[marcus_holmes]

I guess if the asset class is divisible it can rise in value indefinitely. But simple logic says that if anything rises in real value every year, eventually no-one can afford to buy it. Of course, this assumes that the average earnings don't rise alongside it, but that's the definition of inflation.

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.

[apostate]

Interesting insights into a market that I have little experience with. Thanks!