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by apostate
4400 days ago
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While I agree with your sentiment about property values, your statement "nothing can continue to rise in price over inflation indefinitely" is not true, unless I'm misunderstanding something. It is possible for an asset class to have greater returns than inflation (in fact, most do), but with increased risk. While this increased risk does mean 'corrections' will happen, returns for most asset classes (especially equity) are significantly higher than inflation in the long run. A world in which no asset class could outpace inflation would require zero economic growth. |
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The London property market has been around for about 2000 years, more or less in its current form. If property prices really doubled every ten years indefinitely, and assuming it cost 1 penny to buy a London townhouse in 0ad, then ridiculousness ensues.
The last thirty years have been atypical of property prices. My theory, bolstered by little other than observation and deduction, is that we're seeing the effect of women entering the workplace. House prices are constrained by affordability (or the availability of money, which is why interest-free loans from Japan enabled Northern Rock to give 100% 100-year mortgages to people who couldn't normally afford houses) and over the last thirty years we've gone from most families having a single income to most families having a double income, so house prices rose consistently over the period and will settle at this new high. It used to be that your house was worth roughly 3x your annual salary, logically it should settle at 3x your combined annual salary. It'll be interesting to see if it does that.