There is no getting away from it; there is no escape: The London property bubble! Not a day passes without yet another scaremongering report on “vastly overpriced property” in the capital. Even the Duke of Westminster, one of Britain’s largest private landowners, has joined the chorus and is betting that the London property market is at its peak after warning of a housing bubble that could blow up in our face any moment now. Merryn Somerset Webb, the formidable and razor-sharp editor-in-chief of MoneyWeek and FT contributor (Disclosure: Yes, Pinkers is a huge fan of hers!) has been singing from the same hymn sheet for quite a while. For once, Pinkers disagrees.
Frankly, it’s not only boring, it’s a myth! There is no London property bubble and there never has been one. The very definition of the word ‘bubble’ in this context is intrinsically flawed. Price is dictated by the fundamental law of supply and demand and demand for London property has been outstripping supply for a number of years. The reasons for this are manifold but one of the prime drivers in the last 5 years has been rising geopolitical instability, exacerbating capital flow into assets perceived as ‘safe havens’. This, of course, could change at any moment and prices could drop quite dramatically. But calling it a ‘bubble’ is not only missing the point, it’s plain wrong. To put it more bluntly: You can sell a dirty nappy… provided the price is right! Any property at any given moment is worth exactly the amount the buyer is prepared to pay for it. No more, no less.
London has become the world’s capital. New York is about New York; Paris is about Paris; Berlin is about Berlin etc… but London is about the world! It is the most cosmopolitan and tolerant of all metropolises with an unrivalled cultural heritage. Furthermore, it it is geographically perfectly positioned and the British tax regime is hailed as a magnet for foreign investment.
Craving a bubble? Visit your nearest newsagent and buy a pack of bubble gum, designed to be inflated out of the mouth as a bubble – most satisfying!
Further reading: Holy Halifax?