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Let’s just say it: London’s in a house price bubble

The city’s house prices have risen 18 per cent in a year. Can we stop pretending this is normal now please?

More unalloyed good news from the ever-sane London housing market: according to mortgage lender Nationwide, property prices in the capital have climbed 18 per cent over the last twelve months. Average prices are now 5.3 per cent up on the start of the year, 20 per cent above their pre-crisis peak, and more than twice their equivalent in the country as a whole.

This is obviously brilliant news for anyone who owns a home in London, has all the space that they could ever need, and whose long term ambition is to move almost anywhere else. Let's have three cheers for entirely rational exuberance. If you're a first time buyer, though, or a Londoner who hopes to have kids one day without moving to Worcestershire, then the news is rather less positive.

Actually, there’s another groups for whom any boom in the London housing market is fantastic news: investors. In recent years, London houses have become increasingly popular not just as a place to live in, but as a safe place to put your money. And whether the buyer is a Russian oligarch, or a moderately affluent buy-to-let investor, the logic is the same: whatever else may be going on in the world, whatever the broader economic conditions, London house prices can be relied on to increase.

Sentiments like that, though, have a historic tendency to be proved suddenly and catastrophically wrong. And there are a number of reasons to think the market might, one day, go into reverse.

One is that – despite how it may feel to those paying them – London rents are currently at an unusually low level compared to house prices. This, the FT's Tim Harford pointed out last week, suggests that either rents should soar – or prices should fall.

There’s another reason to suspect that the boom can't last forever:  interest rates can only move in one direction. When they inevitably climb, mortgages that are just about affordable now will suddenly be affordable no longer. Result: more repossessions, fewer new buyers entering the market – and, probably, a fall in prices.

The biggest reason for cynicism, though, is that the current nature of the housing market is likely to exaggerate any such fall. Prices are being driven at least partly by investors – and investors are timid beasts. The price of a home in the capital probably doesn’t need to dip much before everyone concludes that London property isn’t the rock solid investment that they thought it was, and people start to pull their money out before everyone else does. If that happens all bets are off.

That doesn't mean the market will change direction tomorrow. (It won’t.) Nor does it mean that London's housing shortage is entirely imaginary: whatever else is going on, there are clearly too many people chasing too few houses.

But as thing stand, prices are also being driven upwards by herd mentality and a bizarre assumption that they can only move one way. It's the logic of the bubble – and, eventually, bubbles burst.

Jonn Elledge edits the New Statesman's sister site CityMetric, and writes for the NS about subjects including politics, history and Daniel Hannan. He is on Twitter, almost continously, as @JonnElledge.

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Let's face it: supporting Spurs is basically a form of charity

Now, for my biggest donation yet . . .

I gazed in awe at the new stadium, the future home of Spurs, wondering where my treasures will go. It is going to be one of the architectural wonders of the modern world (football stadia division), yet at the same time it seems ancient, archaic, a Roman ruin, very much like an amphitheatre I once saw in Croatia. It’s at the stage in a new construction when you can see all the bones and none of the flesh, with huge tiers soaring up into the sky. You can’t tell if it’s going or coming, a past perfect ruin or a perfect future model.

It has been so annoying at White Hart Lane this past year or so, having to walk round walkways and under awnings and dodge fences and hoardings, losing all sense of direction. Millions of pounds were being poured into what appeared to be a hole in the ground. The new stadium will replace part of one end of the present one, which was built in 1898. It has been hard not to be unaware of what’s going on, continually asking ourselves, as we take our seats: did the earth move for you?

Now, at long last, you can see what will be there, when it emerges from the scaffolding in another year. Awesome, of course. And, har, har, it will hold more people than Arsenal’s new home by 1,000 (61,000, as opposed to the puny Emirates, with only 60,000). At each home game, I am thinking about the future, wondering how my treasures will fare: will they be happy there?

No, I don’t mean Harry Kane, Danny Rose and Kyle Walker – local as well as national treasures. Not many Prem teams these days can boast quite as many English persons in their ranks. I mean my treasures, stuff wot I have been collecting these past 50 years.

About ten years ago, I went to a shareholders’ meeting at White Hart Lane when the embryonic plans for the new stadium were being announced. I stood up when questions were called for and asked the chairman, Daniel Levy, about having a museum in the new stadium. I told him that Man United had made £1m the previous year from their museum. Surely Spurs should make room for one in the brave new mega-stadium – to show off our long and proud history, delight the fans and all those interested in football history and make a few bob.

He mumbled something – fluent enough, as he did go to Cambridge – but gave nothing away, like the PM caught at Prime Minister’s Questions with an unexpected question.

But now it is going to happen. The people who are designing the museum are coming from Manchester to look at my treasures. They asked for a list but I said, “No chance.” I must have 2,000 items of Spurs memorabilia. I could be dead by the time I finish listing them. They’ll have to see them, in the flesh, and then they’ll be free to take away whatever they might consider worth having in the new museum.

I’m awfully kind that way, partly because I have always looked on supporting Spurs as a form of charity. You don’t expect any reward. Nor could you expect a great deal of pleasure, these past few decades, and certainly not the other day at Liverpool when they were shite. But you do want to help them, poor things.

I have been downsizing since my wife died, and since we sold our Loweswater house, and I’m now clearing out some of my treasures. I’ve donated a very rare Wordsworth book to Dove Cottage, five letters from Beatrix Potter to the Armitt Library in Ambleside, and handwritten Beatles lyrics to the British Library. If Beckham and I don’t get a knighthood in the next honours list, I will be spitting.

My Spurs stuff includes programmes going back to 1910, plus recent stuff like the Opus book, that monster publication, about the size of a black cab. Limited editions cost £8,000 a copy in 2007. I got mine free, as I did the introduction and loaned them photographs. I will be glad to get rid of it. It’s blocking the light in my room.

Perhaps, depending on what they want, and they might take nothing, I will ask for a small pourboire in return. Two free tickets in the new stadium. For life. Or longer . . . 

Hunter Davies is a journalist, broadcaster and profilic author perhaps best known for writing about the Beatles. He is an ardent Tottenham fan and writes a regular column on football for the New Statesman.

This article first appeared in the 16 February 2017 issue of the New Statesman, The New Times