Recent figures claim property prices for October are 10% higher than for the previous month. OK, that’s in London, which is a renowned basket case when it comes to this sort of thing – and much else, besides – but still… If this increase continues over a calendar year, we will have seen a price increase of more than 200%. That’s an ouch-inducing figure.
I know it won’t happen. There’s a bit of room for property to move upwards in price, but sustained 10% increases, month after month, are unlikely. Well, I say it won’t happen. What I mean is I hope it won’t. But they probably said something along these lines in Weimar Germany during that tricky inter-war period of theirs. On second thoughts, I don’t think that’s an entirely useful comparison.
But we’ve been here before. Remember the bull days of New Labour, just before the credit crunch, when prices were rocketing at that alarming rate? I do. I remember talking to a friend who owned a place in London who couldn’t believe what was going on. But he didn’t complain too much. Who would?
If this is the start of a new bull property market, why is it happening? From what I can gather, it begins with international money flooding in (I believe I can use that word regarding money, though not people). London is a safe haven. We can’t fail to notice that the world is aflame (It always seems that way, doesn’t it?) There’s the Middle East, North Africa, the southern Eurozone countries and, no doubt, a few other places whose desirability we are not allowed to question, despite them patently being places where you would think twice about living if you wanted the good life.
Despite its problems, London remains a global haven for the rich and mobile. And the reports suggest they are shifting their money, not just to invest it, but to keep it safe and provide them with a bolt-hole if things get nasty at home.
Boris Johnson wades in with his typically excellent prose, but unfortunately gives only a manifesto for doing not much at all. He ends with a flourish: ‘The Brits: we’re the biggest load of bloody foreigners on earth,’ to make the point that questioning house-price inflation created by foreign money is a no go area.
He has a point. Brits live abroad, they inflate Dordogne property prices and they claim unemployment benefits in other European countries. But that doesn’t make it right. It is not right that property prices are inflated by international money chasing a limited resource; it’s not right that people are priced out of their childhood communities by external inflationary forces; and it’s not right to try and solve the problem by building more and more and more affordable (read cheap and not particular nice to live in) property in the South East and London.
There is, on a slightly different tack, a thought that property prices are rising in London because of a simple market ‘thaw’ – buyers looking for property after their summer holidays. Let’s hope this is significant. Luckily, it is also thought there is little upward pressure on property prices in places outside London. Let’s hope that’s right, too.
But anyone looking at what’s going on at the moment can’t fail to be concerned. Property has always been a scarce resource; it takes time to build more houses, it takes political will, and prices respond badly to increases in demand. And when you hose money into an economy; when governments encourage people to buy with easy credit and artificially low interest rates; when governments wilfully increase the population through reckless immigration, thus increasing demand for housing; when foreign nationals are free to inflate the market with their money when things look dicey at home or they really rather like the idea of having a pad in London; and when people are reluctant to see their communities grow increasingly dense through non-stop house building – you get property prices increasingly out of the reach of normal people.
And that is where we are heading, again, and not for the last time unless we start understanding the economic fundamentals that drive prices and make them so unfriendly for the average person.