The world's money and people are pouring into the capital. Don't knock it.by John McDermott / November 14, 2013 / Leave a comment
© Jason Hawkes
Tell us how you would fix London and read suggestions from experts such as Simon Jenkins and David Lammy
In April 2012, JP Morgan published what is perhaps the most important report on the world’s money since the end of the financial crisis. Heavy on faux profundity and light on verbs, The Realization argued that when it comes to asset management, we are entering “A new world. A new normal. A tectonic shift.” Investment portfolios typically hold only a mix of stocks and bonds. However, the former is too volatile and the latter yields too little, a result of quantitative easing (injecting money into the economy) in the west, and capital flows from the east, according to JPMorgan. It is time to get real, the bank suggested. “The real assets category offers investors ‘optionality’ in a world of uncertainty.”
Ironically, optionality is not a real word. But in practice JP Morgan recommended its clients make hundreds of billions of dollars of direct investment in, for example, commodities, ports, toll roads, power stations, railways, container ships, farmland, timber sites—and property. The global real estate market is worth $14 trillion, it noted. Better get in quick, then: “a select group of investors is at the vanguard of what, we believe, is a rare structural shift.” Others are already cashing in! “Early movers should continue to be rewarded in the midst of an (r)evolution in asset allocation”.
If there is a fever among the managers of the world’s money, it is more than matched by Londoners’ hysteria over the price of housing. Incidental chats gravitate towards tales of invidious costs. Little wonder: sale prices rose 10 per cent in the year to July, according to the Office for National Statistics; and by the same in October, according to Rightmove, the property website. Everyone seems to want to know how much you pay. Zoopla’s property search app is downloaded more frequently than Tesco’s. The government’s Help to Buy guarantee is lubricating a city beset by property fetishism.
And soon enough, it all becomes the foreigners’ fault. “This is what happens when property in your city becomes a global reserve currency,” Michael Goldfarb wrote last month in an incendiary and widely read New York Times op-ed. Goldfarb, an American foreign correspondent and author living in London, is as far from a xenophobe…