I chaired a panel at the Prosperity UK conference in London earlier this week. The subject was the UK's intellectual property (IP), how we exploit it now (pretty well, by the way) and how we can continue to do so post-Brexit. We spoke of tax incentives; the availability of the finance needed to take a firm all the way to a listing; the need to treat our historical infrastructure as an asset rather than a liability; and the thrill that we all get from the fact that the young now aspire more to work for exciting small companies than they do for big investment banks.
And, of course, we talked about house prices. What, you might ask, has that got to do with turning smart ideas developed at the UK's top universities into viable businesses, or with the super-successful fintech industry in London? Everything. As one of my panellists Peter Davies, the chair of Oxford Sciences Innovation pointed out, if academics can't afford to live in Oxford, where the average house price is now more than 11 times average earnings, how can they have their good ideas in Oxford? And if the founders of fintech start-ups have to share bunk beds with their colleagues to launch in London, why would they keep doing it however good the long-term tax incentives might be?
Why indeed. With this in mind, there is good news: London house prices now appear to have peaked. The number of unsold new houses under construction in London has hit a new record of 27,000. Asking prices saw the largest drop in eight years this month: if you are looking for a five-bedroom house you will find that the starting price for negotiation is more than 7% below where it was this time last year, according to Rightmove.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
And anyone in any doubt as to what is going on need only turn to the words of the chief executive of the Grosvenor Group, which owns much of Belgravia and Mayfair. Commenting on the fact that the group's total returns from UK and Irish operations fall to 0.3% last year (after six years of annual returns of more than 10%), he said this: "Central-bank policies around the world have resulted in property and other heavy assets rising steeply in recent years, and that means property is really quite vulnerable to what we think is going to come next in the cycle, which is interest rates rising."
So here you have it. Cheap credit has driven up house prices (see this week's investing in property pageto see how cheaply you can still get a mortgage!). It has now taken them as far as it can: demand is stagnant (net new buyer enquiries are around zero) and in the words of Capital Economics "prices have exhausted their ability to continue rising more rapidly than incomes". Good news for start-up chiefs and creative academics. Good news for IP development. Good news for all of us.
-
FTSE 100 hits record highs – why is it rising and will we see more gains?Advice UK equities have been described as unloved for a long time but as the FTSE 100 hits new highs, we explain if now is the time to buy British.
-
How to invest in copperIt may be time to invest in copper as the red metal appears poised for a big jump. Dominic Frisby looks at what should investors should buy
-
Beat the cost of living crisis – go on holidayEditor's letter As inflation rages, energy bills soar and the pound tanks, what’s a good way to save money this winter? Go on holiday, says Merryn Somerset Webb.
-
How capitalism has been undermined by poor governanceEditor's letter Capitalism’s “ruthless efficiency” has been undermined by poor governance, a lack of competition and central banks’ over-enthusiastic money printing, says Andrew Van Sickle.
-
Don't be scared by economic forecastingEditor's letter The Bank of England warned last week the UK will tip into recession this year. But predictions about stockmarkets, earnings or macroeconomic trends can be safely ignored, says Andrew Van Sickle.
-
The biggest change in the last 17 years – the death of the “Greenspan put”Editor's letter Since I joined MoneyWeek 17 years ago, says John Stepek, we’ve seen a global financial crisis, a eurozone sovereign debt crisis , several Chinese growth scares, a global pandemic, and a land war in Europe. But the biggest change is the death of the “Greenspan put”.
-
The wolf returns to the eurozone’s doorEditor's letter The eurozone’s intrinsic flaws have been exposed again as investors’ fears about Italy’s ability to pay its debt sends bond yields soaring.
-
Things won't just return to normal – that's not how inflation worksEditor's letter You might think that, if inflation is indeed “transitory”, we just need to wait and everything will return to “normal”. But this is a grave misunderstanding of how inflation works, says John Stepek.
-
Car hire and the strangeness of the post-pandemic economyEditor's letter A global shortage of hire cars and unusually high hotel occupancy rates sum up the post-pandemic global economy in a nutshell, says Merryn Somerset Webb, with enhanced demand meeting restricted supply.
-
Why we need to get a grip on our governmentEditor's letter Our government is trying to do too much, enacting policies that are destructive to the private sector. It needs to drop the the feel-good nonsense and create policies that lead to long-term wealth, says Merryn Somerset Webb.
