And then the snow came.

January saw both the High Street and housing market freeze over. It was the worst January for retail sales growth in 15 years, while activity in the housing market went into a steep reversal.

Was it the snow, or something more serious?

Bad news for houses came from the Royal Institution of Chartered Surveyors. (RICS) You will recall, this column is a fan of the RICS Monthly housing survey.  Its headlined index, created by taking the percentage number of surveyors who said house prices were up and deducing the percentage number who said they were down, has proven to be a good barometer of the housing market.

Its headline index actually improved slightly in January, hitting 32, that is the second best reading since December 2006 (the best reading was in November, when the index hit 35)

But more to the point sales, new enquires and new instructions all fell. The balance of surveyors reporting a rise in agreed sales fell from plus 19 to minus 15. On the other side of the scale, there was a fall in new instructions too, with the balance falling from plus 15 to minus 5, while the balance of new buyer enquires fell from plus 18 to minus 20.

The average number of completed sales per surveyor fell by 2.1 per cent on the month to 18.6 per surveyor, while the stock of properties rose 3.5 per cent to 64.8 per surveyors.

The all important ratio of quarterly sales to stock fell from 30.4 to 28.8. To put the current reading in context, at the nadir of the housing crash this ratio had fallen to below 15. But during the days of the boom earlier in the noughties the ratio approached 65.

The lesson of last year is that house prices can rise even when absolute demand is low. The point is, that demand relative to supply is the key, and last year saw the stock of properties fall precipitously. And right now, stocks are low. At the point when house prices began their sharp decent, agents typically had stock of around 90.

In recent months there have been signs that the stock of properties on agents books have been increasing, but they have been increasing from very low levels. The low levels of stocks with estate agents is the sole explanation for why house prices have been rising, even though conditions are tough. 

As for the High Street, according to the British Retail Consortium (BRC) like for like sales across the UK fell by 0.7 per cent in January on the same month last year.  Sales overall, rose by 1.2 per cent.

Intriguingly, non-food non-store sales, that’s Internet, mail-order and phone sales, in January, were 14.6per cent higher than a year ago compared with 26.5 per cent in December. The BRC says part of the explanation for this increase is that some shoppers went online as snow prevented them from getting out.

Stephen Robertson, Director General, British Retail Consortium, described January as “An awful start to the year and in stark contrast to an upbeat December.” He added: ”This is the worst January growth in total sales in the 15 years we’ve been running the survey. It was a month of two halves with a focus on must-haves early on. The coldest January since 1987 boosted food sales at the start of the month, as shoppers stocked up. But food sales growth melted with the snow. The month as a whole was significantly weaker than December.”

Actually, it can surely come as no surprise. When the snow came down, the UK practically ground to a halt. The key question is will sales in February make up for the January tumble?

It is too early to call. But, bear in mind real wages are falling. In November average earnings rose by just 0.9 per cent on this time last year.  According to the Labour Research Department  pay freezes make up a higher proportion of all wage deals than at any other time during the recession.  Last week, the National Institute of Economics and Social Research said: “ The unemployment rate in the UK has not risen as sharply as in the US, but this reflects a decline in real wages in 2008-2009. After taking account of the decline in output, the change in average hours worked and developments in real wages, the UK labour market has performed slightly worse than expected, and slightly worse than in the other G7 economies.”

It maybe that the poor retail and housing sales in January were down to the snow, but with real wages falling, it seems 2010 will see our affordability stretched more than ever.