Regular readers will know that we think that property across much of the UK is still grossly overpriced. Inflation is doing its job, of course, and house prices are falling steadily in real terms and often in nominal terms too across the country. However, there is a way to go before we'd want to step in as investors in most places.
That said, two articles in the weekend papers make the point that if you already own property, it isn't so much the absolute price as the value of the trade you make that counts.
Take the difference between London prices and prime country prices. Since 2007, London prices have soared (up 9.4% in 2012 alone, according to Knight Frank) while prices of nice houses outside London have fallen (down 4.3% in 2012). So sell your London house to buy in the country today and you'll get a much, much nicer manor than you would have in 2007, when the gap between the two was rather smaller.
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
The Telegraph offers some tempting examples. In Islington, £650,000 buys you a two-bedroom flat on the ground floor looking out over a busy road. In Loxton in Somerset, it gives you a four-bedroom house with an acre of land and £30,000 to spare (although you will find your stamp duty takes care of most of that). In Rye, East Sussex, it gets you the middle class dream (The Old Vicarage) a Grade II house dating from 1600 with "pretty cottage gardens" and fabulous views. Oh, and £65,000 left over.
In the FT, Francesca Steel makes the same point about the differential between Edinburgh prices and London prices. In Edinburgh, prime property prices are down 18% from their peak, and there has apparently "rarely, if ever, been a bigger gap between values in prime London and prime Scotland."
This is, in turn, "fuelling renewed interest from buyers outside Scotland" as well as non UK buyers according to Knight Frank 10% of prime property buyers are now foreign. Even the Russians are arriving: Steel points to four £2m+ sales to Russian buyers in the last year.
Clearly there is good reason for London prices to be outpacing other regions (safe haven demand, cash buyers, etc, etc) and the widening gap between the capital and the rest doesn't for a second mean that prices in the former aren't going to start falling, or that those in the latter aren't likely to keep falling. Far from it.
But if you plan to sell a house in London and buy one elsewhere at some point, you may find that now is an excellent time to do it. It isn't about the actual prices, it's about the gap between the prices.
-
Tycoon Truong My Lan on death row over world’s biggest bank fraudProperty tycoon Truong My Lan has been found guilty of a corruption scandal that dwarfs Malaysia’s 1MDB fraud and Sam Bankman-Fried’s crypto scam
-
Why undersea cables are under threat – and how to protect themUndersea cables power the internet and are vital to modern economies. They are now vulnerable
-
House prices to crash? Your house may still be making you money, but not for much longerOpinion If you’re relying on your property to fund your pension, you may have to think again. But, says Merryn Somerset Webb, if house prices start to fall there may be a silver lining.
-
Prepare your portfolio for recessionOpinion A recession is looking increasingly likely. Add in a bear market and soaring inflation, and things are going to get very complicated for investors, says Merryn Somerset Webb.
-
Investing for income? Here are six investment trusts to buy nowOpinion For many savers and investors, income is getting hard to find. But it's not impossible to find, says Merryn Somerset Webb. Here, she picks six investment trusts that are currently yielding more than 4%.
-
Stories are great – but investors should stick to realityOpinion Everybody loves a story – and investors are no exception. But it’s easy to get carried away, says Merryn Somerset Webb, and forget the underlying truth of the market.
-
Everything is collapsing at once – here’s what to do about itOpinion Equity and bond markets are crashing, while inflation destroys the value of cash. Merryn Somerset Webb looks at where investors can turn to protect their wealth.
-
Value is starting to emerge in the marketsOpinion If you are looking for long-term value in the markets, some is beginning to emerge, says Merryn Somerset Webb. Indeed, you may soon be able to buy traditionally expensive growth stocks on the cheap, too.
-
ESG investing could end up being a classic mistakeOpinion ESG investing has been embraced with enormous speed and zeal. But think long and hard before buying in, says Merryn Somerset Webb.
-
UK house prices will fall – but not for a few yearsOpinion UK house prices look out of reach for many. But the truth is that British property is surprisingly affordable, says Merryn Somerset Webb. Prices will fall at some point – but not yet.
