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Remember 1993?

For some it may bring back memories of Bill Clinton coming to power in the US or Monica Seles being stabbed in the back by an obsessed fan of rival Steffi Graff at a tennis tournament in Hamburg. Meat Loaf's 'I'd Do Anything For Love' was the biggest selling song of the year, way before i-pods and on-line downloads.
 
For me I remember working in Hanover Square at what was to be the end of the recession before a record 15 years of continuous economic growth in the UK.  I was at Healey & Baker (now Cushman & Wakefield) and the market was tough.  Letting activity in the retail market was almost non-existent for all but the best schemes, and investment values had kept falling for the preceding three years.
 
Although technically the UK was by now out of recession it certainly didn't feel like it.  Unemployment was still rising at the start of the year, house prices had fallen off the edge of a cliff and vacancy levels in shopping centres had reached 8%.  Rents were still falling and wouldn't show meaningful growth for another 3 - 4 years.
 
So what happened next?

So, the Government decided to continue with its program of quantative easing, pumping another £25bn into the UK economy, taking the total amount of QE so far to £200bn.

As JP Morgan analyst Harm Meijer has been pointing out for a few months, it is the amount of liquidity being created in the wider financial system that is mainly responsible for the recent sharp rise in prices:

In a world in which it seems almost every 'light' is engineered on 'green' and appears likely to stay that way for a while, we believe property prices will be boosted by government/bank policies - much more strongly than most market participants currently appear to expect and perhaps even more strongly than some can even imagine.

"Indeed, we forecast real estate values in the UK to jump by 10% in the next 12 months, albeit to unsustainable levels, and those on the continent to stabilise. Yield compression is back; we forecast a 100bp reduction for the UK.

But be warned, there are risks: