Wednesday 27 April 2011

Another Accident Waiting To Happen?

The story below has appeared in BBC News about how the number of cash purchases has increased in the housing market. Given the costs of housing today it is unlikely that these purchases are being funded by any ordinary savings.

Whilst some of the reasons put forward in the article have their logic and in some areas, notably the south west, people moving on retirement who have managed to sell their old homes will be able to afford it, there have to be some questions about the other places.

Notably that in some areas of London it can be up to 80%. Why? London is about the highest priced area in the UK and four out of five are buying in cash? These cannot be ordinary working people or even those in the middling income grades. Also, they are unlikely to be recent graduates or many others who would have to borrow.

This is therefore not a “normal” market for ordinary people. So just who has all this cash? It is possible that a number of footballers and other entertainers on a roll may have enough. Also the bonus boys and girls in some of the major financial companies, but they cannot account for this level between them.

So this must mean either money flooding in from less “safe” places spent by the wealthy anxious to get their money and investments relocated or persons in the illegal economy.

There is another consideration, aptly described in the Cobden Centre articles:


Given that all these matters are highly complex and we seem to have a government of uncertain men with uncertain ideas there could be some real problems in the making if the market suddenly seizes up without them noticing.

In the USA the first small signs of the property crash began in late 2005 when sales began to stick and the market turned abnormal. Nobody realised then or thought that all the money thrown at it by government agencies and Wall Street would lead to very severe problems indeed.

Mervyn better be right because I believe that the money was that was printed for Operation Bernhard ended up at the bottom of a deep very cold lake.

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