The bubble may have burst, says Ross Clark, but a crash looks unlikely. For now, property remains a sensible investment — better than sticking cash in a low-interest account
I’m getting fed up with my 2.5 per cent Northern Rock Super-Sucker’s Account. It was OK when it was paying 6 per cent and Alistair Darling was promising by the hairs on his chinny-chin-chin to repay every penny in the event of the bank going belly-up. But I can’t see the point now: why risk your capital for some measly little apology for interest which isn’t even keeping up with inflation? I keep wanting to hook out the money and put it into something solid: gold or property.
I know I am not the only one who feels this way: that is why property prices unexpectedly started rising in the spring of 2009, a time when they were almost universally expected to keep on plunging. Almost everyone in the property business to whom you talk speaks of gnarled old tight-fists raiding their piggy banks to put their hoarded savings into a buy-to-let or a place for their kids.
The trouble is there are only so many cash savings to be mined, and they seem close to exhaustion. There is suddenly too much property on the market to sustain the pretence of a lively property market. The main house price indices — the Halifax and Nationwide — have for several months now started to register declines in prices. The monthly figures, which cause great excitement on front pages — are pretty meaningless swings with the margin of error. But after three months of falls you can be pretty sure: yes, prices are falling.
It isn’t cash-buyers who ultimately drive the property market, but the mortgaged masses.
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