A pack on your back — it's the latest way to gum up the market in houses
CHRISTOPHER FILDES
lirust what we need: a well-meant effort to gum up the market in houses. This market now seems to be gumming itself up, but never mind. A new Housing Act has been passed into law, and with it the concept of sellers' packs. Anyone who wants to sell a house will have to put one of these packs together or, more precisely, to order one. They are supposed to contain all the information that a buyer of the house might want to have, and members of the Royal Institute of Chartered Surveyors will be happy to provide them for anything up to £1 ,000. Who are these surveyors? Well, if you wanted to annoy them, you could describe them as estate agents with their Sunday suits on. Preparing the packs will help to keep them busy and provide a welcome boost to their incomes — for business has been slackening off, and Countrywide, which owns the biggest chain of estate agents in the country, now forecasts that in the last three months of this year it will lose money. Good news, too, for the 7,500 inspectors who will be recruited to police the scheme, and for the lawyers, who can see new scope for litigation. The packs will be with us in two years' time, and will be compulsory all over England and Wales the year after. You might ask why willing buyers or sellers could not decide for themselves whether to ask for all this information or provide it or pay for it
but ministers and their advisers, just like estate agents, need to be kept busy. Here comes the latest instance of Sir Peter Middle ton's Law: 'Even if you have a badly functioning economy — which in many ways we still do — it is always possible to make it worse by government initiatives.'
A clock speaks
These developments are being closely studied by the Stopped Clocks Club, of which I am chief horologue. When I founded it the Bank of England and I were the only members. We had watched with disbelief as house prices zoomed ever onwards and upwards, we were weary of forecasting that they would run out of steam, we decided to stop and wait for the facts to catch up with our forecasts. Now we find ourselves less exposed as a minority group. Christopher Smallwood of Barclays expects that house prices will fall by 8 per cent and that by the end of 2007 they may be down by as much as one fifth. When the market was running away — up hill, that is — I urged the Governor to treat it like a mule and attract its attention by hitting it over the head with a length of four-by-two planking. In the event, five sharp raps with a rising rate of interest seem to have done the trick. This is an achievement he declines to celebrate. Central bankers, he says, do not go in for celebrations — 'in fact, our job is make sure that they don't get out of hand'. He has certainly put a damper, and not before time, on the Great British House Party. It just goes to show that, as our club's motto proclaims, even a stopped clock is right twice a day.
Blowing bubbles
So pop goes our favourite illusion: that the way to get rich is to buy a non-productive asset with borrowed money and then live inside it. How these bubbles glisten, while they last. Richard Dale in The First Crash (Princeton, £18.95) analyses the South Sea Bubble. It had evetything — ramped markets, mug punters, contagious excitement, puffs planted in friendly tip-sheets, and a Chancellor of the Exchequer who was cut in on the stock and ended up in the Tower. The Sword Blade Company, promoter of the bubble, was the (Whig) Bank of England's (Tory) rival. A patient economist, Archibald Hutcheson, kept on explaining that South Sea stock was overpriced, and the stock kept on rising, until it sucked in such sceptical investors as Robert Walpole and Isaac Newton. A City merchant called Guy sold at the top and founded a hospital. This was, Professor Dale says, a test case for the theory that investment decisions are rational. Buying stock in the belief that the market is rising, so that somebody else will come along and pay more for it later, is known as momentum investment, or Bigger Fool Theory, and is rational while the supply of fools lasts. When the momentum builds up, the market's prophecy can be self-fulfilling. The more you borrow, the more you can buy and the more money you can expect to make. We have been watching this trend in the market for houses and, like all trends, it goes on till it stops. It now seems to be stopping.
Poor scholars
It is a sad day when the Blacicwells, Oxford's benevolent bookselling family, are thinking of putting the shutters up. Some or all of their shops — to my surprise, there are now 61 of them — are for sale, or may diversify into sweatshirts, branded mugs and other accessories of the modern student lifestyle. Books must play less of a part in it, now that essays are available on line in kit form, and Blackwell's has been losing business to Internet booksellers like Amazon. The student body will live to regret this. They will find that they cannot treat Amazon, as they have been known to treat Blackwell's, as a convenient reference library. Credit may be scarcer, too. It was said that when Blackwell's sent you its final demand — or rather, the fifth out of six in the series — you should ask to see Sir Basil Blackwell and explain to him that you were only a poor scholar. This was probably true and might earn you a breathing space. He would not have felt the same way about sweatshirts.
Asking for less
The Conservatives were ready for the election and rightly expected to sweep back to power. In the campaign guide provided by Central Office, they claimed that when they last held office, national expenditure per head of population had been reduced — 'which was then considered a vote-winner', Andrew Roberts explains in his life of Lord Salisbury. No Conservative leader has been more effective in getting and holding power, and his successors might like to study his tactics in the 1895 election when preparing for the next one. Their shadow Chancellor, Oliver Letwin. is matched with the biggest spender of all, as we shall be reminded next week when he previews next year's Budget. If the party of Salisbury hopes to appeal to the taxpaying classes, the obvious slogan presents itself: Oliver asks for less.
Christopher Fildes's book, A City Spectator, is published by Nicholas Brealey (£12.99).
Previous page
