Foxtons, The London Bubble Stock: James Saft

London has more bus journeys than the rest of England combined

Facts are Sacred by Simon Rogers

To put it in perspective, Foxtons is now trading for a bit more than 20 times what investors expect it to earn next year. That implies investors believe that either it will gain market share rapidly or, as real estate agent fees are a percentage of sales and rental prices, they think London real estate will continue its stratospheric rise. How Foxtons came to command such a premium price, its journey on the way, and the policies and forces which got it there form a very short tour of what has gone wrong in Britain over the past decade and a half. House prices in London have more than tripled since 1998, rising far more than incomes and driven by a complex combination of forces. While difficulty getting planning approval has played a role, as has London’s popularity with rich foreigners seeking a bolt-hole against political risks at home, much of the gains have been driven by the financialization of the British economy. With London perhaps the pre-eminent global banking capital, that created many very highly paid jobs, and people capable and willing to pay up for houses and flats. Before the financial crisis, there was also the fact that British lenders would more or less lend to anyone, often with only their own testimony in support of their ability to repay the money. That allowed people not making financial services salaries to borrow, and many did, hoping that gains in property prices would justify loans which no sane banker would make. That all ended with the crash, which began shortly after Foxtons was sold in 2007. London property prices tumbled by 16 percent, Foxtons proved unable to handle its debts, and the banks moved in. NOT A NORMAL UNIVERSE In a normal universe you would expect it to end there – bad loans and bad policies are followed by a crash and lenders mop things up. But we don’t live in a normal universe. British and global monetary policy has been kept exceptionally loose since the crash, at least in part to support asset values. At the same time, while parts of financial services in Britain have been hard hit, a failure globally to adequately regulate the industry means it remains huge in relation to the rest of the British economy.

While bus travel in the capital continues to stay strong, is the rest of England bored of buses? Email Bus transport declined slightly in London but overtook the rest of England put together. Photograph: David Levene for the Guardian Local bus journeys in London have fallen by 0.6% this year. But the bigger 2.5% drop for the rest of England means that bus journeys in London now make up the majority of bus travel in the country. The latest figures from the Department for Transport showed that 4.6bn local bus journeys were made in England during 2012/13 with 2.4bn of those taking place within London’s borders. Bus travel in England has declined 6.2% from 2008/9, the year that free concessionary travel was introduced. The joint-report by the Office for National Statistics and the DfT also points out that this was the year the economic downturn began. Relatively speaking though, bus travel in London has flourished. It has grown by 3.9% since 2008/9 and by 28.4% since 2004/5 when 1.8bn journeys were made in the capital. Public funding for buses in London was upped considerably in the mid ’90s, which started a growth trend that wasn’t consistent with the rest of the country. Local travellers shun buses While in London there are 279 local bus journeys for every resident, the rest of England has an average of just 51. So it seems bus travel is just not the ticket for residents in many local authorities. The area with the least bus journeys per head was the tiny county of Rutland, which had just 2.7 journeys for every resident (1/100th of London’s rate) although the small population may distort the figures there.

London’s clubby commodities trade gets picked on

Nonetheless, change has been slow. Not all these criticisms are valid. Market participants could be forgiven, however, for wondering why reforms are being driven from the US when so many of the physical commodity markets are headquartered and supposed to be regulated in Britain. The London commodity community traders, lobbyists, exchanges and regulators has bristled at even gentle criticism. The system has been largely deaf to questions from outside, treating any and all criticism as hostile, even when it has been offered in the spirit of trying to make markets work more effectively. The result is silence. Few prosecutions and disciplinary actions. Limited disclosure of relevant physical and futures market data. No disclosure about routine or exceptional regulatory and supervisory activity. The silence is hard to interpret. Either Londons commodity markets are among the cleanest and best-behaved in the world of finance, or regulation is not very effective at preventing, detecting and punishing misbehaviour.