia’s 1MDB fraud and Sam Bankman-Fried’s crypto scam
-
House prices to crash? Your house may still be making you money, but not for much longerOpinion If you’re relying on your property to fund your pension, you may have to think again. But, says Merryn Somerset Webb, if house prices start to fall there may be a silver lining.
-
Prepare your portfolio for recessionOpinion A recession is looking increasingly likely. Add in a bear market and soaring inflation, and things are going to get very complicated for investors, says Merryn Somerset Webb.
-
Investing for income? Here are six investment trusts to buy nowOpinion For many savers and investors, income is getting hard to find. But it's not impossible to find, says Merryn Somerset Webb. Here, she picks six investment trusts that are currently yielding more than 4%.
-
Stories are great – but investors should stick to realityOpinion Everybody loves a story – and investors are no exception. But it’s easy to get carried away, says Merryn Somerset Webb, and forget the underlying truth of the market.
-
Everything is collapsing at once – here’s what to do about itOpinion Equity and bond markets are crashing, while inflation destroys the value of cash. Merryn Somerset Webb looks at where investors can turn to protect their wealth.
-
Value is starting to emerge in the marketsOpinion If you are looking for long-term value in the markets, some is beginning to emerge, says Merryn Somerset Webb. Indeed, you may soon be able to buy traditionally expensive growth stocks on the cheap, too.
-
ESG investing could end up being a classic mistakeOpinion ESG investing has been embraced with enormous speed and zeal. But think long and hard before buying in, says Merryn Somerset Webb.
-
UK house prices will fall – but not for a few yearsOpinion UK house prices look out of reach for many. But the truth is that British property is surprisingly affordable, says Merryn Somerset Webb. Prices will fall at some point – but not yet.
