What caught my eye this week.
With 2024’s decline in mortgage rates arrested – if not yet quite beaten-up for resisting said arrest – it is likely house prices will continue to go nowhere for a while.
Especially given the higher stamp duty for buy-to-let landlords that came in with the October Budget.
The now-5% stamp duty surcharge they pay is survivable. But it’s hardly going to spur animal spirits.
Nor will the gloomier economic backdrop.
Curbed enthusiasm
Right-wing pundits are falling over each other to blame Labour’s October Budget for all the UK’s woes.
As if Labour’s plan to increase public spending by 2-3% has really flipped the UK economy overnight into a “Socialist Worker’s Paradise” that’s “capitalist in name only” and all the rest.
Not to mention the nonsense of a five-month-old government being held responsible for the past 15 years of stagnant real wage growth, rising public sector debt, and taxes steadily ratcheting upwards.
Tricky fellows, these reds! They must have been pulling the strings from opposition all along?
Still, I’m not going to bat for Labour’s hike in Employer’s National Insurance.
As I said at the time [1] I feared for jobs – and profits – especially in the hospitality and retail sector.
That downside is already coming through in company downgrades and commentary [2]. From an unenviable set of options for raising revenue, hiking the cost of employment wasn’t the way to go.
What’s more, Reeves and Starmer are in part responsible for the national mood music.
And that has been akin to going to a Saturday night dinner party where the host has Joy Division’s Isolation on rotation.
The only way isn’t up
None of which can be expected – to get back to where I started – to buoy the housing market.
For many of the two-thirds of British households that own their own home, that’s bad news I suppose.
People argue their home is not an asset or an investment, inexplicably [3] to me.
Yet they expect its price to go up over time. And they – perhaps secretly – get surly when it doesn’t!
Personally, I’d argue the relatively sluggish property prices of recent years – especially in the South East, which was previously so overheated – has been a silver lining to these years of gloom.
Stalled sticker prices have enabled a real-terms price crash. That has begun to redress decades of unsustainable growth.
Given the centrality of housing to the UK economy, I’d take such an inflation-adjusted silent crash [4] – that is, price falls in inflation-adjusted terms – to an actual plunge in nominal prices any day.
Take me back to dear old Blighty
From a long-term historical perspective, UK property remains achingly expensive.
Data from Mojo Mortgages [5] this week compared the landscape in 2024 to half a century ago:
[6]
Yes – it is definitely far harder to buy a home today than it was for our parents and grandparents.
The table even understates the issue. I make that a 310% increase in the deposit as a percentage of a house.
The upshot is that house prices have risen by 2,534% in 50 years.
Yet salaries have grown by just 1,791% over this period.
Which means, Mojo calculates, that today’s salaries are £13,676 short of keeping pace with house prices.
Or alternatively that house prices should be £75,000 cheaper.
Nobody’s happy
There are a lot of reasons why British people feel gloomy about their finances.
Stagnant wages, higher taxes, years of political disappointment. The moribund UK stock market even.
But with going-nowhere house prices we now have a double-whammy of housing miserableness.
At least homeowners could previously feel good about their often-biggest asset escalating further in price. Even if they publicly tutted about how hard it was for young people.
But now the home-owning majority have seen the value of their nest egg stall for years, and actually fall in real terms.
Yet homes still remain out of reach for most young people. Not without a big leg-up from Mum and Dad – or a City job that comes with a six-figure bonus.
Of course Labour says it wants to build 1.5 million new homes [7] to address the supply side.
Good thing those homes won’t need to built by workers that they just made more expensive to employ, eh?
Um… have a great weekend.
From Monevator
How to unitize your portfolio – Monevator [8]
Accessing the Access to Work scheme – Monevator [9]
From the archive-ator: Why your life expectancy is much longer than you think – Monevator [10]
News
Note: Some links are Google search results – in PC/desktop view click through to read the article. Try privacy/incognito mode to avoid cookies. Consider subscribing to sites you visit a lot.
Mortgage payments to rise for over half of homeowners by 2027 – Guardian [11]
Pushing UK pensions into private markets would deliver ‘tiny’ gains, forecasts show – FT [12] [Search result] and DWP [13] [PDF]
Supermarket loyalty schemes deliver genuine savings says watchdog – Guardian [14]
Net UK migration figures hit 906,000 in 2023, revised figures show – BBC [15]
Pension credit applications surge 145% on means-testing of Winter Fuel Payments – This Is Money [16]
FCA recasts ‘naming and shaming’ rule in response to backlash – Reuters [17]
British workers [apparently] making £590 a month from side hustles – This Is Money [18]
Panic in Russia as rouble slips to symbolic mark against dollar – Sky [19]
Smithfield Market and Billingsgate to close forever – Londonist [20]
Australia passes social media ban for under-16s – Sky [21]
[22]
Does valuation still matter for the US market? – Neil Woodford [23]
Products and services
Halifax is offering an unusual 18-month fixed-rate mortgage – This Is Money [24]
Could a professional ‘life admin’ service make your life easier? – Which [25]
Premium Bond prize rate cut to 4% – Be Clever With Your Cash [26]
Open an account with low-cost platform InvestEngine via our link [27] and get up to £50 when you invest at least £100 (T&Cs apply. Capital at risk) – InvestEngine [27]
The most-viewed houses on Rightmove in 2024 – This Is Money [28]
Watch out for high charges when accessing your pension – Which [29]
Homes for sale with stunning staircases, in pictures – Guardian [30]
Comment and opinion
Warren Buffett’s new letter on estate planning [PDF] – Berkshire Hathaway [31]
Rail ticketing in Britain has become an absolute farce – Guardian [32]
Thematic funds: double trouble – Behavioural Investment [33]
It’s bananas to regard art as an investment – FT [34]
Bitcoin and FOMO – A Wealth of Common Sense [35]
Getting ready for a year of One-in, One-out – 3652 Days [36]
Misleading economic and investing indicators – Humble Dollar [37]
Secrets of smart investing with Jazon Zweig [Podcast] – Part 1 [38] and Part 2 [39] via Apple
The financial stability consequences of digital assets [PDF] – US Federal Reserve [40]
A white paper arguing passive investing has reduced price inelasticity and market responsiveness, with consequences down the line [PDF] – Apollo Academy [41]
Naughty corner: Active antics
Is investment in space about to take-off? – Institutional Investor [42]
A chat with retired UK fund manager Anthony Bolton [Podcast] – BTBS [43]
Larry Swedroe: improving low-vol strategies with leverage – Alpha Architect [44]
Why are you looking at everybody else’s returns? – Investment Talk [45]
After Return on Equity – The Diff [46]
The best-performing US stocks of the past 20 years – Bespoke [47]
Three reasons why investors are brushing off Trump’s tariff threats – Sherwood [48]
Kindle book bargains
I Will Teach You To Be Rich by Ramit Sethi – £0.99 on Kindle [49]
Eat That Frog! Get More of the Important Things Done by Brian Tracy – £0.99 on Kindle [50]
Growth: A Reckoning by Daniel Susskind – £0.99 on Kindle [51]
A Confederacy of Dunces by John Kennedy Toole [An old fav, not about investing] – £0.99 on Kindle [52]
Environmental factors
What can convince consumers to buy more EVs? [Search result] – FT [53]
Cash-strapped UK to water down green targets as economic reality bites – Politico [54]
Will flights really reach net zero by 2050? – BBC [55]
For the love of a little sea in Ireland – Hakai [56]
How islands are confronting existential climate threat – BBC [57]
Robot overlord roundup
The state of generative AI use in business – Menlo VC [58]
How an AI grandma fights back against phone scammers – CBS [59]
The tangled web of AI company ownership [Interactive] – Sherwood [60]
Apple Intelligence ads are missing the mark – Sherwood [61]
Off our beat
Whatever happened to the big night out? – Guardian [62]
More Americans want a second passport and are willing to pay – Sherwood [63]
The promise of DuoLingo – The Dial [64] [h/t Abnormal Returns [65]]
Happiness is a choice – We’re Gonna Get Those Bastards [66]
Looking back at the Future of Humanity Institute – Asterisk [67]
‘Clean girl’ influencers in court – The Verge [68]
German and Nordic countries prepare their citizens for possible war – Guardian [69]
And finally…
“The venture industry is a meritocracy, up to a point. It is also what its critics call a ‘mirror-tocracy’.”
– Sebastian Mallaby, The Power Law [70]
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