Saturday, October 23, 2010

Will ridiculous London house prices be immune?

Manhattan-on-Thames: can London defy falling house prices?

London house prices compared to wages fell 39% in 1989-92, more than the national average. Supply in the capital is even more constrained than in the rest of the UK, meaning that prices rise more in the boom times and fall more in the bust. (Draw yourself a demand/supply chart if you don't believe me.) Anyone who thinks that we have reached a permanently high plateau and that things are different this time is in for a rude awakening.

Posted by monty032 @ 09:26 AM (1540 views)
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4 thoughts on “Will ridiculous London house prices be immune?

  • Annoyingly true comment someone made:

    Ignoring the economic reasons for house price falls for a moment, doesn’t it worry you that the overwhelming majority of people here forecast/ want falls? Markets never reward the majority. For a market to fall it needs the majority to be ‘in’ the market, so that there is nobody left to buy. The imbalance of comments would appear to demonstrate the opposite – the majority are ‘out’ of the market, which implies high pent-up demand and the likelihood of a rising market.

    I don’t think that this argument swings it there way, but it is a few points to the bull team.

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  • Richard Calhoun says:

    I remember it well in 89-92 and as sure as eggs are eggs we are going to experience the same thing again.

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  • I agree we are due for a rude awakening. The term ‘the bigger you are the harder you fall’ comes to mind in relation to London. It’s probably one of the worst places to setup business as far as running costs are concerned. The BBC’s migration to Manchester is a classic example.

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  • Well, maybe things are a little different now because when the economy runs out of money it just prints off more while the banks rob prudent savers by slashing interest rates to pay for all the Gucci handbags bought on credit. House prices could easily be propped up for a while to keep the balance sheets of banks look more solid than they are. The best piece of advice I have heard all year is to spend every penny you own because you are left with exactly what any government of the day wants you to be left with – earned or not, saved or not. Spend it all and be a elderly burden!

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