Sign of The Times

A couple of small stories on the property market recently have illustrated the extent to which the media seem to have given themselves the job of talking up the market. For a brief while, The Express stood alone in its determination to see every oncoming train as the light at the end of the tunnel. But now most of the media seem to have joined the corporations and the politicians in the determination to see the good news in every story. It is as though they all looked into the economic abyss around March, decided that the psychological theory of the business cycle was the only hope, and thenceforth have treated stories of optimistic surveys, positive projections and "smaller than expected" losses and declines, as more important than hard statistics of economic decline, stagnation, deficit and devaluation.

The first example was from last week. Persimmon announced a pre-tax profit of £9.8 million. Compared with expectations of a loss, this was treated as good news. Nevermind that this headline figure was one-third of last year's figure, which itself was a feeble profit for a company of Persimmon's supposed size and valuation. But even that modest amount was a fiction. This "profit" was only achieved by writing up (increasing the book value of) Persimmon's landbank. Without this write-up, they would indeed have made a spanking loss. But this was treated as the second piece of good news in the story. Let's not question whether it was reasonable for Persimmon to write up the value of their landbank when they and their competitors are making losses in a stagnant market where prices are down further from the level when they wrote down the value of their landbank. To the media, this convenient fiction must unquestionably be a sign that property values are heading upwards. So a real loss against a background of minimal activity and falling values is converted into a profit and rising values. Hallelujah!

The second example is from a snippet in today's Times, which was short enough to quote in full:

"Signs of life returned to the office sector yesterday as Land Securities announced that it had let offices at Thomas More Square, on the edge of the Square Mile in London, to News International, parent company of The Times, for £4.2 million a year for ten years, with an 18-month rent-free period. The deal, for 192,000 sq ft, was one of the biggest lettings so far this year and would provide a boost to the London office market, where vacancy rates had risen by 4 per cent, according to CB Richard Ellis."

Well, that is good news. Presumably, News International employees had previously been homeless: hot-benching in the park, networking on street corners, posting their reports at Internet Cafes. They must have been, because if they had been at another office, there would be no net gain to report, and no boost to the market in general, just a benefit to the new landlords and a loss to the old. In a slump, it wouldn't be surprising to find companies moving offices, as they are able to trade up (moving to a more salubrious neighbourhood) at reduced costs (for example, 18 months rent-free, though in this case, that is just a coincidence, nothing to do with a weak market, nay, an indication of its strength). In other circumstances than the current benign climate, it could be seen as part of the downwards pressure on prices in a market with excess capacity due to reduced economic activity. A cynic might even call a movement to more upmarket premises at reduced costs a sign of bad times. But that can't be it in this case, because this was not just a nice change of venue for News International and a convenient rent-holiday, but a general boost to the office property market. Apparently...

I'm glad we're in such good shape. As the wishing-well approach is working so well, let's close our eyes and wish really hard for victory in Afghanistan by Christmas, a return to balanced government budgets next year, and an end to poverty within the decade.