A warning from Blackpool about London house prices
One side effect of QE has been to prop up house prices in expensive areas while those in poorer areas decline. Just look at this chart showing the gap between price growth in Kensington and Blackpool. The only question now, says Merryn Somerset Webb, is what will close that gap?
There was much competition for best chart of the day at the MoneyWeek conference last week.
The chart shows the way in which house price growth in Blackpool and Kensington converges over time (the blue line shows Kensington prices, the grey line Blackpool prices). They often pull apart dramatically as they have recently. But so far they have always come back together.
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You can make a case for prices in London being structurally higher forever thanks to globalisation and its role as a financial hub if you like. But it is hard to argue that the two lines won't move together to at least some degree from here given their history.
It is just a question of whether price growth in Kensington falls or price growth in Blackpool rises. I know which we think is most likely. You?
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