[Moved from SE23 Topics: Forest Hill Pools]

I don't expect to persuade too many people here, and it may be a bit off topic, since this the argument is about economics.

Michael recently wrote:

I could agree with him, but I think he means by a healthy market one where there is money to be made by expanding the supply. But what if (a) the population of London stabilises, or even declines and / or (b) people choose in various ways to live with more people per dwelling unit? You'd still have a healthy market, in the same way you can still have healthy markets in other consumer durables, but local authorities would no longer be able to raise revenue by increasing the supply. We've had decades of over-supply brought on by inflated prices, and the touching belief (I remember hearing it from my grandfather) that you can't go wrong buying property.

Re the population of London, my view may be jaundiced by having worked in the City for nearly 30 years, and not having seen much to justify its mystique. Financial markets - like property markets - serve a purpose, but it's possible to get obsessed by them. Where I am working currently, there are acres of empty desk space, with much of the work which would have been done by their occupants earlier in my career now done in Singapore or India. We've all also noticed fewer Polish plumbers, who have gone home now their own economy is more attractive than ours, and property prices aren't so silly. So don't expect continued immigration to reflate the bubble. In short, long term sustained growth in London such as we have been used to is unlikely to resume.

Re household sizes, a quick google elicits that the average household size fell from 4.6 in 1901 to 2.43 in 1996 - and it seems to be accepted wisdom that it will fall below 2.0 by 2025. How sad is that? Are people really going to continue to become more isolated from each other, and suffer the pain of unnecessary housing costs for the joy of living alone for ever? Sartre might have said that hell was other people, but we don't have to be as self-obsessed as him. And what if we're not, and we manage to get back to say an average of three to a household? Suddenly we have a many times bigger over-supply of housing than we already perceive.

The bright side is that being connected to the tube system by 2012 and the relative good value of SE London, we are in a better position than other parts, but still I am fairly confident that, adjusting for inflation, house prices will be lower than today's levels.