Property Market.

David Smith of the Sunday times writes very elegantly on the British economy in his weekly economics article. I would like to see him write more about global issues, however, I imagine his brief is to be more UK specific.
To some extent he has aped the economist's Big Mac index, by having his own tongue in cheek index regarding the housing market, the skip index. How many skips are there on his road? If there are a lot then it means the economy is booming. He has broadly been accurate in predicting the housing market, although this is probably more due to his analytical ability than his index.

The global house price boom is phenomenal and tests economists’ powers of prediction to the limit. Personally I have felt the market would cool in the UK but figures for property price growth have continued to astound me.

So what of the future?
As has rightly been pointed out the UK is not building enough houses, so the supply side continues to remain tight, however the demand side has surpassed all but the most bullish expectations, particularly in the UK, the market I know the most about.
We cannot, however, ignore the sheer quantity of speculative capital that has flooded the housing market. The number of ordinary people who are leveraging themselves and buying several properties and restoring them. I know a number of people who struggle to pay for holidays yet have a property portfolio of over a million pounds. They are able to do this by buying off plan, or by self-certifying. One friend has bought hundreds of miles from London, two properties in markets she knows nothing about.The other important factor is the broad based nature of the property price increase, even in Scotland which has a declining population has felt the full effects. Parts of West Yorkshire where thousands of flats have flooded the market have joined the property price surge. So my biggest question is why don't we see more regional imbalances? Is it because properties in these areas were so undervalued for so long?
The city of London is awash with cash, the South East has a huge property shortage, but I cannot believe this is the case in large parts of the UK, yet they have all seen massive property price surges, therefore my personal view is that in the more deprived areas of the UK, speculative capital has played a more important role, and these areas are more likely to see a severe slow down, London and the South East are unlikely to suffer in the same way, when the slow down arrives.

When will this happen, when will property really begin to slow?

It will only be when there is demand side shock to the economy, so this has to be when interest rates reach a tipping point, or when economic growth begins to slow, or if banks begin to tighten their lending criteria. None of these factors look remotely like occurring in the near future.

It will come eventually though, I do not believe it will never arrive.