As Expensive as London? Not likely…

 

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JERSEY, C.I. – Did you know house prices in Jersey are now as high as in London? Don’t believe the hype.

The story came from a press release circulated by Jersey-based mortgage broker Skipton International.

It matters because housing is such a big issue in Jersey and feeds into most others. About half of islanders can’t afford to own the roof over the heads. Meanwhile, many nurses, teachers and social workers thinking of coming here avoid the island, in part because they know they’ll struggle to buy.

In a nutshell, Skipton International claims to have produced a new house price index which shows that the average price of property in Jersey is now the same as  in London, ie: £456,000, give or take a few bob.

That’s a lot of dough, and the news probably didn’t surprise a lot of people in Jersey. But it surprised me because I’m one of those sad sorts who traipses down to the States Statistics Unit every three months to hear what they have to say on the same subject.

During my last traipse, in February, they said – click here for the details (page 15) – that while the average home in Jersey does indeed cost  £456,000, the average in London is a whopping £534,000.

That suggests London is actually 20% more expensive than Jersey.

So how did Skipton International arrive at such  a different result?

To find out, you have to look at where the numbers come from.

ROYAL COURT

The States’ statistics guys get most of their Jersey-related house price data from the Royal Court.

Given that property transactions are publicly approved in court (on Fridays) anyone who’s interested can easily find out exactly how much every house sold for.

Then our statistical heroes put the data together in line with guidance from the Office for National Statistics (ONS) in the UK.

That helps them compare like with like, especially given that they get their London data from none other than the ONS.

Turning to Skipton International. The mortgage broker gets its Jersey numbers from…. wait for it…. the States Statistics Unit. Presumably that’s why it arrives at the same conclusion as far as Jersey is concerned.

However, when comparing Jersey prices to London, Skipton uses the Nationwide House Price Index for the mainland part of the equation.

There’s nothing wrong with the Nationwide House Price Index. It’s been doing the rounds for eons, and the UK’s biggest building society is involved in many property transactions so it’s a pretty fair bet that if the Nationwide Index is going up or down, that’s a fair-ish reflection of the wider market.

However, the Nationwide only has access to mortgage data from its own customers (sorry, members). Nationwide’s index is therefore based on the value of mortgage approvals for people who have chosen to take out their mortgage through the Nationwide. See where this is going?

PROBLEMS

That throws up two problems. One is that according to the Nationwide’s own methodology it has to estimate actual house prices as opposed to knowing them. The Nationwide data is not backed up by completed transactions, as the data is in Jersey.

The second problem is that the Nationwide is a member-owned building society. Nothing wrong with that – in fact, it’s a great idea – but can we be confident that it is a universally popular mortgage provider for all sectors of the market? Do partners at law firms and investment banks, for example, take out their mortgages with the Nationwide?

Maybe they do, but there’s no way for us to tell from the data provided.

Perhaps that’s why the States Statistics Unit gets its London house price data from the ONS.

The ONS also relies on mortgage information but there are two advantages to the ONS way of doing things. One is that the ONS relies on mortgage completions – not approvals – and the second is that the ONS gathers information from across the market, not just one provider.

Here in Jersey we don’t have to estimate what average property prices are, because all (most) property sales have to be approved in the Royal Court on a Friday.

If it’s absolutely necessary to compare one place with another, then it’s equally necessary to be careful how you do so.

The UK is big and difficult to analyse but if you have to pick one way of putting a number on the average house price there should you pick the measure chosen by every policymaker between Shetland and the Scilly Isles, or should you pick the one sent out in a press release by a company that sells mortgages?

What’s in a Million?

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JERSEY, C.I. Two interesting and contrasting stories made the Jersey headlines lately.

In case you weren’t paying attention: a couple of civil servants went to Cape Town to network and play golf in February in rather-comfy fashion at a total cost to the public purse of about £15,000.

Days later – in a completely separate turn of events – it emerged that even though last year ministers persuaded the States to vote against giving everyone a Liberation Day bank holiday in 2015 (on the grounds it would add £1.5m to the public wage bill) public employees got the holiday anyway.

Union pressure was to blame, we were told, and departments would have to find the £1.5m from other budgets.

Handily, for a numbers-oriented blog, all that separates the two numbers in question are zeroes.

So without a calculator it’s easy to see that in money terms, the public holiday story was 100 times bigger than Cape Town-gate.

HOWEVER

It was to be expected that in the case of the civil servants, there were practically queues forming outside local media offices of seething politicians. All of them keen to publicly lambast the hapless officials not long after their return from South Africa.

The upshot was that when £15,000 went up in well-appointed, lie-flat smoke, it sparked an outcry that even ministers could get behind. One of them – who was also on the trip – has made no secret of the fact that he only billed you and I about £600.

So presumably when it emerged days later that £1.5m had slipped through the cracks for entirely different reasons, the furore would be a hundred times bigger?

Barely a peep, and certainly no queues of politicians – backbench, ministerial or otherwise – lining up have their tuppence-worth.

And that’s all the more surprising when the online response to the limited coverage the story did get, was none-too-happy.

Faced with these two stories, politicians had the opportunity to lambast two well-paid civil servants for flying their golf clubs in business class and/or to question the unexpected distribution of £1.5m to 7,000 middle-earners.

With busy schedules, picking only one must have been a tricky decision.

Flight of Fancy: Pricing Civil Servants’ Time

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Jersey, C.I. – A South African friend down the pub claims to only ever fly home in business class, never paying more than £2,000.

We were, unsurprisingly, discussing the curious case of the two States of Jersey civil servants who spent £6,500 each flying to a conference in Cape Town.

Skyscanner illustrates what the Jersey Evening Post already reported: that the way to make a trip from Jersey to Cape Town cost £6,500 is to book a flexible business class ticket with British Airways in advance.

The benefit of doing so is that if you need to change plans, you can.

The premium for this flexibility, easily deduced from British Airways’ own website, is about £1,000.

The resulting £6,500 fare is about 2.5 times the best value business class fares. More so, if my South African mate books the flights.

ALLOWANCES

Before we have a look at what else Skyscanner tells us, let’s make a couple of allowances for the civil servants.

Everyone’s time is wasted by hanging around in transit lounges, so we’ll only look for flights with no more than one connection and a total duration not exceeding 16 hours. The British Airways direct flight is 12 hours.

Definitely no overnights in Addis Ababa.

Let’s also say that overnight flights make the most efficient use of our civil servants’ time. Nodding off in Europe and waking up in South Africa allows them to start their day ready for business.

And let’s, for the time being, allow them to fly in business class. Afterall, working and sleeping – both desirable for public servants on the move – are more easily accomplished up front.

So allowing our civil servants to fly overnight in business class on either direct flights or those that have no more than one connection (avoiding airlines we’re not really sure about), what do we find?

The answer – which my South African friend and Skyscanner already knew – is that such flights are pretty easy to find for less than £2,500.

That means the flexibility in the £6,500 fare was only worth it if the civil servants had re-scheduled their flights not once, but twice. Unlikely.

BIG JUMP

So what did that extra £4,000 really buy?

What Skyscanner also shows us is that the big jump in fares happens between flights which stop once – say in Dubai, Schiphol or Johannesburg – and those that go straight to Cape Town, which are much rarer.

What our civil servants bought by spending £6,500 rather than £2,500, was four hours, and the convenience of not having to change flights.

That suggests that whoever signed off on the flights valued our civil servants’ time – subconsciously, perhaps – at £1,000 an hour.

Is the time of our civil servants worth that much? Perhaps. For important people, time is money.

There’s no need, however, to scratch our heads in deducing a true value for our civil servants’ time. The States does this for us, at least for one of them.

IMPORTANT PEOPLE

Jersey’s public accounts show the Chief Officer of Economic Development, Mike King, is paid between £140,000 a year and £145,000.

There are 260 working days in a year, so Mr King’s employers (taxpayers) value his time at between £540 and £560 a day. Nice work.

Many people are paid for eight hours in a working day.

Important people work long hours, though, so let’s try try this with 10 hours as well.

Dividing the daily rate by eight or ten (hours) we can see that Mr King’s time is worth between £54 and £70 an hour.

(That’s some way below £1,000 an hour)

And it implies that the value of 12-16 hours of our civil servants’ time (the duration of a flight to South Africa) is actually worth between £650 and £1,100.

That’s about what it costs to fly to Cape Town in coach.