The rich are worried about inflation – just look at prime property sales

In our editor's letter last week I wrote that there was a growing pile of anecdotal evidence suggesting that the very rich - the largest holders of cash deposits - were beginning to lose some faith in the ability of their cash to hold its value. So they seemed to be swapping it for things they thought might be able to do so. Hence the fact that art prices are hitting new highs; a case of Chateau Lafite-Rothchild is considered to be worth £147,170 in some quarters; and the new limited edition Ferrari is sold out.

So I suppose we shouldn't be surprised by the recent news from the top end of the housing market. Prices may be falling still, but look at the volumes of sales of £1m-plus houses and you will see they have risen very fast over the last year. In August 2009 a mere 488 houses sold for over £1m. In August 2010 that number was 84% higher at 896, says search agent Henry Pryor.

So what's it all about? The conventional argument is that the sales reflect strong demand from foreign buyers looking to take advantage of the fall in the value of the pound and grab a bargain. But while that might account for the purchases in the likes of Kensington, it hardly explains the 120% rise in the sales of £1m-plus houses in the West Midlands in the first six months of the year.

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By themselves these numbers mean little, but add the rising sales (if not rising prices) of high value houses to those of other traditional inflation hedgers and it might, just might, be a sign that, as cotton prices hit new highs, as food prices rise at the fastest pace for 16 months and as quantitative easing (QE)is back on the agenda, the rich are hedging themselves against inflation even before the majority of the nation notice it is upon us.

However there is one thing these numbers very clearly do not tell us that the housing market as a whole is back on form. The £1m plus market is often cash driven. The below-£1m market is largely mortgage driven. And there, volumes are as poor as ever. There were 37% more houses on the market in July 2010 than in July 2009. But 1% fewer of them sold.