City Eye: We talk up a crisis and then set the house ablaze

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The Independent Online

It looks like I got my timing slightly wrong. You may remember I was calling a nasty downturn in share markets after the first quarter. Chris Macdonald, chief executive of quoted financial adviser Brooks Macdonald, thought the nastiness would arrive earlier; that view was more acute than mine.

The nastiness is already here. Worse than that, it's sitting at the table, banging its knife and fork and calling for more slaughter.

The mid-cap market is just horrible: the FTSE 250 was off 7.2 per cent in the first week of trade this year, and no one noticed. Big stocks have it even worse. You could feel the shudder in the City when Merrill Lynch announced a $4bn loss on Thursday. The FTSE 100 folded like a deckchair.

Next up, a storm of rhetoric on the dire future for the property market.

Over the years, investors, central banks and politicians have grumbled about volatility and the role of the media in adding to that volatility. On the whole, I'm not very sympathetic to this point of view. The news media, when we can't find a simple, reliable explanation for the gyrations in shares, bonds and currencies, just pin the blame on hidden forces – hedge fund managers, private equity players and the like. It's not a bad fallback, and it may even be true.

But the reporting of British property prices is a special case. If the markets are a bit panicky at the moment, the UK's newsrooms are awash with paranoia. We have cheaper credit and more rate cuts are in the pipeline, but that doesn't matter when fear stalks the land.

The ultimate fear of many news editors is losing their own houses. And they usually react rather curiously, confronting their nightmares through the publication of lurid collages of doom.

Sadly, this is the kind of reporting that has an impact on its subject. The fear spreads to lenders and there is a super-tight squeeze on mortgages, causing a mini-crash. So where once a tide of credit was pricing people out of buying a home, suddenly prices drop – but it's still hard to get a loan and enter the market. Not very satisfactory.

But there is a way forward – affordable housing. Iain Sim is chief executive of Coast and Country Housing, which owns some 10,000 ex-council properties in the North-east and has piloted a scheme of part-rent, part-ownership with credit from Nationwide building society. He says: "There seems to be this idea that if you aren't on the owner/occupier ladder, you're some sort of failure. That's so wrong. Don't people realise that future generations, in fact the current generation, need places to live? We need to have a national debate and look at the place for affordable housing on a larger scale."

This is part of the solution to a problem that the Government only partially acknowledges. We don't have enough houses in the UK and highly priced property in a low-inflation environment is tough on the young. But the real reason for the acute shortage of housing, affordable or otherwise, is that there are far more of us than the 60 million or so in the last, out-of-date, census.

Last chapter for books?

Bad news, too, for publishing. Or at least for that lovely old medium, the book. A survey from Publishing Technology (which monitors sales and collects royalties for, among others, JK Rowling) says 30 to 50 per cent of publishers' income will come from downloaded digital files, not books, in five years. The firm's clients include Random House and Harper Collins. On wonders what they're going to do?

Still, people have been predicting the death of the book for so long, it may be a false alarm.