Talk about Newsnight

Sir:
The standard of journalism and lack of impartiality in tonights Newsnight item 'Housing in meltdown'were astounding . The premise expounded by the presenter was that housing and the UK economy in general were experiencing a crisis similar to that of the 1990's.
In fact each 'expert' interviewed made it clear that the crisis was not as bad as reported by Newsnight introduction and story line. Despite this the presenter continued to promote the storyline oblivious to the evidence and comments of the experts. This desire for sensationalism above factual and objective reporting is now depressingly common feature of BBC news reporting. PLEASE STOP THIS MELTDOWN IN INTEGRITY!

Quite right Josh.
Throughout the day I have been astonished at the BBC's hysterical misrepresentation of the Nationwide's report on house prices.

Having seen the verdict of that document misreported on BBC 1's One o' Clock News and on the BBC website, I checked this against the Nationwide report itself and sent BBC News an email expressing my concern.

I later caught the end of last night's Newsnight edition and heard the presenter, risibly, express astonishment in his review of the front pages that the Express was running a trend-bucking headline, "House prices continue to rise".

The Express is right and it's not rocket science so the BBC should be able to get its pretty little head around the idea.

What the report actually says is this:

House price inflation has fallen by 0.6%, down to 1.1%

This means that house prices have only gone up by 1.1% in the reporting period, rather than 1.7% in the previous period. It still means that a house previously worth £100K is now worth £101.1K. That's house prices going up.

Misreporting by the BBC, whether malicious, reckless or just cretinous, has the power and authority of the BBC voice behind it and so has the weight to shape behaviour, making such a misreport a self-fulfilling prophecy.

With ref to the last post: We attended a property auction this week where we witnessed the majority of repossessed properties up and down the country being sold btw 10 and 50% lower than the last sale price this time last year. That's a meltdown in anyones books; if anything the BBC reporting was biased the other way with the vested interests being interviewed stating it's not that bad!
Check these facts for yourself!

With ref to the last post: We attended a property auction this week where we witnessed the majority of repossessed properties up and down the country being sold btw 10 and 50% lower than the last sale price this time last year. That's a meltdown in anyones books; if anything the BBC reporting was biased the other way with the vested interests being interviewed stating it's not that bad!
Check these facts for yourself!

can we ever return to the days when building societies were just that and not aspiring to be banks. All this present unpleasantness started when they started to get ideas above their station, kindly revert to normality please.

Lombard's model of affordability is a joke -- it only looks at the current month's payment on a mortgage and ignores the full cost of the loan over the life of the mortgage. This is a basic, fundamental error that they're making and how they can be allowed to present their rubbish ideas on the BBC really makes you wonder. What they're telling the public about affordability is just factually wrong.

In the early 90's interest rates did spike up to the mid-teens, as Lombard states, but disposable incomes were also growing at 10%-20% per year. Lombard says nothing about this, as if it doesn't matter. You could take on a massive mortgage back in 1989-92, and it would be whittled away to next to nothing through wage inflation after a few years. Wages are now growing in very low single digits (real disposable income growth has actually been negative lately) so massive mortgages are no longer being inflated away. FTBs are selling themselves into a lifetime of debt slavery if they buy a house at current prices. If you look at the total cost of a mortgage over the life of a loan, and take into account the effects of wage growth and interest rates, homebuyers are committing a much higher percentage of their incomes to servicing a mortgage now than they ever have before. The ratio of total cost of a loan to total average income over the life of the loan is now almost double what it was in the early 90's. The average FTB might not be all that financially literate, but they're not completely stupid and this is clearly having an effect on people's willingness to buy into the house of cards that is the current housing market.

Chris Gallagher, you state that

"What the report actually says is this:

House price inflation has fallen by 0.6%, down to 1.1%.

...This means that house prices have only gone up by 1.1% in the reporting period, rather than 1.7% in the previous period"

but, with respect, you misunderstand the report. HOUSE PRICES have fallen by 0.6% in the last month, but HOUSE PRICE INFLATION has fallen from 2.7% to 1.1%. The BBC understands the difference between these two figures, but clearly you don't.

House prices have fallen every month for the past 6 months, but because of big rises early last year, the 12 month figure is still positive. House prices are falling at this point in time, not rising. I think you owe the BBC an apology...

The posters above are correct as is the Daily Express - house pricess are still rising and will continue to rise ad infinitum, why? because when YoY prices become negative then they will spin their headlines to state that house prices have risen x% over 5yrs, 10yrs, 50 yrs or whatever else fits their vested interest.

The first two comments are clearly from estate agents or buy to let investors.

I am not sure why Estate Agents would still want to deny the crash, as surely the refusal of sellers is gumming up the market and lowering transaction numbers to the detriment of their commssions.

If it is buy to let investors, then I don't really have any sympathy. I sold my portfolio a year ago when it was obvious the yields were no good.

Chris - post 2- you are completely wrong

house prices have fallen for the last five months

a property worth 100,000 in january is now worth £99,400

most media clowns hyped this bubble up and people need to get a grip and realise property is overvalued and will come back down

One has to accept that if you purchased a property five months ago you would have lost money. House prices are falling and may do so for several years. Nationwide's historic data shows that prices are about 25% above their long term price to earnings ratio. All financial bubbles have a habit of overcorrecting downwards beyond their long term values. Pevious housing bubbles have always over corrected. Many Economists, who do not have a vested interest in the housing market, beleive we will witness falls of between 25-40%.

With reference to the post by Chris Gallagher. I can see your point regarding the over exaggeration of the programme title. But regarding the Nationwide Report, i think your missing the rather glaringly obvious point. The report shows that house prices have now fallen for the past 5 CONSECUTIVE MONTHS. It is not that house price inflation has fallen by 0.6% this month, it is that house prices full stop have fallen by 0.6%. House prices are already several £k lower than the peak which was in the summer!

Do I sense that more than a few of those still desperately making positive comments and pathetically trying to talk the market up are estate agents or others with vested interests in the property market? All I can say is that if on a Saturday at the start of BST, you have so much time on your hands, then that speaks volumes - where are all those elusive buyers willing to pay 7 or 8x income for a shoe box???

With reference to the post by Chris Gallagher. I can see your point regarding the over exaggeration of the programme title. But regarding the Nationwide Report, i think your missing the rather glaringly obvious point. The report shows that house prices have now fallen for the past 5 CONSECUTIVE MONTHS. It is not that house price inflation has fallen by 0.6% this month, it is that house prices full stop have fallen by 0.6%. House prices are already several £k lower than the peak which was in the summer!

There seems to be a lot of worried estate agents blogging on this site!!!

Nationwide reports house prices peaking in October 07, and they have continued to fall since then. Now they stand at 3.73% lower since October. So to Chris, our esteemed rocket scientist, thats a DROP in prices!!

The 1.1% annual house price inflation, is surprise surprise an annual average, which is currently misleading because it takes into account the rise in prices from the earlier part of 07.

All the evidence suggests that in a month or two that 1.1% average will be negative because I don´t see how we banks are able to dig themselves out of this current financial crisis anytime soon.

House prices are falling, whether you call that "freefall" is a matter of interpretation, but I didn´t see anything sensationalistic about the programme.

I´ve been reading the BBC commentary on house prices for months now, and personally found them too bullish about house prices, perhaps until now.

There seems to be a lot of people very worried on this blog about the BBC reporting negatively when it comes to houes prices?!

How strange!!!! Perhaps there are a group of worried estate agents or buy-to-let landlords blogging on this site!!! Or maybe they´ve just not got anything better to do on a Saturday morning than worry about media reporting accuracy!

Were you also blogging complaints to the media when they were far too bullish about house prices in recent years?!

Well, if the BBC is being hysterical, the same accusation could be levelled at the early commentators here. I imagine they must have a vested interest in overinflated house prices, the main reason we hear flannel about demand and fundamentals.

I am no apologist for the BBC, however. In common with R Brooks, I found Lombard's analysis simplistic, naively comparing base rates. So much for expert economists. The problem with the BBC is they do not have enough people on the news who really understand these matters. A quick comment from Vince Cable, a genuine expert, was all we got, although at least the FT journalist had something sensible to contribute.

Lombard's model of affordability is a joke -- it only looks at the current month's payment on a mortgage and ignores the full cost of the loan over the life of the mortgage. This is a basic, fundamental error that they're making and how they can be allowed to present their rubbish ideas on the BBC really makes you wonder. What they're telling the public about affordability is just factually wrong.

In the early 90's interest rates did spike up to the mid-teens, as Lombard states, but disposable incomes were also growing at 10%-20% per year. Lombard says nothing about this, as if it doesn't matter. You could take on a massive mortgage back in 1989-92, and it would be whittled away to next to nothing through wage inflation after a few years. Wages are now growing in very low single digits (real disposable income growth has actually been negative lately) so massive mortgages are no longer being inflated away. FTBs are selling themselves into a lifetime of debt slavery if they buy a house at current prices. If you look at the total cost of a mortgage over the life of a loan, and take into account the effects of wage growth and interest rates, homebuyers are committing a much higher percentage of their incomes to servicing a mortgage now than they ever have before. The ratio of total cost of a loan to total average income over the life of the loan is now almost double what it was in the early 90's. The average FTB might not be all that financially literate, but they're not completely stupid and this is clearly having an effect on people's willingness to buy into the house of cards that is the current housing market.

What is wrong with the BBC suggesting that houseprices are in need of a large correction.
Mortgages will now reflect true property values and real incomes.
The 3.5 times income makes sense linking wage increases with property values.The low paid should not be priced out of home ownership so first time buyer homes should start around 40 k this would mean that hard working minimum wage earners could also afford a home.
I would be concerned that families with children and pets being repossessed with no social housing and no safety net.
The private landlord will not want to give longterm housing to the low paid and vulnerable. In fact most private accommodation asks for good references, no children,no pets etc. The landlord can also evict with very little notice adding to the pressure for families wanting to settle after losing their home.
bring on the long awaited price adjustment !houses are homes not cash points.

Chris @ 2
You are deluding yourself.
House prices have indeed increased over the last reporting period, however, the reporting period is the last 12 months. Things have changed since the credit crunch and although prices increased markedly over the first 7 months of the 12 month period, there have been successive FALLS in each of the last 5 months (as reported by all the major lenders)

Prices are therefore currently FALLING and, more importantly, the statistics show that the rate of fall is increasing.

Never mind, when the 12 month reporting period starts to show a decline, (likely in the next month or two) you can always comfort yourself by changing to a 2 year reporting period which will continue to show an increase for a while. When that goes negative, try a 5 year reporting period!!!

House prices are related to the cost of credit, and the availability of that credit. Credit is getting more expensive, and there is much less of it available, therefore house prices will fall. This is a fact. Anyone who says anything else is simply spinning a vested interest.

Why don't the BBC get someone from Shelter or Credit Action on their programs? Is it because they don't bung the Government anything?

Mathematically the 'annual' figure taken for the last 12 months will only tell you the integrated annualy averaged house price rise 6 months ago i.e. September last year. Extrapolating the change in house prices for the last six months into the next six months the annual house price change is around 7.5% per year. Any intelligent investor would base their decision on this figure not 1.1%.

Josh aand Chris are clearly estate agents clinging on to the wreckage somewhere. People on the street know what's happening and they're not stupid. Just look at the graphs and it tells the whole story. Boom and bust, the UK's most successful invention! This may all look benign but it isn't; lagging indicators are on their way and that'll be the deathnel of the housing market for some years to come. If you have been prudent and/or don't need to sell there is no problem anyway; just bide your time and enjoy life.
Let the greedy do the worrying......

What is wrong with the BBC suggesting that houseprices are in need of a large correction.
Mortgages will now reflect true property values and real incomes.
The 3.5 times income makes sense linking wage increases with property values.The low paid should not be priced out of home ownership so first time buyer homes should start around 40 k this would mean that hard working minimum wage earners could also afford a home.
I would be concerned that families with children and pets being repossessed with no social housing and no safety net.
The private landlord will not want to give longterm housing to the low paid and vulnerable. In fact most private accommodation asks for good references, no children,no pets etc. The landlord can also evict with very little notice adding to the pressure for families wanting to settle after losing their home.
bring on the long awaited price adjustment !houses are homes not cash points.

Chris said :
"House price inflation has fallen by 0.6%, down to 1.1%
This means that house prices have only gone up by 1.1% in the reporting period, rather than 1.7% in the previous period. It still means that a house previously worth £100K is now worth £101.1K. That's house prices going up."

To the best of my knowledge this is a YOY (Year-on-Year) %. House prices have been dropping since Q3, but have not yet dropped below the level of one year ago. Misunderstanding statistics should be left to politicians, average prices can be higher than last year but be dropping.

I find it astonishing that people accuse newsnight of a "lack of impartiality" etc. when the facts speak for themselves.

It seem to me that Josh and Chris may not be that impartial themselves. It is easy to get upset if you believe the BBC is trying to devalue your house, but in this case it's the market doing it. The BBC is just reporting what is happening. House prices are at a level which couldn't have been sustained with current incomes and sensible lending policies, strangely enough we didn't have sensible lending polices and consequently excessive house price inflation. Come on, 125% mortgages, madness.

You don't usually accuse newsnight of murder when they report on one, or of starting the Iraq war when they report that, so why are newsnight trying to create a house price crash when they report this?

John

Some people will cling onto the idea that their house is worth as much as they like to think it is,and delude themselves for their own mental well being.
Its only if they have to sell that they ultimately will concede their house (or investment) has dropped in value and that houses do not always go up in valuie.
Maybe over periods of fifty years they do yes,but over decades they go up and DOWN.House values are going to plummet and stay down to realistic levels for many years to come.

Look,forget what the experts say,tonight or tommorow sit round a table with some friendss and family and agree what the average price for a 1st time buyers property in your area is worth,then ask the the young ones what their weekly pay is convert it to annual multiply it by 2.5 and enquire how much savings they have ?
Iam guessing you already know the answer if not take between 35 and 50% off the the 1st time buyers price and argue wheather it will take 1 2 or 3 years to fall to that level.Its that simple.

James

Conspiracy theory; The situtation at Terminal 5 is unbelievable. The operators of Terminal Five are not new to the job of running complex operations. Indeed they have been running complex operations as their normal course of business for many years and generally we hear little about operational difficulties, which suggests that they are more then OK at what they do.

So why, with a six month run up to the opening of Terminal Five should they have ended up looking so incompetent. Could the answer lie in something that the management of BA cannot speak about, in case a bad situtation escalates? We hear of low morale in the work force and poor working relations. Could the opening of Terminal Five have been payback time from disgruntled members of the workforce. Could the lack of understanding of where to go and how to work the computers be an act of disingenousness on the part of at least some disgruntled operators? If this should prove to be the case it doesn't get Ba and BAa off the hook. If moral and relations are so low then the potential for such action should have been staring them in the face. However if it is the case then the sooner we know about it the sooner we the public stop being manipulated for somebody elses political ends.

Diarmuid Foghlu

conspiracy theory; The situtation at Terminal 5 is unbelievable. The operators of Terminal Five are not new to the job of running complex operations. Indeed they have been running complex operations as their normal course of business for many years and generally we hear little about operational difficulties, which suggests that they are more then OK at what they do.

So why, with a six month run up to the opening of Terminal Five should they have ended up looking so incompetent. Could the answer lie in something that the management of BA cannot speak about, in case a bad situtation escalates? We hear of low morale in the work force and poor working relations. Could the opening of Terminal Five have been payback time from disgruntled members of the workforce. Could the lack of understanding of where to go and how to work the computers be an act of disingenousness on the part of at least some disgruntled operators? If this should prove to be the case it doesn't get Ba and BAa off the hook. If moral and relations are so low then the potential for such action should have been staring them in the face. However if it is the case then the sooner we know about it the sooner we the public stop being manipulated for somebody elses political ends.

Diarmuid Foghlu

The presentation of the "housing crisis," on Friday 28th was yet another piece of sensationalism reporting by the BBC.

It would seem that a possible 20% reduction in housing prices represents a crash.The reality is that house prices have been rising exponentially for the past ten years.An adjustment downwards after such a rise is not only healthy but realistic.It should be seen in this context.

It is not however a crash.

As we all know people feel good when assets are rising in value and bad when they are falling.

The events in the U.S and the sub prime which represented approximately 5% of the total U.S. mortgage market,is having a detrimental knock on effect globally.

Again the reality is that the greedy bankers have been caught out by creating a "false" market in U.S. mortgages.

These banks bought and sold mortgage related financial instruments without the asset backing the financial package.They therefore had to keep them "off" balance sheet.

They now find they have to recapitalise their balance sheets after taking substantial losses on these financial instruments,to avoid going into insolvency.

When they do,they will have to go about their business almost as usual and find other areas to create more wealth.

The rest of the world prior to the aforementioned was/is doing just fine,most businesses have strong cash flows and the public at large were getting on with their lives.

Surprisingly the BBC failed to mention that employment remains strong in the U.K.and that the economy is in good shape.Growth is forecast to be lower than last year but it is still historically a good growth figure.

The adjustment that needs to take place is in the "heads" of people viz a viz their expectations now and in the near future.

The BBC should have realised this and therefore given a balanced view.This would not only keep matters in perspective but allow the public to come to terms with a slowdown in the economy,with house asset values possibly adjusting downwards also.

In doing so the BBC would have maintained it's position as a medium that offers impartial,sober and factual information.

Instead the program offered a point of view based not on impartiality, sobriety and facts but one of manic hysteria.

This blog is amazing, at least the first ten or so posts. I can’t remember a blog where there was so much interaction. It confirms my opinion that NN blogs would be better if they operated like the Digital Spy site. I can see the NN faces screwing up like they’ve drunk pure lemon juice, or to use their parlance ‘balk’, at the thought of smiley faces. But if you put aside prejudice against mass or popular culture, smileys are quite a subtle form of communication for those less adept at the verbal skills of subtext and hidden provocation that defines and defends the Middle class.

Barrie – who can? I can!!!! And this is how – if you accept that economics is not science but merely a guesstimate means of accounting for capitalists then you can appreciate that a cultural approach to the housing market can reveal more insight than can economics.

The divide between rich and poor in this country is at its highest since WWII. [I have oft said that we would be a better society if we studied the Gini coefficient after The News rather than the Footsie Index since the Gini coefficient is an excellent predictor of a nation’s health as opposed to wealth – but notice the subtle obfuscation that stock exchange information is called an indicator of the ‘health of the economy’.]

Housing market:
At the high end of the market, whilst bonuses may be clipped at this time, incomes are still exceptionally high and since this layer of society is motivated by desire for increased wealth/status, and embodies a strong competitive spirit, then we can assume that there will a continued upward pressure on the price of certain types of housing and in certain locations – the Dez Rez..

In the middle of the market, with a combined household income, of say 50-150K pa, there will continue to be demand for (assuming mortgages at no more than 4 times income plus/minus a reasonable chunk of a deposit from inherited wealth or shrewd investment) houses in the region of 200-600K – perhaps in a modern Executive Development for the Moregeoisie [see, The New Middle Classes (BBC4) presented by Tim Lott], or perhaps a ‘nice’ Edwardian terraced house for the more traditional and/or nostalgic bourgeoisie. These occupants may be more cautious and less ostentatious than the super rich and may pull in their belts in times of credit crunch but they will still seek a certain type of house to demark their Middle classness.

At the lower end of the scale, with household incomes of say 15-45K and possible mortagage/house purchase power of 60-180K, there are few residences available. Moreover, these people are the Nation’s ‘key workers’. The police, teachers, nurses, shop workers, firemen etc., providing the services that precisely the two groups above require to be performed affordably and importantly with ‘good grace’ i.e. no complaints about their lower incomes. Whether these people consider themselves middle or working class really depends on their outlook on life. If they disapprove of hoods they are almost certainly in teaching or social work and consider themselves not only middle class but even Middle class despite their much reduced level of income compared to the professions proper of law, medicine and finance. And, if ‘a man’s right to a pint after work’, is part of the family ethos then you can be fairly certain that even if the householders consider themselves to be middle class, the Middle class will consider them to working class i.e. vulgar in tastes and habits.

It is in the interest of the Middle and upper classes that the key worker layer of society is able to afford housing because then the status quo will be preserved. As long as the service sector is ‘content’, with leisure gadgets and activities, a nice house to call their own, and the perception of middle-classness, then the system can continue and the services that the Bourg/Moregeoisie expect can be maintained,. There will therefore, whether conscious of unconscious, be a downward pressure on the price of housing in the bottom level – 3-bed semis and 2-bed flats – properties that are currently on the market at around 250k and 180k respectively. But these prices are far from affordable by ‘key workers’. I predict therefore, and sincerely hope that I am wrong, that housing at this level will plummet back to 2000 levels of around 180 and 80K respectively.

what's with this meltdown in integrity? Newsnight is the only news outlet that consistently tells the truth and aoart from the odd faupas like the Hutton interview Jeremy gets it right most nights, so lets have a bit of tolerance here

As one of the other six people that whatch Newsnight regularly I'd thought I would add this. 'Religion: bringing hope to people in a world divided by relgion'. Plus, if the BBC is banned from Zimbabwe, what is John Simpson doing in Harare?

Sorry there is no free lunch.

I`ve only just scanned this board tonight and would like to add a point which seems to have been overlooked, of which as a former property investor, now commodity investor I`m acutely aware.

Asset price inflation is liked by governments but wage price inflation is not. The true rate of inflation in the UK (& the US)is understated by RPI and studies have suggested it could be 7-10% -a figure that would upset many public sector wage increases,pension costs,govt. budgets etc.. Therefore even if property prices fall by say 5% in one year,then whether a property has been purchased for cash or on credit the proceeds from a sale would be 5% less than the purchase consideration and be worth even less in terms of purchasing power according to the rate of inflation.

Thus property is not always a hedge against inflation and when (as most home owners have) funds have been borrowed then the leverage effect of falling nominal prices erodes capital more rapidly.

Reversion to the mean is inevitable either by rises in the real rate of income growth or falls in the nominal price of property which could take several years or much sooner if there is a crash.

The idea that property investing is a one way bet is an illusion which the UK & US govts. in particular have not tried to debunk as debt. equals full employement and high tax revenues.

This is all a roundabout way of describing the real rate of return rather then just nominal rates and ignores the utility factor of the property itself.

For those who can its time cash in ,invest to combat inflation live in a low cost warm country and come back when house prices have fallen 30% and scale up.(Like half a million brits are doing each year.)

There is an excellent podcast of a lecture given by Prof. Michael Hudson on this topic Called No Free Lunch.