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Guaranteed Rent Scheme | Reading the runes in property prices

Guaranteed Rent Scheme | Nationwide tells us prices fell at their fastest annual rate in nearly three years last month, yet house builder Taylor Wimpey today announced a rise in average selling prices and completions, while online estate agent Rightmove revealed revenue up 23pc to £57.9m and pre-tax profits of £38.9m, up from £28.7m.

How can all this be true at the same time? The answer is that the UK property market, measured this way and that, has become ingrained as a favourite index of our financial fortunes but doesn’t really exist in any meaningful way.


The average house price favoured by various indices is so misleading, given the highly regional nature of property, that it reflects very little that is real.


Property prices are determined by extremely local factors down to minute variations in streets, let alone neighbourhoods, that make national averages meaningless.


House builders such as Taylor Wimpey are in recovery mode after slumping to near extinction in 2008 and are now putting out favourable numbers as four years distant from those dark days begins to favour their reporting. Land prices are also in their favour as are the Coalition’s more development-friendly planning laws.


Rightmove enjoys a wholly different set of favourable conditions, most notably a market share grab from traditional estate agents and reflects the economy’s broader move online when it come to buying and selling items ranging from groceries to clothes to homes.


Broadly, the property market is actually moving in line with the economy – essentially flat with regional and sector differences, both good and bad. And as with the broader economy, until buyers are satisfied debt has been reduced to an acceptable level and some confidence returns, we will continue to bump along the bottom.


Even though the property market is a curate’s egg and the latest PMI manufacturing data are the worst for three years, there’s plenty of good news around. While other stock markets largely struggled to advance today, the FTSE 100 closed 1.38pc higher, pushed forward by results from UK companies as diverse as Next, Shire and Standard Chartered.


Banks deemed too big to fail seem to have learnt a valuable lesson too; that companies that aren’t too big to fail, such as services group Mouchel, are still worth saving.


I’m sure the likes of Lloyds and RBS had one eye on the politics of that situation – so much the better. Shareholders are wiped out but jobs saved. That’s fine with me. The future’s tough but the tough are still going.


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