Another bubble?
It's generally acknowledged that the recovery from the global recession precipitated by the cluelessness of our banks and regulators will be gradual, faltering and protracted. But try telling the markets that.
Today, building society Nationwide issued its monthly UK house prices report and, on the back of a 0.9 percent monthly increase in September, revealed that house prices are now back to the level they were a year ago.
Even though the sub-prime mortgage crisis and consequent credit crunch were well underway by September 2008, the last shreds of denial were stripped away from global markets when giant US bank Lehman Brothers was allowed to go bust on 15 September 2008. This precipitated a crash, not only in share prices, but in the property market too.
Talking about share prices, the three months to the end of September 2009 represented the biggest quarterly improvement in the FTSE 100's 25 year recorded history. It closed at 5133.9 on 30 September, 21 percent higher than three months earlier. Having said that, it's gone down the toilet since then and is now in danger of dropping below 5,000 for the first time for a few weeks.
Back to UK house prices, does this mean everything's better now? Well, unemployment is still rising, national debt is at mind-boggling levels and the matter of banking short-termism remains unresolved, so no. But house prices have always had a strong influence on consumer confidence, especially in the UK, so there is that.
However, there is also the question of whether this is yet another bubble and whether the restored house price level is sustainable. On one hand prices are still down 13.5 percent on the October 2007 peak, but on the other, the rental market is awash with properties, implying it's the low number of houses available for sale that is driving up prices.
