CITY AND SUBURBAN
A house is a machine for living in, so price wars grease its wheels
CHRISTOPHER FILDES
Not being a banker or a builder or a Conservative candidate, I like to think that houses are a buyer's market. That is in the best interest of people who want to buy houses and live in them. Nostalgia for the old days of house price inflation and a sell- er's market now overwhelms the governing party, and its Chancellor is being urged to find some magic button which, when pressed, will stimulate the housing market. Two things might do that. One is to set off a raging price war among mortgage lenders, so that they fall over each other to offer dis- counts and rate cuts and even cash to get new customers. The other is to let house prices fall to a level where, in relation to incomes, they are on the low side. Albeit by mistake, the Chancellor has done both of these already, and I hope that he will be his robust self with the lenders who now want him to do more. The market would be better if it were more liquid, but that is for them to resolve. Too many of their debtors are stuck in their houses because they owe more than the houses are worth. If the debtors were companies, the lenders would know what to do. They would transform some of the debt into equity, giving themselves a part-owner's stake in the house. It would tie up their capi- tal, but they now have capital coming out of their ears, which is why banks and building societies find themselves paying it out. That redoubtable lender, Sir Brian Pitman of Lloyds, has just paid £1.8 billion to get deep- er into the mortgage business via Chel- tenham and Gloucester, but he hopes that the market stays weak. In a mortgage price war, he expects to win. In a house price war, the buyers will win.
Château Laffitte
BARCLAYS USED to have a few branch- es in France conveniently located for the chairman's yacht. Then a more modern, expansive, European-minded management rushed in and bought L'Europeenne de Banque, which had been the Rothschilds' Paris bank until Francois Mitterrand was mean enough to have it nationalised. The attraction to Barclays was L'Europeenne's head office in the Rue Laffitte — large and opulent enough to be just what Barclays wanted, a suitably impressive headquarters for the château generals who had planned the invasion. Now an even more modern management is retreating in good order, leaving half a billion pounds dead on the bat- tlefields of France. (Not being nationalised, Barclays lacks Credit Lyonnais's scope for palming off its bad loans on the French tax- payer.) As for the Château Laffitte, Barclays wrote off £70 million against its value 18 months ago, and another £50 million went this week. At this price, the Rothschilds might be induced to take it back.
Last chance saloons
THE ALTERNATIVE solution now pre- sents itself. The City has quite enough banks and insurance companies with grand head offices, and no good hotels at all, so change is overdue. The Pearl's superb Edwardian palazzo arranged (by Percy Monckton) round a courtyard has stood empty for years. Now it has been sold to some enterprising Malaysians who plan to turn it into a luxury hotel. Its neighbour across Holborn, the Pru- dential, is a monastery built for actuaries, but hoteliers need only look a little further. To let in Bishopsgate is the lavish modern man- sion built for Standard Chartered, complete with piano nobile. No one seems to have told the architect (Fitzroy Robinson) that the client was supposed to be a bank. Billings- gate, done up at vast expense for Citicorp, hangs heavy on the agents' hands. The river- side setting is matchless and the smell of fish has faded. The (still unlet) top half of Bar- clays' own labyrinthine new head office in the Moorish taste has a view which over- looks the bottom half. The Stock Exchange's charmless and unwanted pile could be reborn as Forte Towers. My eye has long been on the Union Discount Com- pany of London, with its banking hall of 1890 (by John Anderson) in coloured tiles and dark mahogany, bellying bar counter, sweeping staircase and enticing balcony above. The discount market is not what it used to be, but the Union would make a roaring saloon. Perhaps we could rename it the Commercial Union.
Selling Lloyd's short
TRY A new idea on Lloyd's of London and the answer comes in three instal- ments. First the idea is thrown out as being alien to Lloyd's unique traditions. Then it is rejected on legal advice as being inconsistent with Lloyd's ill-starred Act of Parliament. Then Lloyd's consults some more lawyers, who find a way round, and Lloyd's airily takes credit for a new idea. It must be half a dozen years since Robert Miller, then at the Institute of Economic Affairs, suggested that members of Lloyd's should be free to buy and sell their places on underwriting syndicates, just as if they were buying and selling shares. The then chairman looked down his nose at Mr Miller and had him shown the twelfth-floor exit. Several disasters later, a working party headed by the present chair- man looked at the idea and liked it, but rejected it: all their expensive advisers could not make it work. Now, guess what? It's working. You can write a cheque and buy your way into a popular syndicate. Mr Miller, now at the Association of Lloyd's Members, has a little list of syndicates he would prefer to sell short. That is the mar- ket Lloyd's needs. How many of its mem- bers ache to be released from the open years — or open wounds — of syndicates they so airily joined when it all seemed so easy! What would they pay to buy their way out? The prices would be established in the market between the willing sellers and the speculative buyers. Mr Miller and I might set up a specialised investment fund, and go bargain-hunting. For Lloyd's most painful and durable ills, here at last is the market solution. If it jars with Lloyd's traditions, it must be on its way.
Just a blip
COMING SHORTLY from the Girthist Press: The Nigel Lawson Diet. I take it that this long-unawaited work, now so much puffed, will appear in two volumes. Volume One will show how a scrawny young finan- cial journalist, on the starvation wages of his calling, grew up to be a mighty editor and minister and Chancellor. That was not all done on lettuce leaves and lemon juice. I look forward to the secrets and the recipes. Vol. Two, I fear, will just be girthishly correct.
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