Hooray! House prices up!

House prices increased by 2.5pc in London and by a national average of 1.1pc last month, reversing losses seen over the last year, according to Land Registry, but some market observers continue to warn of ‘trouble to come’.

Disussion of the entire subject would be more enlightening and enlightened if the statistics published the figure that really counts: the price of housing land per unit area in different localities. Preferably, the statistics would be given as a set of annualised rental values and selling prices, and the ratio between the two. The latter figure is important because it indicates the amount of froth in the market, and hence its potential for “trouble to come”.

The constant publication of house prices is one reason why nearly everyone has got the impression that bricks and mortar are the most marvellous investment it is possible to make. Yet as any property owner knows, bricks and mortar just suck up money and goes down in value unless contantly fed. It it the land prices that we all need to pay attention to, but almost nobody notices. That is what has become the marvellous investment, and to the detriment of all.

Daily Telegraph article.