We recently highlighted the unfortunate knack some investors have of misjudging when they move into illiquid assets. That article, Best laid plans, had been published on The Value Perspective for all of five minutes when, leafing through the latest Financial Stability Report from the Bank of England, we spotted some scary little charts on the ultimate illiquid asset.
We use the term loosely, of course – pedants, economists and, particularly, pedantic economists will no doubt be able to come up with more technically illiquid assets. Nevertheless, for most people, the facts they will only ever own one house at a time – to live in – and the transaction costs are so high mean property is about as illiquid as their assets get.
These days, concerns about the UK’s residential property market’s overvaluation surface in the media with every new house price survey that is published. Certainly, as you can see from the chart below, house price inflation has only moved in one direction over the course of the last two years – and particularly so in London.
via What would it actually take for UK house prices to rise much further?.
