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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 Brexit. You can find him on Twitter or Facebook.

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A swimming pool and a bleeding toe put my medical competency in doubt

Doctors are used to contending with Google. Sometimes the search engine wins. 

The brutal heatwave affecting southern Europe this summer has become known among locals as “Lucifer”. Having just returned from Italy, I fully understand the nickname. An early excursion caused the beginnings of sunstroke, so we abandoned plans to explore the cultural heritage of the Amalfi region and strayed no further than five metres from the hotel pool for the rest of the week.

The children were delighted, particularly my 12-year-old stepdaughter, Gracie, who proceeded to spend hours at a time playing in the water. Towelling herself after one long session, she noticed something odd.

“What’s happened there?” she asked, holding her foot aloft in front of my face.

I inspected the proffered appendage: on the underside of her big toe was an oblong area of glistening red flesh that looked like a chunk of raw steak.

“Did you injure it?”

She shook her head. “It doesn’t hurt at all.”

I shrugged and said she must have grazed it. She wasn’t convinced, pointing out that she would remember if she had done that. She has great faith in plasters, though, and once it was dressed she forgot all about it. I dismissed it, too, assuming it was one of those things.

By the end of the next day, the pulp on the underside of all of her toes looked the same. As the doctor in the family, I felt under some pressure to come up with an explanation. I made up something about burns from the hot paving slabs around the pool. Gracie didn’t say as much, but her look suggested a dawning scepticism over my claims to hold a medical degree.

The next day, Gracie and her new-found holiday playmate, Eve, abruptly terminated a marathon piggy-in-the-middle session in the pool with Eve’s dad. “Our feet are bleeding,” they announced, somewhat incredulously. Sure enough, bright-red blood was flowing, apparently painlessly, from the bottoms of their big toes.

Doctors are used to contending with Google. Often, what patients discover on the internet causes them undue alarm, and our role is to provide context and reassurance. But not infrequently, people come across information that outstrips our knowledge. On my return from our room with fresh supplies of plasters, my wife looked up from her sun lounger with an air of quiet amusement.

“It’s called ‘pool toe’,” she said, handing me her iPhone. The page she had tracked down described the girls’ situation exactly: friction burns, most commonly seen in children, caused by repetitive hopping about on the abrasive floors of swimming pools. Doctors practising in hot countries must see it all the time. I doubt it presents often to British GPs.

I remained puzzled about the lack of pain. The injuries looked bad, but neither Gracie nor Eve was particularly bothered. Here the internet drew a blank, but I suspect it has to do with the “pruning” of our skin that we’re all familiar with after a soak in the bath. This only occurs over the pulps of our fingers and toes. It was once thought to be caused by water diffusing into skin cells, making them swell, but the truth is far more fascinating.

The wrinkling is an active process, triggered by immersion, in which the blood supply to the pulp regions is switched off, causing the skin there to shrink and pucker. This creates the biological equivalent of tyre treads on our fingers and toes and markedly improves our grip – of great evolutionary advantage when grasping slippery fish in a river, or if trying to maintain balance on slick wet rocks.

The flip side of this is much greater friction, leading to abrasion of the skin through repeated micro-trauma. And the lack of blood flow causes nerves to shut down, depriving us of the pain that would otherwise alert us to the ongoing tissue damage. An adaptation that helped our ancestors hunt in rivers proves considerably less use on a modern summer holiday.

I may not have seen much of the local heritage, but the trip to Italy taught me something new all the same. 

This article first appeared in the 17 August 2017 issue of the New Statesman, Trump goes nuclear