A blog by Patrick Crozier

January 31, 2003

The Coming Crash
Patrick Crozier

House prices in London are going to fall by up to 80%. That is the view of someone I met recently.

OK, so anyone can come up with something like that but what impressed me was the analysis.

The way my correspondent - let's call him Theodore - sees is it is that stock market falls are invariably followed by house market falls with a time lag of about 2 years or so. That would seem to correspond with the only crash I am really familiar with - the one in the late 1980s and early 1990s - when the stock market fell by about 20% in 1987 and house prices fell by up to 50% starting in 1989 and bottoming out in about 1992.

But what is the mechanism? According to Theodore what happens is that as the stock market rises people find that they have more money and so spend it. Often this goes directly into the housing market and so prices start to rise. When the stock market starts to fall, people find that they have less money and so house prices start to fall.

But Theodore has also spotted other things happening. First of all, we are starting to see strikes in the state sector - eg. fire and trains. This implies the growth of inflationary pressures. Actually, we are all very familiar with this. We know that the Chancellor has opened the flood gates of state spending and it is not entirely surprising that state-sector workers should start fighting to get their snouts in the trough.

Secondly, we are beginning to see price rises in the service sector. Lawyers and accountants are starting to raise their fees in response to lower business volumes. (So much for supply and demand). Oil prices are already at a high level and are likely to increase with the Second Gulf War. This (along with the government's borrowing requirements) could well lead to an increase in interest rates as there is less money to lend and the Bank of England starts to get edgy about inflation. And we all know what happens when interest rates start to go up.

Thirdly, Theodore has already started to spot falls in house prices at the top end and transaction levels are off by 40%. This is likely to trickle down to the lower end before long. Yes, trickle down works both ways.

All this was a hell of a shock to me. For many years I have gaily assumed that the days of boom and bust are over because we have tamed state-induced inflation. After all, all the busts I had ever seen were state-induced. But this is different. This is the business cycle - that natural economic cycle in which people keep on getting richer until the horrible day arrives when they realise they have been doing all the wrong things eg. internet and telecoms. The adjustment, to doing the right things is known as a recession. And it hurts like hell.

The Immigrant's Story
Patrick Crozier

Recently I had a chat with a man who has been an immigrant not once but twice. Barry (not real name) comes from India (not real country). He was quite an athlete in his youth so decided to join the French Foreign Legion (as you do). In his time he got sent to Lebanon, Chad, Zaire and half a hundred other places. And eventually he left the Foreign Legion and (as he was perfectly entitled to) settled down in France.

France was very nice. One of the nice things Barry found was what would happen on those occasions when he got absolutely smashed and attempted to drive home. On being stopped by the police he would hand over his ID card. They would tap the number into the computer, discover that he was an ex-legionnaire and let him off. Who says that ID cards are a bad thing?

But as all Englishmen know the big problem with France is they speak French. On a trip back to India to see the extended family, he found that he and his family couldn't talk to anyone. Everyone else spoke English. The writing was on the wall.

He left the family in France and moved to England to look for work. He found two jobs: one for the day and one for the night. He slept on the night job. Usually it didn't matter because there wasn't much to do. He also discovered a rather interesting sideline. Working in a hotel, he met a lot of guests who had been fleeced by the cab ride from the airport. When they came to him to book a cab he would ask if they would like to use a cheaper mini-cab. Most of them, of course, did. Then he would phone up some friendly mini-cab drivers and ask them if they wanted the work. Most of them, too, did. And as the mini-cab drivers arrived at the hotel they would each and everyone of them press a 20 pound note into his hand - a sort of finder's fee if you will.

With his two jobs and third, tax-free sideline and with the fact that he hardly had any time to spend the money, Barry soon found that he was starting to make a tidy sum. He decided to buy a house and move the family to England. So, he went along to the bank and asked for a mortgage. The bank liked Barry. He had a steady income and had saved well. He got the mortgage.

Five years later and Barry has slowed down a bit and got a normal job. His house in London has appreciated massively and he has decided to realise his gain. So, he's going to move up North. Well, not very far north but far enough to be out of the range of London house prices. He reckons he can buy a place outright and then work part time. After all, he is almost 50 and he would like to spend more time with the kids.

January 24, 2003

Patrick Crozier

This is a test

January 03, 2003

Telegraph mole strikes
Patrick Crozier

It seems that the Telegraph has a "mole". How else can one explain the following words in an editorial:

"Most of the young men who carry and use guns in Britain are consumers or dealers in drugs. In that sense, any crime in which they carry a gun is therefore "drug-related", to use the fashionable term. But it would be more accurate to say the crime is "drug law-related". If drugs were not criminalised, dealers would not need to carry guns any more than brewers or distillers would feel the need to be armed today."