Take your pick. House prices in the UK are rising at their slowest annual rate for four years, according to the Halifax’s index. Alternatively, June’s increase was the strongest monthly increase this year.
As ever with house prices, it’s best to prefer the longer perspective. On this occasion, that means ignoring the June’s very modest month-on-month pick-up of 0.4% and concentrating on the underlying trend. The mood is best captured by the fact that the May-July period recorded the fourth quarterly fall in a row, the first time that has happened since November 2012. In short, the market has slowed significantly this year. The annual rate of increase was 5.7% in January; now it is 2.1%.
This should be seen as excellent news, even if estate agents and those seeking a quick sale of their property may disagree. Back in March last year, house prices were rising at an annual rate of 10%, which was completely unsustainable given how slowly wages are increasing. Indeed, the position was becoming dangerous, especially from the Bank of England’s viewpoint. Double-digit house price inflation and rock-bottom interest rates make an unhealthy cocktail.
It’s too glib to say the referendum results turned the market. The vote for Brexit has been a factor, especially in London, but other forces are at work. The biggest is the sheer expense of houses relative to earnings. Average house prices remain about six times average earnings, a level last seen in 2007, just before the banking crash and recession.
“Affordability concerns”, as the Halifax coyly puts it, are the reason why the current tepid conditions will probably continue for a while. The only obvious countering pressure is the shortage of homes on the market, which is at all-time low according to the lender. Overall, economists predict house price inflation of 2% this year, a forecast that may even prove to be on the high side.
Breon Corcoran, chief executive of Paddy Power Betfair, is 46, which is young to choose to quit as a successful boss of a FTSE 100 company. Shareholders may also feel it’s a bit early. Paddy Power and Betfair merged only 18 months ago and, after the initial enthusiastic applause, the share price has faded.
If Corcoran longs for fresh adventures, which seems to be the case, it would be understandable. He’s done 16 years in total at the two halves of the company. He quit as chief operating officer of Paddy Power in 2011 to lead a successful rehabilitation of Betfair. He then masterminded the £5bn merger with his old shop.
“There is never a good time to leave,” he says now. Shareholders would agree. From £98 last August, the shares are £75.50, down 370p on Monday, so he can’t be said to be going out at the top in stock market terms. He, and the company, could argue that operations have been integrated faster than planned and profit forecasts this year look solid. Even so, the owners would probably prefer the full £50m of promised savings to reach the bottom line before the architect of the deal departs.
The replacement is Peter Jackson, 41, who, after a “rigorous and extensive” global search, has found within the boardroom. He is one of the non-executive directors. Jackson fits the bill from the important technology angle. His background is in banking and currency exchange, plus a six-month stint as UK boss of Worldpay, the payments firm. But Jackson’s experience in the gambling industry is confined to four years as a non-executive.
Maybe that’s sufficient training and there is, after all, no golden rule that bookies must appoint hardened bookmakers. All the same, you can understand why investors took fright. Paddy Power Betfair is the biggest online gambling firm in the world on some measures and its new jockey is a merely a promising newcomer.
The costs of supplying electricity are soaring, British Gas told us last week when it lifted prices by 12.5% – equivalent to £76 on an average dual fuel bill. But what’s this? Regulator Ofgem is moving in the opposite direction. It is cutting up to £19 off bills for 3 million customers with pre-payment meters. Ofgem says costs have fallen since its “safeguard” tariff was introduced in February.
In the tangled world of energy prices, half an explanation is possible. British Gas was looking back a few years, rather than a few months, when it was talking about costs. The company may also buy energy two years in advance, whereas Ofgem uses shorter horizons when doing its sums.
All the same, the gap between the regulator’s dual-fuel pre-payment tariff, which works out at £1,048 for a typical customer, and the standard variable prices of the big six is starting to look wide. British Gas put its own dual-fuel prices at £1,120, for example.
Like-for-like comparisons may be imperfect, but we can say this: a widening gap can only increase the political pressure for intervention.